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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K

<TABLE>
<C>        <S>
   /X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITES EXCHANGE ACT OF 1934
</TABLE>

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

<TABLE>
<C>        <S>
   / /     TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE
           SECURITES EXCHANGE ACT OF 19344
</TABLE>

       FOR THE TRANSITION PERIOD FROM TO______________ TO ______________

                        COMMISSION FILE NUMBER 000-29367
                            ------------------------

                             VANTAGEMED CORPORATION

             (Exact name of Registrant as specified in its charter)

<TABLE>
<S>                                            <C>
               DELAWARE                                     68-0383530
    (State or other jurisdiction of                      (I.R.S. Employer
    incorporation or organization)                     Identification No.)
</TABLE>

            3017 KILGORE ROAD, SUITE 195, 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
                            ------------------------

    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required the file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/  No / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (220.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. / /

    As of March 20, 2001, the aggregate market value of the outstanding shares
of our common stock, held by non-affiliates was approximately $7,245,000, based
upon $1.00, the average bid and ask price of our common stock as reported by the
Nasdaq National Market on March 20, 2001. Determination of affiliate status for
this purpose is not a determination of affiliate status for any other purpose.

    Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the most recent practicable date.

<TABLE>
<CAPTION>
                                                              OUTSTANDING AT
CLASS                                                         MARCH 30, 2001
-----                                                         --------------
<S>                                                           <C>
Common stock................................................    8,634,329
</TABLE>

                      DOCUMENTS INCORPORATED BY REFERENCE

    Portions of the Proxy Statement for the Registrant's 2001 Annual Meeting of
Stockholders to be held in May 2001, are incorporated by reference in Part III
of this Form 10-K.

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                             VANTAGEMED CORPORATION

                            ------------------------

                           INDEX AND CROSS REFERENCE

<TABLE>
<CAPTION>
ITEM
NUMBER                                                                    PAGE
------                                                                  --------
<S>       <C>                                                           <C>
                                     PART I

Item 1    Business....................................................      3
Item 2    Properties..................................................     12
Item 3    Legal Proceedings...........................................     13
                                    PART II

          Market for Registrant's Common Equity and Related
Item 5      Stockholders Matters......................................     14
Item 6    Selected Financial Data.....................................     15
          Management's Discussion and Analysis of Financial Condition
Item 7      and Results of Operations.................................     17
          Forward-Looking Statements and Risk Factors.................     28
          Quantitative and Qualitative Disclosures About Market
Item 7A     Risk......................................................     36
Item 8    Financial Statements........................................     37
          Changes in and Disagreements With Accountants on Accounting
Item 9      and Financial Disclosure..................................     66
                                    PART III

          Directors and Executive Officers of VantageMed (incorporated
Item 10     by reference).............................................     66
Item 11   Executive Compensation (incorporated by reference)..........     66
          Security Ownership of Certain Beneficial Owners and
Item 12     Management (incorporated by reference)....................     66
          Certain Relationships and Related Transactions (incorporated
Item 13     by reference).............................................     66
                                    PART IV

          Exhibits, Financial Statement Schedules, and Reports on Form
Item 14     8-K.......................................................     67
          Signatures..................................................     69
</TABLE>

                                       2
<PAGE>
                                     PART I

ITEM 1. BUSINESS

THE COMPANY

    VantageMed Corporation is a national provider of healthcare information
systems and services distributed to over 11,000 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, other healthcare providers and provider organizations. Our software
manages the patient data necessary to effectively integrate Internet-based
solutions with the functions performed by our systems. Because of our existing
relationships with our customers, we are uniquely positioned to manage their
transition from legacy products to our Internet-enabled products and services.
With the addition of Internet capabilities to our Windows-based products, we
will increase our customers' access to information and their ability to
communicate with numerous healthcare participants such as their patients,
providers, third-party insurance payers, managed care organizations, pharmacies,
and other ancillary service providers.

    Since forming the Company in 1995, we have acquired 26 healthcare
information systems companies. Due to the change in the financial market and the
uncertainty in the healthcare industry, we decided not to pursue additional
acquisitions during the year 2000.

    Our recurring revenues were 82% for the year ended December 31, 2000,
compared to 79% for the year ended December 31, 1999. We define recurring
revenues as any revenues derived from an existing or acquired customer after the
initial installation of the product, including revenues from sales of new
products to existing customers. To increase recurring revenues, we are expanding
our service offerings and migrating existing customers to our Windows-based,
Internet-enabled products and services, and expanding our electronic services.
Additionally, due to a change in business condition and operating results at
that time, in June of 2000 we implemented a restructuring plan to improve our
future operating conditions.

    Our installed customer base, software products and services, and Internet
strategy have positioned us to address the information needs of healthcare
providers through the development of an integrated technology solution.

THE VANTAGEMED SOLUTION

    We offer integrated Windows-based, Internet-enabled healthcare information
systems that reduce the impact of growing economic pressures, administrative
burdens and increased information requirements now faced by healthcare providers
and physician organizations. 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. With our
established distribution network, we are well positioned to take advantage of
the opportunities that result from the increasingly complex needs of the
healthcare industry.

    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:

    - OFFERING WINDOWS-BASED, INTERNET-ENABLED PRODUCTS AND SERVICES. These
      products and services are designed to meet the changing and expanding
      needs of our customers and to enable them to meet the increasingly complex
      demands of the healthcare market.

                                       3
<PAGE>
    - OFFERING PRODUCT MIGRATION ALTERNATIVES. We enable our current and future
      customers to move from their existing legacy technology products to our
      Windows-based, Internet-enabled products and services.

    - STRENGTHENING OUR NATIONAL DISTRIBUTION NETWORK. Through marketing
      programs, training and information systems we have strengthened our
      distribution network in our regional markets in an effort to gain critical
      mass, expand our existing customer base and broaden our market presence.

    - CROSS-SELLING OUR PRODUCTS AND SERVICES TO EXISTING CUSTOMERS AND PURSUING
      NEW CUSTOMERS. With over 11,000 customer sites, we have the ability to
      generate significant growth by cross-selling additional products and
      services, including ongoing maintenance support and electronic transaction
      services, to our installed customer base. These services are important
      sources of our recurring revenues. We believe that our strong
      relationships with our customers position us to be the vendor of choice
      within our client base and to obtain access to new customers through
      referrals.

    - FORMING INTERNET AFFILIATIONS. By leveraging the systems capabilities of
      our Internet-enabled products, we intend to provide the primary interface
      to the Internet for our customers. We have developed affiliations with
      several Internet service and information companies. We intend to form
      additional affiliations to provide a wider range of services for clinical,
      administrative and electronic commerce functions.

PRINCIPAL PRODUCTS

    We classify our software products as either "Windows-based" or "legacy." Our
Windows-based products are the primary products currently offered to our new
customers and are the focus of our ongoing product development efforts. Our
suite of Windows-based products includes RidgeMark, eMCee, eMCee Connect,
ChartKeeper, Therapist Helper and DentalMate. Our Windows-based products provide
our customers with software designed to automate administrative, financial,
clinical and other practice management and managed care functions. These
products offer advanced functionality and are compatible with the latest
generation of operating systems and hardware platforms. These products can
accommodate from one to hundreds of healthcare providers and users.

    As a result of our acquisitions, we support a number of 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. We
currently have 17 legacy products. These systems provide ongoing revenues
derived from support services, software and hardware upgrades, electronic
transaction services and new system sales. Approximately 63% of our customer
sites use our Windows-based products, while approximately 37% use one or more of
our legacy products. We are in the process of migrating customers from the
legacy systems to our Windows-based products and believe this represents a
significant sales and marketing opportunity.

                                       4
<PAGE>
    We have designed our products to enable our customers to easily transition
from their legacy systems to Windows-based products and services. The features,
functions and targeted customers of our Windows-based products and services are
described below.

<TABLE>
<CAPTION>
PRODUCTS                                                                 PRIMARY CUSTOMER
AND SERVICES                   FEATURES AND FUNCTIONS            TYPE OF PRACTICE OR ORGANIZATION
------------            -------------------------------------  -------------------------------------
<S>                     <C>                                    <C>
RidgeMark               Scheduling, billing, patient           Primary and specialty medical
                        registration,                          practices.
                        electronic claims, reporting.

eMCee                   Member tracking, patient eligibility   Managed healthcare organizations and
                        and authorizations, referral           physician associations contracted
                        tracking, claims adjudication,         with third-party payers,
                        utilization review, risk and           traditionally referred to as
                        contracting analysis.                  Management Services Organizations
                                                               (MSOs), Independent Physician
                                                               Associations (IPAs) and Physician
                                                               Hospital Organizations (PHOs).

eMCee Connect           Internet access to member              Managed healthcare organizations and
                        demographics, patient eligibility and  physician associations: MSOs, IPAs
                        referrals, authorization and claim     and PHOs.
                        payment status.

ChartKeeper             Electronic storage and tracking of     Medium to large medical groups.
                        patient charts, transcription notes,
                        document imaging, security and
                        authentication and electronic chart
                        distribution.

Therapist Helper        Patient registration, scheduling,      Psychologists and behavioral health
                        billing, managed care tracking,        practitioners.
                        electronic claims and reporting. Palm
                        Pilot-enabled.

DentalMate              Scheduling, billing, registration,     Dental practices.
                        electronic claims, charting, digital
                        camera and x-ray.
</TABLE>

OUR INTERNET STRATEGY

    We believe that most of the clinical and financial problems facing
healthcare providers require solutions that integrate Internet functionality
with software systems that support the management of healthcare practices. Our
Internet strategy is to provide a full range of Windows-based, Internet-enabled
products and services that reduce inefficiencies and expand the quality and
scope of information exchanged between healthcare participants. This strategy is
designed to:

    - link information systems in medical offices with third-party insurance
      payers and other healthcare management organizations to improve the flow
      of information;

    - provide integrated Internet access for healthcare providers through our
      suite of software products;

    - enhance the value of information collected and managed by our customers;

    - allow healthcare providers to deliver information and services to patients
      over the Internet; and

    - facilitate electronic commerce for both commercial and consumer use within
      the healthcare delivery system.

                                       5
<PAGE>
    As described in the following table, many clinical and administrative
functions are poorly automated and require manual processing. The following
table describes the Internet opportunities we are pursuing and or evaluating
which will enable healthcare providers to communicate interactively with their
patients and related healthcare entities through the Internet.

<TABLE>
<CAPTION>
                       CURRENT DELIVERY   BUSINESS CONSTRAINTS  INTERNET STRATEGY     VALUE-ADDED
                       -----------------  --------------------  -----------------  -----------------
<S>                    <C>                <C>                   <C>                <C>
CLINICAL FUNCTIONS
Prescription           Paper and          Time consuming,       E-mail or access   Access from
  Ordering             telephone          accuracy, patient     pharmacy order     hand-held or
                                          satisfaction, drug    system             portable devices
                                          interaction                              and access to
                                                                                   patient education
                                                                                   site and improved
                                                                                   accuracy

Patient Chart          Handheld recorder  Time consuming,       Browser-based      Wireless
  Dictation            with transcriber   labor intensive       recorder with      hand-held browser
                                                                internet
                                                                transcription
                                                                service

Laboratory Orders and  Paper, fax or      Time consuming,       Access laboratory  Patient and
  Results              printer            errors, misplaced     and store data on  hospital system
                                          documents             patient chart      Internet access
                                                                system

Patient Education      Paper              Accuracy, manual      Internet search    Query system
                                          storages,             and                database to
                                          maintenance           health-related     identify patients
                                                                web sites          by disease,
                                                                                   prescriptions,
                                                                                   demographics,
                                                                                   etc.

Doctor On-Call         Telephone or       Lack of familiarity   Remote access to   Access from
                       paper              with patient          patient chart      hand-held or
                                                                                   portable devices
</TABLE>

                                       6
<PAGE>

<TABLE>
<CAPTION>
                       CURRENT DELIVERY   BUSINESS CONSTRAINTS  INTERNET STRATEGY     VALUE-ADDED
                       -----------------  --------------------  -----------------  -----------------
<S>                    <C>                <C>                   <C>                <C>
ADMINISTRATIVE FUNCTIONS
Patient Appointment    Telephone or none  Time consuming,       Send e-mail to     Attach patient
  Reminder                                missed appointments   patients through   education or
                                                                the scheduling     visit
                                                                system as a        instructions and
                                                                reminder of        forms; patient
                                                                future             directed access
                                                                appointments       to scheduler

Patient Billing        Mail               Time consuming,       Send e-mail with   Enable consumer
  and Statements                          potential errors,     billing            payment of
                                          cash management       statements to      outstanding bills
                                          delays                patients from the  via credit card
                                                                billing system     acceptance

Billing to Insurance   Telephone,         Time consuming, data  Access electronic  Provide patient
                       electronic or      errors, patient       claims             and doctor access
                       paper              eligibility and       clearinghouse;     to claim status
                                          benefits not          access benefit
                                          verified              systems to
                                                                determine benefit
                                                                status

Insurance Remittance   Check or paper     Delays in payment     Receive            Electronically
  Advice                                  and time consuming    electronic file    receive and post
                                          to post payments      and post to        funds
                                                                accounts
                                                                receivable system

Verification of        Telephone          Ineligible patients   Access benefit     Verify through
  Patient Eligibility                     scheduled and         plans before       the Internet at
  and Benefits                            services are          patient visit      time of
                                          rendered without                         appointment
                                          knowing benefits

Authorization of       Telephone, fax or  Delays in patient     Electronically     Automatic
  Additional Medical   mail               care, time consuming  send and receive   approval of
  Services                                                      authorizations     standard
                                                                                   authorization
                                                                                   requests
ELECTRONIC COMMERCE AND OTHER FUNCTIONS
Prescription Refill    Paper or           Time consuming,       E-mail or access   Access to patient
                       telephone          accuracy, and drug    pharmacy order     education site
                                          interaction           system

Medical Supplies       Telephone or fax   Time consuming,       Access supplier    Search for low
  Ordering                                costly                Web sites to       cost products,
                                                                order supplies     volume purchasing
                                                                                   opportunities

Office Supplies and    Telephone or fax   Time consuming and    Access supplier    Search for low
  Services                                costly                web sites to       cost products and
                                                                order supplies     volume purchases
</TABLE>

                                       7
<PAGE>
ELECTRONIC SERVICES

    Our products enable electronic data interchange, or EDI functions. EDI can
improve a healthcare practice's cash flow by enabling more cost-efficient
processing of patient statements, accurate and timely submission of claims to
third-party payers, and more rapid receipt of payer reimbursements. Our EDI
services currently include the following:

    ELECTRONIC CLAIMS SUBMISSION.  Electronically submits insurance claims from
    practices to payers, either directly or through a clearinghouse.

    ELECTRONIC PATIENT BILLING.  Electronically submits patient billing
    information from practices by dial-up modem to either our printing center or
    to a clearinghouse which processes, prints and mails invoices and provides
    billing reports to the practice.

    ELECTRONIC PAYMENT REMITTANCE.  Electronically remits insurance payments and
    automatically posts explanation of benefits into the practice management
    system.

    PATIENT INSURANCE VERIFICATION.  Electronically accesses insurance and
    managed care plans to determine a patient's eligibility and benefits.

    We generate revenues by providing these electronic services on a per
transaction or flat monthly fee basis. We also offer additional EDI services
such as eligibility verification, referral authorization, and claims status
services through our Internet-enabled product eMCee Connect.

SUPPORT SERVICES

    We believe that customer satisfaction with support and services is critical
to our ongoing success. The scope of our support services includes 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, product, and practice
specialty. In addition to providing on-site training for certain of our product
lines, we maintain classroom-based training facilities. We publish periodic
newsletters and sponsor user group conferences. These forums provide the user
with current information and provide us with an opportunity to demonstrate new
products.

    We provide our customers with ongoing software support and services under
monthly and annual agreements. These agreements provide for help desk support,
software maintenance, and remote diagnostics. As of December 31, 2000, our
customer service and support groups consisted of 169 employees, representing
approximately 49% of our total employee base.

HARDWARE AND SUPPLIES

    In many cases, the sale of our software products is combined with the sale
of hardware systems and installation services. In addition, because many medical
practices require additional hardware as their practices grow, we sell computers
and other peripherals as part of our product offerings. We typically receive
installation and ongoing maintenance revenues as a result of these hardware
sales.

PRODUCT DEVELOPMENT

    As of December 31, 2000, our product development organization consisted of
71 employees. We focus our product development efforts on improving the
functionality and performance of our Windows-based products and on developing
new products that operate on a common architecture. This common architecture
gives our products the capability to simultaneously operate on different systems
such as standard desktop computers or less sophisticated and lower cost
workstations using standard Internet browsers.

                                       8
<PAGE>
    Our development teams are organized by product. Each product team has a
product manager, a project manager and various developers. 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
end users and our sales teams. Project management tools, project scheduling and
distribution of technical and training notes are managed through our corporate
Intranet.

PRIVACY ISSUES

    Because our products and services are utilized to transmit and manage highly
sensitive and confidential medical information, we must address the security and
confidentiality concerns of our customers and of patients and consumers. To
enable the use of our products and services for the transmission of sensitive
and confidential medical information, we utilize advanced technology designed to
provide a high degree of security. This technology includes:

    - password security that requires a password to access our software;

    - user access restrictions that allow our customers to determine the
      individuals who will have access to data and what level of access such
      individual will have;

    - encryption of data transmitted as required over private networks, where we
      control access to the network and public networks where use is shared with
      the public, including over the Internet; and

    - use of a mechanism for preventing outsiders from improperly accessing
      private data resources on our network, commonly referred to as a
      "firewall."

    We intend to be in compliance with the guidelines set forth in the federal
Health Insurance Portability and Accountability Act of 1996 ("HIPAA") as amended
within the timeframes set forth therein and in rules promulgated thereunder. We
also encourage each of our customers to implement their own firewall to protect
the confidentiality of information being transferred into and out of their
computer network.

    Internally, we work to ensure the safe handling of confidential data by
employees in our electronic services department by:

    - providing each employee with an employee handbook explaining practices and
      procedures for handling confidential medical information;

    - monitoring employee activities to ensure compliance with the standards set
      forth in our employee handbook;

    - using individual user names and passwords for each employee handling
      electronic data; and

    - requiring employees who handle confidential data to sign confidentiality
      agreements.

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

SALES AND MARKETING STRATEGY

    Although we are a national company, we manage our sales and marketing
efforts to serve our customers on both a regional and 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
build recurring revenues. Within our existing customer base, we promote and sell
system upgrades,

                                       9
<PAGE>
maintenance services, add-on software modules and electronic data interchange
services. Our sales force focuses on cross-selling to existing customers as well
as attracting new customers.

    As a result of our acquisition strategy, we have acquired a number of
qualified sales personnel with strong experience and customer relationships in
the regions they serve. As of December 31, 2000, we had 40 sales and marketing
personnel, including national sales management, regional sales specialists and
direct sales representatives.

ACQUISITION INTEGRATION

    There were no acquisitions completed in 2000. As opportunities arise we are
positioned to use our existing infrastructure to support the acquisition and
integration of targeted businesses. An integration team, which includes existing
operational personnel, identifies and completes the various post-acquisition
tasks of integration, including incorporation of desired product features into
our products and consolidation of administrative and financial functions.

    As part of our integration process, we facilitate communications with
acquired businesses through our corporate Intranet and software systems. Our
corporate Intranet connects our regional offices and provides up-to-date and
complete information on our policies and procedures, product descriptions, and
administrative functions along with full e-mail and contact management.

    We believe that our existing infrastructure and our integration practices
and procedures effectively position us to continue the acquisition of new
companies as such opportunities arise.

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:

    - regional service and support;

    - price;

    - product features, functionality and ease of use;

    - ongoing product enhancements; and

    - reputation and stability of the seller.

    We believe that our principal competitive advantage stems from our offerings
of feature-rich products based on an open system architecture designed to meet
our customers' needs, our substantial installed customer base, our focus on
customer support and training programs, and our network of offices.

    Our principal competitors include practice management systems and Internet
companies. Industry competitors include organizations such as WebMD Corporation
(formally Medical Manager Corporation), Infocure Corporation, doing business as
VitalWorks and PracticeWorks, Inc., Medic Computer Systems, Inc., IDX Systems
Corporation, McKessonHBOC, Quality Systems, Inc., Medscape Inc., Dentrix Dental
Systems, Inc., and National Data Corporation. Additionally, within each regional
market there are several smaller competitors who have developed technologically
advanced niche products offered at lower prices. 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 changes in customer requirements than we can. In addition, as
the market for our products develops, additional competitors

                                       10
<PAGE>
may enter the market and competition may intensify, requiring us to lower the
prices of our products and services.

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 any patents on our
products. Employees and 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. 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 patient records 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 patient medical information are evolving rapidly and are often
unclear and difficult to apply.

    HIPAA was enacted on August 21, 1996 and required the Secretary of Health
and Human Services to adopt national standards for the transmission of certain
types of patient medical information and the data elements used in such
transmissions, and to adopt standards to ensure the integrity and
confidentiality of such information.

    On November 3, 1999, the Secretary promulgated proposed regulations designed
to protect the privacy of certain individually identifiable health information
and in December 2000, the Secretary issued the final privacy regulations (the
"Regulations"). The Regulations impose significant regulatory burdens on health
care providers, health plans and health care clearinghouses, as well as these
entities' business associates. Unless modified, the Regulations go into effect
in February 2003. We are in the process of analyzing the Regulations and taking
steps to ensure that we are fully compliant well in advance of their effective
date.

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

                                       11
<PAGE>
to access protected health information, a right to request amendment of
protected health information and a right to request restrictions on
communication of protected health information by covered entities.

    Because we also provide services to many covered entities, we will be
required to enter into written contracts with certain of our customers that
provide assurances that we will appropriately safeguard any protected
information we receive from such customers. The contracts must establish the
permitted and required disclosures of protected information, must preclude use
or further disclosures of the information in a manner that would violate the
Regulations if done by a covered entity and must allow the covered entity to
terminate the contract in the case of a material breach by us. We will be
allowed to use and in certain instances disclose protected information for
proper management and administration of our business, carrying out our legal
responsibilities and other permitted uses. We can disclose protected information
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
expected to be required to make available any protected information we have in
response to proper requests by patients, provide patients with an accounting of
the disclosures and make our internal records relating to compliance available
for inspection by our customers. We are in the process of developing appropriate
contracts and consulting with our customers to develop a set of standard
compliance procedures. 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, 2000, we employed 345 persons, including 40 in sales and
marketing, 169 in customer support services, 71 in product development and 65 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. None of our employees is represented by a labor union. We
have not experienced any work stoppages and consider relations with our
employees to be good.

ITEM 2. PROPERTIES

    We currently lease on a month-to-month basis approximately 2,000 square feet
at our principal executive and corporate headquarters at 3017 Kilgore Road,
Rancho Cordova, California. 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.

                                       12
<PAGE>
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 have now been
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 purport to represent a class of all persons who purchased the
Company's common stock pursuant to its February 15, 2000 IPO. The Plaintiffs
allege that the prospectus pursuant to which the IPO was effected contained
materially false and misleading statements and it did not state that the Company
would be delayed in introducing a new version of its RidgeMark product, and did
not state that sales of its eMCee product would be lower than expected.

    VantageMed has filed a motion to dismiss the consolidated complaint for
failure to state a claim upon which relief can be granted. The motion is
scheduled for hearing in August 2001.

    The proceedings are in the early stages, and no prediction can be made as to
the outcome. The Company believes these actions are without merit and intends to
defend itself against them vigorously.

                                       13
<PAGE>
                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDERS MATTERS

    VantageMed's common stock has been quoted on the Nasdaq National Market
since February 15, 2000 and has traded under the symbol "VMDC." The following
table sets forth the high and low of the average daily bid and ask prices for
our common stock as reported by Nasdaq for the periods indicated:

<TABLE>
<CAPTION>
                                                                    2000
                                                             -------------------
PERIOD                                                       HIGH ($)   LOW ($)
------                                                       --------   --------
<S>                                                          <C>        <C>
First Quarter..............................................   $15.00     $3.50
Second Quarter.............................................   $ 4.00     $1.00
Third Quarter..............................................   $ 4.75     $1.00
Fourth Quarter.............................................   $ 2.25     $0.75
</TABLE>

    As of March 14, 2001, the number of registered holders of our common stock
is 146 and the number of beneficial owners of our common stock is approximately
1,833.

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

USE OF PROCEEDS

    In February 2000, VantageMed Corp. completed an initial public offering
("IPO") of 3 million shares of its common stock. Advest Group, Inc. (an
operating subsidiary of the MONY Group, Inc.) and UBS/Paine Webber (formally
J.C. Bradford & Co.) acted as managing underwriters. The shares of common stock
sold in the IPO were registered under the Securities Act of 1933, as amended, on
a registration statement on Form S-1 (Registration No. 333-91657) that was
declared effective by the Securities and Exchange Commission on February 14,
2000. The IPO commenced on February 15, 2000. All 3 million shares of common
stock registered were sold at a price of $12 per share. The aggregate offering
price of the shares of common stock registered and sold was $36 million. We paid
an aggregate of approximately $2,520,000 in underwriting discounts and
commissions. In addition, the following table itemizes the expenses incurred in
connection with the offering:

<TABLE>
<CAPTION>
                                                                  AMOUNT
                                                              --------------
                                                              (IN THOUSANDS)
<S>                                                           <C>
Securities and Exchange Commission registration fee.........      $   11
National Association of Securities Dealers, Inc. filing
  fee.......................................................           4
Nasdaq National Market listing fee..........................          73
Accountants' fees and expenses..............................       1,245
Legal fees and expenses.....................................         606
Transfer Agent's fees and expenses..........................          23
Printing and engraving expenses.............................         332
Miscellaneous...............................................         146
                                                                  ------
  Total Expenses............................................      $2,440
                                                                  ======
</TABLE>

    None of the amounts shown were paid directly or indirectly to any director
or officer of VantageMed or their associates, persons owning 10 percent or more
of any class of equity securities of VantageMed or an affiliate of VantageMed.

    After deducting the underwriter's discounts and commissions and the offering
expenses, the net proceeds to us from the offering were approximately
$31.0 million. In February 2000 we used

                                       14
<PAGE>
$3,545,000 of these net proceeds to repay outstanding principal and interest due
on 20 promissory notes. Also in February 2000 we used $67,000 of net proceeds to
repay deferred compensation and applicable bonuses for our executive officers
through December 31, 1999. Additionally, out of working capital during the first
quarter 2000, we paid $61,000 of deferred compensation and applicable bonuses
for January 2000 for our executive officers and $93,000 of deferred compensation
for other management members who elected to defer payment during the time period
from December 1999 through January 2000. Additionally, we paid off five
convertible promissory notes totaling $549,000 at the request of the note
holders.

APPLICATION OF NET PROCEEDS

    Since the completion of the IPO in February of 2000, we used approximately
$1.4 million of such net proceeds for product development, approximately
$376,000 on sales and marketing, and $8.9 million for working capital and other
general corporate purposes. The following table set forth the intended use of
our residual net proceeds. We currently anticipate that approximately
$4 million of these proceeds may be used for potential acquisitions. Due to the
change in the financial market and the uncertainty in the healthcare industry,
we decided not to pursue additional acquisitions during the year 2000.

    Final allocation of proceeds depends on numerous factors, including amounts
spent on acquisitions, growth of our business and the need for additional
marketing and development activities. A substantial portion of the net proceeds
have not been allocated to any specific use. We will continue to retain broad
discretion over actual use of these proceeds.

<TABLE>
<CAPTION>
                                                               APPROXIMATE
                                                                  AMOUNT
                                                              --------------
                                                              (IN THOUSANDS)
<S>                                                           <C>
For potential acquisitions..................................     $ 4,000
For increased product development activities................       1,573
For increased sales and marketing activities................       2,624
For working capital and other general corporate purposes....       8,364
                                                                 -------
                                                                 $16,561
                                                                 =======
</TABLE>

ITEM 6. SELECTED FINANCIAL DATA

    The selected consolidated financial data set forth below are derived from
our audited financial statements and should be read in conjunction with our
consolidated financial statements and related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operation"
included in this Form 10-K. The consolidated statement of operations for the
years ended December 31, 1997, 1998, 1999 and 2000, and the consolidated balance
sheets at December 31, 1998, 1999 and 2000 have been audited by Arthur Andersen
LLP, independent public accountants.

                                       15
<PAGE>
                      SELECTED CONSOLIDATED FINANCIAL DATA
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                  ----------------------------------------------------
                                                    1996       1997       1998       1999       2000
                                                  --------   --------   --------   --------   --------
<S>                                               <C>        <C>        <C>        <C>        <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
  Software and systems..........................   $2,056     $2,800    $ 3,943    $  9,429   $  7,736
  Customer support and electronic services......    1,874      2,448      5,430       9,983     16,171
                                                   ------     ------    -------    --------   --------
    Total revenues..............................    3,930      5,248      9,373      19,412     23,907
Operating costs and expenses:
  Software and systems..........................    1,181      1,274      2,146       4,078      2,899
  Customer support and electronic services......      981      1,200      3,606       6,226     10,122
  Selling, general and administrative...........    1,209      2,566      4,706      10,382     15,496
  Product development...........................      287        441      1,500       4,120      5,572
  Depreciation and amortization.................      141        376      1,445       3,873      5,656
  Restructuring, impairment and other charges...       --         --         --          --     12,899
                                                   ------     ------    -------    --------   --------
    Total operating costs and expenses..........    3,799      5,857     13,403      28,679     52,644
                                                   ------     ------    -------    --------   --------
Income (loss) from operations...................      131       (609)    (4,030)     (9,267)   (28,737)
Interest income (expense), net..................       16        (20)      (207)       (948)    (2,282)
                                                   ------     ------    -------    --------   --------
Income (loss) before income taxes...............      147       (629)    (4,237)    (10,215)   (31,019)
Provision (benefit) for income taxes............       64       (195)        --          --         18
                                                   ------     ------    -------    --------   --------
NET INCOME (LOSS)...............................   $   83     $ (434)   $(4,237)   $(10,215)  $(31,037)
                                                   ======     ======    =======    ========   ========
Basic earnings (loss) per share.................   $ 0.07     $(0.27)   $ (1.96)   $  (3.13)  $  (3.84)
Diluted earnings (loss) per share(1)............   $ 0.07     $(0.27)   $ (1.96)   $  (3.13)  $  (3.84)
Weighted-average shares-basic...................    1,255      1,620      2,158       3,262      8,086
Weighted-average shares-diluted(1)..............    1,272      1,620      2,158       3,262      8,086
</TABLE>

<TABLE>
<CAPTION>
                                                                   AS OF DECEMBER 31,
                                                  ----------------------------------------------------
                                                    1996       1997       1998       1999       2000
                                                  --------   --------   --------   --------   --------
<S>                                               <C>        <C>        <C>        <C>        <C>
CONSOLIDATED BALANCE SHEET DATA:
Net working capital.............................   $  251     $  106    $(4,563)   $ (8,012)  $ 13,001
Short-term investments and cash equivalents.....       --         --         --          --     15,451
Long-term investments...........................       --         --         --          --      1,001
Total assets....................................      993      5,165     11,051      36,464     34,189
Long-term debt, net of current portion..........       --      1,501      1,721       2,639      1,155
Accumulated earnings (deficit)..................      199       (267)    (4,578)    (14,793)   (45,830)
Total stockholders' equity (deficit)............     (293)     2,242      2,918      20,492     26,798
</TABLE>

------------------------

(1) Common equivalent shares from preferred stock, stock options, warrants and
    convertible notes have been excluded from the computation of diluted
    earnings (loss) per share in the loss periods of 1997, 1998 and 1999, and,
    common equivalent shares from stock options and warrants have been excluded
    for the loss period of 2000, as their effect in all loss periods is
    antidilutive. Such securities, had they been dilutive, would have been
    included in the computation of diluted net loss per share.

                                       16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

    THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. YOU CAN IDENTIFY THESE STATEMENTS
BY WORDS SUCH AS "EXPECTS," "ANTICIPATES," "INTENDS," "PLANS," "BELIEVES,"
"SEEKS," "ESTIMATES" AND SIMILAR EXPRESSIONS. BECAUSE THESE FORWARD-LOOKING
STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS
FOR A NUMBER OF REASONS, INCLUDING THOSE DISCUSSED UNDER "SPECIAL CAUTIONARY
NOTICE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS" AND ELSEWHERE IN
THIS DOCUMENT.

    YOU SHOULD READ STATEMENTS THAT CONTAIN THESE WORDS CAREFULLY BECAUSE THEY
DISCUSS OUR EXPECTATIONS ABOUT OUR FUTURE PERFORMANCE, CONTAIN PROJECTIONS OF
OUR FUTURE OPERATING RESULTS OR OUR FUTURE FINANCIAL CONDITION, OR STATE OTHER
"FORWARD-LOOKING" INFORMATION. YOU SHOULD CAREFULLY REVIEW THE RISKS DECLARED IN
THIS DOCUMENT UNDER "SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING
STATEMENTS AND RISK FACTORS. YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON
THE FORWARD-LOOKING, STATEMENTS, WHICH SPEAK ONLY AS OF DATE OF THIS ANNUAL
REPORT ON FORM 10-K. WE UNDERTAKE NO OBLIGATION TO PUBLICLY RELEASE ANY
REVISIONS TO THE FORWARD-LOOKING STATEMENTS OR REFLECT EVENTS OR CIRCUMSTANCES
AFTER THE DATE OF THIS DOCUMENT.

OVERVIEW

    VantageMed is a national provider of healthcare information systems and
services. Our strategy is to continue to expand our national distribution
network through the acquisition 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
continue to grow our recurring revenues through the migration of current
customers from legacy systems to our Windows-based, Internet-enabled software
products, electronic services and additional acquisitions, while at the same
time continuing to expand both our market penetration and product offerings.

    Of the 26 business combinations we have completed to date, Healthcare
Information Systems, Inc. and Northern Health Solutions, Inc. were accounted for
as pooling of interests, and therefore, our financial statements include them as
a part of our operations for all periods presented. We acquired four established
regional healthcare information systems companies in 1997, with the first
occurring in July 1997, eight companies in 1998 and fourteen companies in 1999.
We have financed our 26 business combinations to date through the issuance of
approximately 3.1 million shares of common stock, 120,000 shares of Series B
preferred stock, $1.2 million in stock options, $4.3 million in promissory notes
and $1.9 million in cash. We have made no acquisitions in the year 2000 due to
the change in the financial market and the uncertainty in the healthcare
industry.

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

    Our revenues include both recurring and non-recurring revenues. We define
recurring revenues as any revenues derived from an existing or acquired customer
after the initial installation of the product and revenues generated from sales
of new products to existing customers. We consider our non-recurring revenues to
be revenues generated on sales to new customers. We expect the mix of recurring
and non-recurring revenues to fluctuate because of our acquisition activities
and our ability to sell our products to new customers. Over time, we believe
that recurring revenues will continue to represent a large portion of our
overall revenues. Recurring revenue is not a measurement defined by

                                       17
<PAGE>
generally accepted accounting principles (GAAP) and should not be considered an
alternative to, or more meaningful than, revenues as defined by GAAP. All
companies do not calculate recurring revenues in the same manner or at all.
Accordingly, our recurring revenue data may not be comparable with that of other
companies. We have included information concerning recurring revenues because we
believe recurring revenues provides useful information regarding our overall
revenue mix.

    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 are primarily payroll and
related costs to develop new products and enhance existing products.

                               GROSS MARGIN DATA
                     (IN THOUSANDS, EXCEPT PERCENTAGE DATA)

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                                     ----------------------------------------------------
                                                       1996       1997       1998       1999       2000
                                                     --------   --------   --------   --------   --------
<S>                                                  <C>        <C>        <C>        <C>        <C>
SOFTWARE AND SYSTEMS:
  Revenues.........................................   $2,056     $2,800     $3,943     $9,429    $ 7,736
  Cost of revenues.................................    1,181      1,274      2,146      4,078      2,899
                                                      ------     ------     ------     ------    -------
  Gross margin.....................................   $  875     $1,526     $1,797     $5,351    $ 4,837
                                                      ======     ======     ======     ======    =======
  Gross margin percentage..........................     42.6%      54.5%      45.6%      56.8%      62.5%
</TABLE>

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                                     ----------------------------------------------------
                                                       1996       1997       1998       1999       2000
                                                     --------   --------   --------   --------   --------
<S>                                                  <C>        <C>        <C>        <C>        <C>
CUSTOMER SUPPORT AND ELECTRONIC SERVICES:
Revenues...........................................   $1,874     $2,448     $5,430     $9,983    $16,171
Cost of revenues...................................      981      1,200      3,606      6,226     10,122
                                                      ------     ------     ------     ------    -------
Gross margin.......................................   $  893     $1,248     $1,824     $3,757    $ 6,049
                                                      ======     ======     ======     ======    =======
Gross margin percentage............................     47.7%      51.0%      33.6%      37.6%      37.4%
</TABLE>

    Our acquisitions have resulted in significant intangibles and related
amortization. Amortization expenses result from the amortization of intangible
assets. Intangible assets acquired include acquired software, covenants not to
compete, customer lists, assembled workforce and goodwill and has averaged 94.3%
of the consideration paid by VantageMed for an acquisition. Acquired software is
amortized over two to four years depending on the estimated continued use of the
software product acquired. Covenants not to compete are amortized over two to
five years, representing the life of such agreements. Customer lists are
amortized over two to ten years, representing the estimated future life of
customer relationships. Assembled workforce is amortized over one to ten years,
depending upon the average length of employment for the employees of those
companies we have acquired. Goodwill is amortized over two to ten years
depending upon whether the acquisition is established as a new regional office
or is consolidated into an existing regional office; and whether or not there is
continuing sales of the software purchased in the acquisition. We periodically
review whether there has been a permanent impairment of its long-lived assets,
in accordance with Statement of Financial Accounting Standards No. 121. In 2000,
we recorded an impairment charge of $11,935,000 for the impairment of these
intangibles.

                                       18
<PAGE>
    Depreciation expenses also include depreciation of property and equipment
over their useful lives, which range from three to seven years. Depreciation
expenses are not material to our operating results. In 2000, we recorded a
$750,000 net write-off of property and equipment.

    We have invested approximately $12.2 million in product development since
our inception. These funds have been primarily invested in our window-based,
internet-enabled products. The costs have been expensed as incurred.

    As of December 31, 2000, we had a post-acquisition federal and state net
operating loss carry forward benefit of approximately $10.5 million available to
offset future income tax, if any. These benefits will begin to expire
incrementally at various dates ending in 2021.

    Since July 1997, we have developed a customer base of over 11,000 sites
through both acquisitions and internal growth. We expect our revenues to
increase through both internal growth and acquisitions in the future. We believe
that migration of current and acquired customers to our Windows-based,
Internet-enabled products and the development and marketing of these products to
new and existing customers 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. We recognize revenues from software license fees in accordance
with American Institute of Certified Public Accountants Statement of Position
97-2. Software license fees are recognized as revenues upon delivery of our
software products to our customers, as long as evidence of an arrangement
exists, the amounts of fees are fixed and determinable and the collection of the
resulting receivable is probable. Computer hardware and supplies revenues are
recognized upon product shipment. Revenues from support and maintenance
contracts are recognized ratably over the life of the contract. Revenues from
other services are recognized as the services are provided.

    Our strategy is to acquire companies with technology that will enhance our
overall product offerings or companies that build regional market penetration in
support of our national distribution channel. Our acquisitions have produced an
established distribution channel of regional offices nationwide, provided us
access to an existing customer base, new product offerings, and helped us to
build our management team. No acquisitions were completed during the year 2000.

    As we continue to grow, internally and by acquisitions, we expect our
operating expenses as a percentage of sales to decrease. Additionally, in June
of 2000 we implemented a restructuring plan to improve our future operating
results.

                                       19
<PAGE>
RESULTS OF OPERATIONS

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

                SELECTED CONSOLIDATED FINANCIAL DATA PERCENTAGES

<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                    ----------------------------------------------------
                                                      1996       1997       1998       1999       2000
                                                    --------   --------   --------   --------   --------
<S>                                                 <C>        <C>        <C>        <C>        <C>
Revenues:
  Software and systems............................    52.3%      53.4%       42.1%      48.6%      32.4%
  Customer support and electronic services........    47.7       46.6        57.9       51.4       67.6
                                                     -----      -----      ------     ------    -------
    Total revenues................................   100.0      100.0       100.0      100.0      100.0
Operating costs and expenses:
  Software and systems............................    30.1       24.3        22.9       21.0       12.1
  Customer support and electronic services........    25.0       22.9        38.5       32.1       42.3
  Selling, general & administrative...............    30.8       48.9        50.2       53.5       64.8
  Product development.............................     7.3        8.4        16.0       21.2       23.3
  Depreciation and amortization...................     3.6        7.2        15.4       20.0       23.7
  Restructuring, impairment and other charges.....      --         --          --         --       54.0
                                                     -----      -----      ------     ------    -------
    Total costs and operating expenses............    96.8      111.7       143.0      147.8      220.2
Income (loss) from operations.....................     3.2      (11.7)      (43.0)     (47.8)    (120.2)
Interest income (expense), net....................     0.4       (0.4)       (2.2)      (4.9)      (9.5)
                                                     -----      -----      ------     ------    -------
Income (loss) before income taxes.................     3.6      (12.1)      (45.2)     (52.7)    (129.7)
Income taxes......................................     1.6       (3.7)         --         --        0.1
                                                     -----      -----      ------     ------    -------
    Net income (loss).............................     2.0%      (8.4)%     (45.2)%    (52.7)%   (129.8)%
                                                     =====      =====      ======     ======    =======
</TABLE>

YEAR ENDED DECEMBER 31, 1999 COMPARED TO DECEMBER 31, 2000

    A portion of the variances between the year ended December 31, 1999 and the
corresponding year of 2000 are attributable to our acquisition activity. During
the year ended December 31, 1999, we completed fourteen business combinations,
all of which were accounted for using the purchase method of accounting.
Therefore, revenues and expenses from these companies were only included for a
portion of the year ended December 31, 1999, but were included in the entire
year ended December 31, 2000. Due to a change in the financial market and the
uncertainty in the healthcare industry, there were no acquisitions for the year
ended December 31, 2000.

    REVENUES.  Total revenues increased 23.2% from $19.4 million for the year
ended December 31, 1999 to $23.9 million for the year ended December 31, 2000.
The revenue increase primarily resulted from the increase in customer support
and electronic service revenues. Recurring revenues increased 27.3% from
$15.3 million for the year ended December 31, 1999 to $19.5 million in the
corresponding year of 2000, while non-recurring revenues increased 7.8% from
$4.1 million in for the year December 31, 1999 to $4.4 million in the
corresponding year of 2000.

        SOFTWARE AND SYSTEMS.  The software and systems component of total
    revenues decreased 18.0% from $9.4 million, or 48.6% of total revenues for
    the year ended December 31, 1999 to $7.7 million, or 32.4% of total revenues
    in the corresponding year of 2000. Software and systems revenues consist of
    software licensing revenues and revenues from the sale of computer hardware
    and supplies. Software licensing revenues were 50.0% and 57.8% and computer
    hardware and supply revenues were 50.0% and 42.2% of total software and
    systems revenues for the years ended

                                       20
<PAGE>
    December 31, 1999 and 2000, respectively. The decrease in software and
    systems revenue was primarily due to general market softness in the year
    2000 for new systems. Additionally, in 1999, we experienced growth in
    hardware revenue as a result of customers upgrading their hardware in
    anticipation of year 2000 compliance.

        Revenues from software licensing decreased 5.0% from $4.7 million for
    the year ended December 31, 1999 to $4.5 million for the year 2000. Legacy
    product sales were 55.4% of software licensing revenues for the year ended
    December 31, 1999 compared to 56.6% in the corresponding year of 2000. New
    product sales were 44.6% of software licensing revenues for the year ended
    December 31, 1999 compared to 43.4% in the corresponding year of 2000. The
    gross profit for software licensing revenues decreased 5.6% from
    $4.1 million for the year ended December 31, 1999 to $3.9 million in the
    corresponding year of 2000.

        Revenues from computer hardware and supplies decreased 30.9% from
    $4.7 million for the year ended December 31, 1999 to $3.3 million in the
    corresponding year of 2000. The gross profit from computer hardware and
    supplies revenues decreased 23.3% from $1.2 million for the year ended
    December 31, 1999 to $937,000 in for the corresponding year of 2000.

        CUSTOMER SUPPORT AND ELECTRONIC SERVICES.  The customer support and
    electronic services component of total revenues increased 62.0% from
    $10.0 million, or 51.4% of total revenues in the year ended December 31,
    1999, to $16.2 million, or 67.6% of total revenues in the corresponding year
    of 2000. Customer support revenues are derived from software maintenance and
    customer service, network and computer hardware support, training, data
    conversion and system installation. Electronic services revenues are
    generated by electronic claims processing and electronic statement printing
    and mailing. Customer support revenues were 88.6% and 78.6% and electronic
    services revenues were 11.4% and 21.4% of total customer support and
    electronic services revenues for the years ended December 31, 1999 and 2000,
    respectively. Approximately 72% of the increase in customer support and
    electronic services was due to the revenue derived in 2000 from the
    acquisitions completed throughout 1999. The remaining 28% increase was due
    to internal growth.

        Revenues from customer support increased 43.8% from $8.8 million for the
    year ended December 31, 1999 to $12.7 million in the corresponding year of
    2000. The gross profit for customer support revenues increased 54.8% from
    $3.0 million for the year ended December 31, 1999 to $4.7 million in the
    corresponding year of 2000.

        Revenues from electronic services increased 202.8% from $1.1 million for
    the year ended December 31, 1999 to $3.5 million in the corresponding year
    of 2000. The gross profit for electronic services revenues increased 87.3%
    from $717,000 for the year ended December 31, 1999 to $1.3 million in the
    corresponding year of 2000.

COST OF REVENUES.  Total cost of revenues increased 26.4% from $10.3 million for
the year ended December 31, 1999 to $13.0 million in the corresponding year of
2000, and increased as a percentage of total revenues from 53.1% for the year
ended December 31, 1999 to 54.5% in the corresponding year of 2000.

        SOFTWARE AND SYSTEMS.  Software and systems costs include both software
    licensing costs and computer hardware and supplies. Software and systems
    costs decreased 28.9% from $4.1 million or 21.0% of total revenues for the
    year ended December 31, 1999 to $2.9 million, or 12.1% of total revenues in
    the corresponding year of 2000. Software licensing costs were 14.3% and
    19.8%, and computer hardware and supplies costs were 85.7% and 80.2% of
    total software and systems costs for the year ended December 31, 1999 and
    2000, respectively. The decrease in cost is primarily related to the
    decrease in revenue.

        Costs for software licensing decreased 1.4% from $583,000, or 3.0% of
    total revenues in the year ended December 31, 1999 to $575,000, or 2.4% of
    total revenues in the corresponding year of

                                       21
<PAGE>
    2000. The decrease is due to a change in the mix of products and services
    sold. Gross margin percentage for software licensing was 87.6% for the year
    ended December 31, 1999, compared to 87.2% for the corresponding year of
    2000.

        Costs for computer hardware and supplies decreased 33.5% from
    $3.5 million or 18.0% of total revenues in the year ended December 31, 1999
    to $2.3 million, or 9.7% of total revenues in the corresponding year of
    2000. The decrease as a percent of total revenues is due to a change in the
    mix of product and services sold. Gross margin percentage for computer
    hardware and supplies increased from 25.9% for the year ended December 31,
    1999 to 28.7% in the corresponding year of 2000.

        CUSTOMER SUPPORT AND ELECTRONIC SERVICES.  Customer support and
    electronic services costs increased 62.6% from $6.2 million, or 32.1% of
    total revenues in the year ended December 31, 1999 to $10.1 million, or
    42.3% of total revenues in the corresponding year of 2000. Customer support
    costs were 93.2% and 79.1%, and electronic services costs were 6.8% and
    20.9% of total customer support and electronic services costs for the year
    ended December 31, 1999 and 2000, respectively. The increase in cost is
    primarily related to the increase in revenue.

        Costs for customer support increased 38.0% from $5.8 million, or 29.9%
    of total revenues in the year ended December 31, 1999 to $8.0 million, or
    33.5% of total revenues in the corresponding year of 2000. The customer
    support costs increased primarily due to revenue and cost increases from
    acquisitions. The customer support gross margin percentage increased from
    34.4% for the year ended December 31, 1999 to 37.0% in the corresponding
    year of 2000, primarily due to operational efficiencies derived from a
    reduction in staff as part of the Company's restructuring plan implemented
    in the second quarter of 2000 and the discontinuance of certain legacy
    products throughout the year.

        Costs for electronic services increased 398.0% from $425,000, or 2.2% of
    total revenues in the year ended December 31, 1999 to $2.1 million, or 8.8%
    of total revenues, in the corresponding year of 2000. The electronic
    services gross margin percentage decreased from 62.8% for the year ended
    December 31, 1999 to 38.8% in the corresponding year of 2000. Decrease in
    gross margin was due to revenue growth in product with a lower gross margin
    percentage.

SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and administrative
expenses increased 49.3% from $10.4 million, or 53.5% of total revenues for the
year ended December 31, 1999, to $15.5 million, or 64.8% of total revenues in
the corresponding year of 2000. Of the $5.1 million increase, selling expenses,
corporate administration, and regional distribution channel expenses increased
approximately $1.2 million, $1.4 million, and $2.5 million, respectively. The
$1.2 million increase in selling expenses is the direct result of selling costs
of the acquired distribution channel. The $1.4 million increase in corporate
administration expenses resulted from a full year of salaries in 2000 from
acquired companies compared to a partial year in 1999 due to the timing of
acquisitions, and the building of corporate staff and infrastructure. The
$2.5 million increase in regional distribution channel expenses resulted from
regional operating costs directly related to our acquired distribution channel.

PRODUCT DEVELOPMENT.  Product development expenses increased 35.2% from
$4.1 million or 21.2% of total revenues for the year ended December 31, 1999, to
$5.6 million, or 23.3% of total revenues in the corresponding year of 2000. The
dollar and percentage increases were due primarily to a full year of staffing
costs in 2000 from acquired companies, compared to a partial year of these costs
in 1999 due to the timing of acquisitions, and related costs necessary for
development of our new products.

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expenses increased
46.0% from $3.9 million or 20.0% of total revenues, for the year ended
December 31, 1999, to $5.7 million, or 23.7% of total revenues, in the
corresponding year of 2000. Of these amounts, amortization expenses were
$3.0 million for the year ended December 31, 1999 and $4.7 million in the
corresponding year of

                                       22
<PAGE>
2000. At December 31, 2000, we had intangible assets totaling $21.3 million with
accumulated amortization of $9.3 million. The weighted average life of these
intangibles was 7.5 years.

RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES.  Due to a change in business
conditions and the operating results at that time, in June of 2000 we
implemented a restructuring plan to improve our future operating results.
Additionally, we perform periodic reviews of the recoverability of our
intangible assets and property and equipment. During the year, these reviews
resulted in the Company recording an impairment of certain intangible assets and
software rights. We incurred non-recurring charges of $12.9 million associated
with the restructuring plan, impairment of certain intangibles and software
rights. These charges were primarily associated with older legacy software
products that were being discontinued, a charge for write-off of purchased
software that has become obsolete and the payment to employees for severance
agreements and costs associated with closing a regional office and combining two
regional offices.

INTEREST INCOME (EXPENSE), NET.  Interest expense increased from $948,000, or
4.9% of total revenues for the year ended December 31, 1999 to $2.3 million, or
9.5% of total revenues in the corresponding year of 2000. The percentage and
dollar increases primarily resulted from a non-cash interest charge for the
beneficial conversion feature of a promissory note and the amortization of the
fair value of warrants, totaling $3.1 million, interest expense on debt of
$428,000, offset by interest income earned on our investment securities of
$1.2 million.

INCOME TAXES.  No tax benefit was recorded for the years ended December 31, 1999
and 2000. In 2000, we recorded $18,000 to recognize the minimum tax liability in
several states that required such payment. The acquiring companies
acquisition-date net operating loss carryovers were greater than the additional
deferred tax liabilities that were recorded in connection with the purchase of
intangibles other than goodwill. In accordance with Statement of Financial
Accounting Standards No. 109 (SFAS 109) "Accounting for Income Taxes," we
recorded a valuation allowance to fully offset any potential tax benefit
associated with its post-acquisition net operating losses.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO DECEMBER 31, 1999

    A majority of the variances between the year ended December 31, 1998 and the
corresponding year of 1999 is attributable to our acquisition activity. During
the year ended December 31, 1998, we completed eight business combinations, six
of which were accounted for using the purchase method of accounting and two
accounted for as pooling of interests. Therefore, revenues and expenses from the
companies acquired using the purchase method were only included for a portion of
the year ended December 31, 1998, but were included in the entire year ended
December 31, 1999. In addition, fourteen companies were acquired using purchase
accounting during 1999, resulting in additional revenues and expenses for the
year ended December 31, 1999 that were not present in the corresponding year of
1998.

REVENUES.  Total revenues increased 107.1% from $9.4 million in the year ended
December 31, 1998 to $19.4 million in the corresponding year of 1999. Of this
$10.0 million increase, $8.0 million was attributable to additional revenues
from acquisitions and the remaining $2.0 million was attributable to internal
growth. Recurring revenues increased 104.3% from $7.5 million in the year ended
December 31, 1998 to $15.3 million in the corresponding year of 1999, while
non-recurring revenues increased 115.4% from $1.9 million in the year ended
December 31, 1998 to $4.1 million in the corresponding year of 1999.

        SOFTWARE AND SYSTEMS.  The software and systems component of total
    revenues increased 139.1% from $3.9 million, or 42.1% of total revenues for
    the year ended December 31, 1998 to $9.4 million, or 48.6% of total revenues
    in the corresponding year of 1999. Software and systems revenues consist of
    software licensing revenues and revenues from the sale of computer hardware
    and supplies. Software licensing revenues were 38.0% and 50.0% and computer
    hardware and

                                       23
<PAGE>
    supply revenues were 62.0% and 50.0% of total software and systems revenues
    for the year ended December 31, 1998 and 1999, respectively. Approximately
    $4.3 million of the increase in software and systems revenues was due to
    acquisitions, and the remaining $1.1 million was due to our internal growth.

        Revenues from software licensing increased 214.8% from $1.5 million for
    the year ended December 31, 1998 to $4.7 million for the same year in 1999.
    Legacy product sales were 55.4% of software licensing revenues for the year
    ended December 31, 1999 compared to 85.8% in the corresponding year of 1998.
    New product sales were 44.6% of software licensing revenues for the year
    ended December 31, 1999 compared to 14.2% in the corresponding year of 1999.
    The gross profit for software licensing revenues increased 211.2% from
    $1.3 million for the year ended December 31, 1998 to $4.1 million in the
    corresponding year of 1999.

        Revenues from computer hardware and supplies increased 92.8% from
    $2.4 million for the year ended December 31, 1998 to $4.7 million in the
    corresponding year of 1999. The gross profit for computer hardware and
    supplies revenues increased 159.8% from $470,000 for the year ended
    December 31, 1998 to $1.2 million in the corresponding year of 1999.

        CUSTOMER SUPPORT AND ELECTRONIC SERVICES.  The customer support and
    electronic services component of total revenues increased 83.8% from
    $5.4 million, or 57.9% of total revenues in the year ended December 31,
    1998, to $10.0 million, or 51.4% of total revenues in the corresponding year
    of 1999. Customer support revenues are derived from software maintenance and
    customer service, network and computer hardware support, training, data
    conversion and system installation. Electronic services revenues are
    generated by electronic insurance claims processing, electronic statement
    printing and mailing and electronic remittance advices. Customer support
    revenues were 89.7% and 88.6% and electronic services revenues were 10.3%
    and 11.4% of total customer support and electronic services revenues for the
    year ended December 31, 1998 and 1999, respectively. Approximately
    $3.7 million of the increase in customer support and electronic services was
    due to acquisitions. The remaining $927,000 of the increase was due to
    internal growth.

        Revenues from customer support increased 81.4% from $4.9 million for the
    year ended December 31, 1998 to $8.8 million in the corresponding year of
    1999. The gross profit for customer support revenues increased 101.5% from
    $1.5 million for the year ended December 31, 1998 to $3.0 million in the
    corresponding year of 1999.

        Revenues from electronic services increased 105% from $557,000 for the
    year ended December 31, 1998 to $1.1 million in the corresponding year of
    1999. The gross profit for electronic services revenues increased 127.6%
    from $315,000 for the year ended December 31, 1998 to $717,000 in the
    corresponding year of 1999.

COST OF REVENUES.  Total cost of revenues increased 79.1% from $5.8 million for
the year ended December 31, 1998 to $10.3 million in the corresponding year of
1999, but decreased as a percentage of total revenues from 61.4% for the year
ended December 31, 1998 to 53.1% in the corresponding year of 1999.

        SOFTWARE AND SYSTEMS.  Software and systems costs include both software
    licensing costs and computer hardware and supplies. Software and systems
    costs increased 90.0% from $2.1 million or 22.9% of total revenues for the
    year ended December 31, 1998 to $4.1 million, or 21.0% of total revenues in
    the corresponding year of 1999. Software licensing costs were 7.9% and
    14.3%, and computer hardware and supplies costs were 92.1% and 85.7% of
    total software and systems costs for the year ended December 31, 1998 and
    1999, respectively.

        Costs for software licensing increased 242.9% from $170,000, or 1.8% of
    total revenues in the year ended December 31, 1998 to $583,000, or 3.0% of
    total revenues in the corresponding year of 1999. The decrease as a percent
    of total revenues is due to a change in the mix of products and

                                       24
<PAGE>
    services sold. The gross margin percentage for new products was 95.1% and
    87.6% for the year ended December 31, 1998 and 1999, respectively. The gross
    margin percentage for legacy products was 87.6% and 87.7% for the year ended
    December 31, 1998 and 1999, respectively.

        Costs for computer hardware and supplies increased 76.9% from
    $2.0 million, or 21.1% of total revenues in the year ended December 31, 1998
    to $3.5 million, or 18.0% of total revenues in the corresponding year of
    1999. The decrease as a percent of total revenues is due to a change in the
    mix of product and services sold. Gross margin percentage for computer
    hardware and supplies increased from 19.2% for the year ended December 31,
    1998 to 25.9% in the corresponding year of 1999.

        CUSTOMER SUPPORT AND ELECTRONIC SERVICES.  Customer support and
    electronic services costs increased 72.7% from $3.6 million, or 38.5% of
    total revenues in the year ended December 31, 1998 to $6.2 million, or 32.1%
    of total revenues in the corresponding year of 1999. Customer support costs
    were 93.3% and 93.2%, and electronic services costs were 6.7% and 6.8% of
    total customer support and electronic services costs for the year ended
    December 31, 1998 and 1999, respectively.

        Costs for customer support increased 72.4% from $3.4 million or 35.9% of
    total revenues, in the year ended December 31, 1998 to $5.8 million, or
    29.9% of total revenues in the corresponding year of 1999. The customer
    support gross margin percentage increased from 31.0% for the year ended
    December 31, 1998 to 34.4% in the corresponding year of 1999, primarily due
    to acquisitions.

        Costs for electronic services increased 75.6% from $242,000, or 2.6% of
    total revenues, in the year ended December 31, 1998 to $425,000, or 2.2% of
    total revenues, in the corresponding year of 1999. The electronic services
    gross margin percentage increased from 56.6% for the year ended
    December 31, 1998 to 62.8% in the corresponding year of 1999.

SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and administrative
expenses increased 120.6% from $4.7 million, or 50.2% of total revenues for the
year ended December 31, 1998, to $10.4 million, or 53.5% of total revenues in
the corresponding year of 1999. Of the $5.7 million increase, selling expenses,
corporate administration, and regional distribution channel expenses increased
approximately $400,000, $1.1 million, and $4.2 million, respectively. The
$1.1 million increase in corporate administration expenses resulted from
increases in headcount and the building of corporate staff and infrastructure.
The $4.2 million increase in regional distribution channel expenses resulted
from regional operating costs directly related to our acquired distribution
channel.

PRODUCT DEVELOPMENT.  Product development expenses increased from $1.5 million,
or 16.0% of total revenues for the year ended December 31, 1998, to
$4.1 million, or 21.2% of total revenues in the corresponding year of 1999. The
dollar and percentage increases were due primarily to additional staffing and
related costs necessary for development of our new products.

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expenses increased
from $1.4 million, or 15.4% of total revenues, for the year ended December 31,
1998, to $3.9 million, or 20.0% of total revenues, in the corresponding year of
1999. Of these amounts, amortization expenses were $1.3 million for the year
ended December 31, 1998 and $3.0 million in the corresponding year of 1999. At
December 31, 1999, we had intangible assets totaling $33.0 million with
accumulated amortization of $4.6 million. The weighted average life of these
intangibles was 8.5 years.

INTEREST INCOME (EXPENSE), NET.  Interest expense increased from $207,000, or
2.2% of total revenues for the year ended December 31, 1998 to $948,000, or 4.9%
of total revenues in the corresponding year of 1999. The percentage and dollar
increases primarily resulted from interest expense associated with indebtedness
incurred to complete our acquisitions.

                                       25
<PAGE>
INCOME TAXES.  No tax benefit was recorded for the years ended December 31, 1998
and 1999. The acquiring companies acquisition-date net operating loss carryovers
were greater than the additional deferred tax liabilities that were recorded in
connection with the purchase of intangibles other than goodwill. In accordance
with SFAS 109 "Accounting for Income Taxes," we recorded a valuation allowance
to fully offset any potential tax benefit associated with its post-acquisition
net operating losses.

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 82.0% 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.

    In January 2000, we borrowed $700,000 through Friedli Corporate Finance, an
entity controlled by one of our Directors. The outstanding principal plus
interest on this note was repaid in February 2000 with proceeds from our IPO.

    In January 2000, we borrowed $500,000 at an interest rate of 12% from one of
our vendors with a maturity date the earlier of ten days following the
completion of the IPO or December 31, 2000. This balance was paid off in
February 2000 with proceeds from the IPO.

    In February 2000, we completed an initial public offering of common stock,
which resulted in net proceeds of approximately $31.0 million. At December 31,
2000, we had $17.3 million in cash and short-term and long-term investments,
compared to $250,000 at December 31, 1999.

    Net cash used for operating activities was $9.5 million, $9.3 million and
$298,000 for the years ended December 31, 2000, 1999 and 1998, respectively. Net
cash used in operating activities for the year ended December 31, 2000 related
to the net loss for the period offset primarily by an increase in depreciation
and amortization expense, impairment of certain intangibles, the recognition of
a non-cash interest charge for the beneficial conversion feature of a promissory
note, the amortization of the fair value of warrants and the loss on disposal of
property and equipment. Net cash used in operating activities for the years
ended December 31, 1999 and 1998 related to the net loss for the period, which
was offset primarily by depreciation and amortization expense.

    Net cash used for investing activities was $14.3 million for the year ended
December 31, 2000 and consisted primarily of the purchases of higher-yield
short-term and long-term investments, as well as the purchase of computers and
office equipment used in our regional offices. Net cash provided by investing
activities in 1999 consisted primarily of cash received from businesses acquired
offset slightly by purchases of property and equipment. Net cash used for
investing activities in 1998 consisted primarily of purchases of property and
equipment offset slightly by cash received from businesses acquired.

    Net cash provided by financing activities was $27.3 million, $6.2 million
and $1.4 million for the year ended December 31, 2000, 1999 and 1998,
respectively. Financing activities for the year ended December 31, 2000
consisted of $31.0 million in net proceeds from the issuance of common stock,
$1.2 million in issuance of long-term debt, and $4.9 million in payments of
long-term debt. Cash provided by financing activities for the year ended
December 31, 1999 related primarily to the issuance of preferred stock and
proceeds from issuance of long-term debt. Cash provided by financing activities
for the year ended December 31, 1998 related primarily to the proceeds from
issuance of long-term debt.

    In addition, at December 31, 2000 we had $506,000 in capital leases
primarily for computers and office equipment, most of which we assumed in
connection with acquisitions. In addition, we had $1.2 million in assumed debt
or promissory notes issued in connection with acquisitions that was

                                       26
<PAGE>
outstanding at December 31, 2000. Interest rates on the promissory notes range
from non-interest bearing to 10.75%. Future minimum payments under debt and
lease obligations (capital and operating) for 2001, 2002, 2003, 2004, 2005 and
thereafter are $1.7 million, $1.2 million, $1.0 million, $694,000, $481,000 and
$147,000, respectively.

    Prior to the IPO, we operated with negative working capital and with
negative cash flow. Since the IPO, we have eliminated our negative working
capital position. However, the negative cash flow from operations has continued,
and is expected to continue, until we expand our cross-selling of new products
and add-on services to our existing customer base. In addition, we implemented a
restructuring plan in June 2000 to improve our future operating results.

    We believe that our cash, short-term and long-term investments will be
sufficient to meet our cash flow needs through at least December 2001.

RECENT ACCOUNTING PRONOUNCEMENTS

    See Note 2 of Notes to Consolidated Financial Statements for the recent
accounting pronouncements.

                                       27
<PAGE>
FORWARD-LOOKING STATEMENTS AND RISK FACTORS

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS AND RISK
  FACTORS--

    THIS ANNUAL REPORT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), WHICH ARE INTENDED TO BE
COVERED BY THE SAFE HARBORS CREATED THEREBY. INVESTORS ARE CAUTIONED THAT
FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. ALTHOUGH WE BELIEVE
THAT THE ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN
ARE REASONABLE, ANY OF THE ASSUMPTIONS COULD BE INACCURATE AND THEREFORE, THERE
CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS WILL PROVE TO BE
ACCURATE. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE
FORWARD-LOOKING STATEMENTS INCLUDED HEREIN, THE INCLUSION OF SUCH INFORMATION
SHOULD NOT BE REGARDED AS A REPRESENTATION BY US OR ANY OTHER PERSON THAT OUR
OBJECTIVES AND PLANS WILL BE ACHIEVED. WE ARE NOT OBLIGATED AND EXPRESSLY
DISCLAIM ANY OBLIGATION, TO UPDATE ANY FORWARD-LOOKING STATEMENTS.

    WE ARE SUBJECT TO VARIOUS RISK FACTORS, MANY OF WHICH ARE OUTSIDE OF OUR
CONTROL, THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER FROM THOSE EXPRESSED IN
FORWARD-LOOKING STATEMENTS MADE BY US THROUGHOUT THIS REPORT AND ELSEWHERE. ALL
STATEMENTS WHICH ADDRESS OPERATING PERFORMANCE, EVENTS OR DEVELOPMENTS THAT WE
EXPECT OR ANTICIPATE WILL OCCUR IN THE FUTURE, INCLUDING STATEMENTS RELATING TO
EXPECTED FUTURE OPERATING RESULTS AND FUTURE FINANCIAL CONDITIONS OR STATEMENTS
EXPRESSING GENERAL OPTIMISM ABOUT FUTURE OPERATING RESULTS, ARE FORWARD-LOOKING
STATEMENTS. THE FOLLOWING ARE THE IMPORTANT FACTORS WHICH MAY CAUSE ACTUAL
RESULTS TO DIFFER FROM THOSE EXPRESSED IN SUCH FORWARD-LOOKING STATEMENTS.

RISKS ASSOCIATED WITH OUR BUSINESS

WE HAVE A LIMITED OPERATING HISTORY, A HISTORY OF LOSSES, EXPECT OUR
EXPENDITURES TO INCREASE AND OUR LOSSES TO CONTINUE, AND MAY NEVER ACHIEVE
PROFITABILITY

    We have incurred operating losses since we became a Delaware corporation in
April 1997. We operated and continue to operate with a negative cash flow. Since
1997, we have incurred aggregate net losses of $45.9 million, of which
$11.3 million was amortization and depreciation, $11.9 million for the
impairment of intangibles and $750,000 for the net write-off of software
purchased for internal use that will no longer be used by the Company. Our
business strategies may not be successful and we may not be able to achieve or
sustain revenue growth or profitability.

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 WE FAIL TO INTERNET-ENABLE OUR PRODUCTS IN A TIMELY FASHION WE MAY LOSE OUR
MARKET OPPORTUNITY AND MAY BE UNABLE TO ACHIEVE OR SUSTAIN REVENUE GROWTH AND
PROFITABILITY

    Not all of our Windows-based products are Internet-enabled and those that
are have not been tested in the market for any substantial length of time. If we
fail to Internet-enable our products in a timely manner we may lose market share
opportunities to competitors and may be unable to increase our revenues or to
obtain profitability in the near term or at all.

                                       28
<PAGE>
OUR RESTRUCTURING PROGRAM MAY NOT BE SUCCESSFUL

    During the second quarter of 2000, we developed and implemented a
restructuring program designed to cut Company costs and overhead. The
restructuring program has included, among other things, the consolidation of
offices, the centralization of our technology centers, staff reductions, and the
phasing out of older products and product lines. There can be no assurances that
our restructuring program will result in cost reductions, and the phasing out of
products may result in decreased revenues if customers currently using those
products do not convert to our new product offerings.

IF THE EXPANSION OF THE INTERNET AND INTERNET SERVICES IN THE HEALTHCARE
INFORMATION TECHNOLOGY INDUSTRY SECTOR CONTINUES ON A SLOW PACE, WE MAY BE
UNABLE TO ACHIEVE OR SUSTAIN REVENUE GROWTH AND PROFITABILITY FROM THE INTERNET

    Our current systems and anticipated future services are dependent on the use
of the Internet. To the extent that the use of the Internet does not further
penetrate the healthcare information technology industry our ability to realize
revenue from Internet 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 AND LOSS OF
REVENUE AND INJURE OUR BUSINESS REPUTATION

    The performance of our Internet-enabled 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 related equipment has experienced periodic operational problems,
delays or outages. In 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 lead to customer dissatisfaction, delays in market
acceptance of our products, injury to our business reputation and a loss of
revenue.

WE MAY BECOME SUBJECT TO STATE, FEDERAL OR FOREIGN TAXES THAT COULD HARM OUR
BUSINESS

    We do not currently collect sales or other similar taxes with respect to
revenues from consumers in states other than the state of origin. However, one
or more states may seek to impose sales tax collection obligations on
out-of-state companies, similar to ours. Expansion of our operations into such
states could subject revenues from these states to state sales taxes under
current laws. In addition, a federal or foreign tax may potentially be imposed
on products and services sold over the Internet. A successful assertion by one
or more states or any foreign country that we should collect sales or other
taxes on the sale of merchandise or the imposition of federal taxes could
seriously harm our business.

    On October 21, 1998, the Internet Tax Freedom Act was signed into law
placing a three-year moratorium on new state and local taxes on e-commerce in
the United States. The moratorium is expected to end on October 21, 2001.
Failure to renew this legislation could result in the broad imposition of state
and local taxes on e-commerce, which could seriously harm our business.

IF SECURITY AND LEGAL LIABILITY CONCERNS MAKE CUSTOMERS UNWILLING TO UTILIZE OUR
PRODUCTS AND SERVICES TO TRANSMIT MEDICAL INFORMATION OVER THE INTERNET, 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 Internet-enabled software
products because of concerns related to the transfer and management of medical
information over the Internet, including: security of the patient medical
records being transferred through the Internet; errors in the

                                       29
<PAGE>
transmission of sensitive medical data over the Internet; legal liability for
data security failures or transmission errors; and regulatory burdens imposed on
healthcare participants who use the Internet to transfer confidential patient
medical information.

    If these concerns prevent potential customers from buying our products and
prevent existing customers from upgrading to our Internet-enabled 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
confidential medical information 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.

CONCERNS RELATED TO THE INFRASTRUCTURE, SPEED AND RELIABILITY OF THE INTERNET
COULD DIMINISH THE DEMAND FOR AND DELAY MARKET ACCEPTANCE OF OUR PRODUCTS AND
COULD KEEP US FROM BECOMING PROFITABLE

    The Internet may fail to become a viable mechanism for the delivery,
exchange and management of healthcare information due to a number of factors
that are out of our control, including: communication speed; reliability of
Internet service; Internet capacity; lack of development of complementary
products, such as communication devices; and delays in the development or
adoption of new standards and protocols required to handle increased levels of
Internet activity.

    If concerns about such factors prevent potential customers from buying our
products and/or prevent existing customers from upgrading to our
Internet-enabled products, our Internet-enabled products may not gain market
acceptance, our sales revenues may not increase and we may be unable to achieve
or sustain profitability.

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 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 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.

                                       30
<PAGE>
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.

OUR NEED FOR ADDITIONAL FINANCING IS UNCERTAIN, AS IS OUR ABILITY TO RAISE
FURTHER FINANCING, IF REQUIRED

    We may need to raise additional funds to respond to business contingencies
which may include the need to: cover unexpected losses; fund more rapid
expansion; fund additional marketing expenditures; enhance our operating
infrastructure; respond to competitive pressures; or acquire or develop
complementary businesses or necessary technologies.

    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, you will experience dilution in your 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.

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

                                       31
<PAGE>
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 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.

OUR FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO DISPOSE
OF THE PENDING LITIGATIONS THROUGH PRE-TRIAL MOTIONS OR BY MEANS OF A SETTLEMENT
WITHIN A RANGE THAT THE COMPANY CAN AFFORD

    The proceedings are in the early stages, and no prediction can be made as to
the outcome. We believe these actions are without merit and intend to defend
ourselves against them vigorously.

RISKS ASSOCIATED WITH OUR ACQUISITION STRATEGY

IF WE FAIL TO IDENTIFY OR NEGOTIATE THE PURCHASE OF COMPLEMENTARY ACQUISITION
CANDIDATES OR IF COMPETITION FOR SUCH CANDIDATES INCREASES, WE MAY BE UNABLE TO
GROW OUR BUSINESS AND EXPAND OUR DISTRIBUTION NETWORK AND MAY FAIL TO ACHIEVE OR
SUSTAIN PROFITABILITY

    We believe that some of our competitors are undertaking an acquisition
strategy similar to ours. If competition for acquisition targets increases,
there may be fewer qualified acquisition candidates available to us and the
terms of such acquisitions may become less favorable. Identifying appropriate
acquisition candidates, negotiating and consummating an acquisition can be a
lengthy and costly process, may divert management's attention and may prevent us
from growing our business and expanding our distribution network. We did not
complete any acquisitions for the year ended December 31, 2000. We may not be
able to attract and/or complete acquisitions in the future due to market
conditions, stock price or other factors that may be unfavorable to the Company.

PROBLEMS INTEGRATING ACQUIRED COMPANIES COULD RESULT IN SUBSTANTIAL COSTS,
DIVERT THE ATTENTION OF OUR MANAGEMENT TEAM, CAUSE US TO LOSE VALUABLE CUSTOMERS
AND DILUTE THE VALUE OF OUR ACQUISITIONS

    When we acquire new businesses we must cross-train existing and acquired
sales personnel; standardize accounting, operational and financial functions of
acquired businesses; retain key acquired personnel; and incorporate acquired
technology into our existing products.

    Problems or delays in the integration process may result in substantial
costs and the diversion of management's attention from our existing business. In
addition, integration delays could cause us to lose key customers and employees
from the acquired company thereby diluting the value of the acquired company.

    When we acquire businesses we amortize the acquired intangible assets over
the expected future life. If there is an impairment in the assets due to cash
flow, customer base, technology, market value or other indicators of the assets
impairment, the remaining book value may need to be written down or we may need
to accelerate the remaining useful life of the intangible assets.

                                       32
<PAGE>
TECHNICAL PROBLEMS WITH ACQUIRED TECHNOLOGY OR PRODUCTS COULD HARM OUR
REPUTATION, RESULT IN UNEXPECTED COSTS AND CAUSE OUR REVENUES TO DECREASE

    Although we test and examine an acquisition target's technology and products
prior to consummating an acquisition, there may be technical product problems
that we fail to discover. These problems may result in unexpected costs that
decrease our revenues and may result in customer dissatisfaction and harm to our
business reputation.

WE MAY BECOME RESPONSIBLE FOR UNKNOWN OR UNEXPECTED FINANCIAL OR LEGAL
LIABILITIES FOLLOWING AN ACQUISITION

    When we purchase a target company, we generally acquire all of that
company's liabilities. Although we perform due diligence prior to an
acquisition, we may become responsible for a liability that is unknown or
greater than anticipated. Any recourse we may have against the former
shareholders of an acquired company in such a situation is limited. Such
unexpected liabilities could have a significant negative impact on our profits.

IF OUR ACQUISITION ACTIVITIES DIVERT THE ATTENTION OF OUR MANAGEMENT TEAM AWAY
FROM THE DAY-TO-DAY OPERATIONS OF OUR COMPANY, PRODUCT DEVELOPMENT, EXISTING
CUSTOMER RELATIONSHIPS AND FINANCIAL PERFORMANCE COULD SUFFER

    As a part of our growth strategy, we intend to acquire additional healthcare
information systems companies. The identification and investigation of
appropriate acquisition candidates and the negotiation of acquisitions will
require a substantial investment of time on the part of our management team.
These activities could divert time and attention from our product development
and from the day-to-day operations of our company. These disruptions could in
turn harm our relationships with existing customers and have a negative effect
on our overall financial performance.

OUR ACQUISITION STRATEGY MAY REQUIRE US TO RAISE ADDITIONAL CAPITAL, WHICH COULD
RESULT IN DILUTION

    We intend to finance future acquisitions by issuing shares of common and/or
preferred stock for all or a substantial portion of the acquisition price. In
the event that the potential acquisition candidates are unwilling to accept
stock as part of the consideration for the sale of their businesses, we may
decide to utilize more of our cash resources, if available, in order to maintain
our acquisition program. This may result in the need to raise additional
capital. To the extent we issue shares of our capital stock to finance
acquisitions or raise capital, you will experience dilution in your ownership.

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. Industry competitors include organizations such as WebMD
Corporation (formally Medical Manager Corporation), Infocure Corporation, doing
business as VitalWorks and PracticeWorks, Inc., Medic Computer Systems, Inc.,
IDX Systems Corporation, McKessonHBOC, Quality Systems Inc., Medscape Inc.,
Dentrix Dental Systems, Inc., and National Data Corporation. Additionally,
within each regional market there are several smaller competitors who have
developed technologically advanced products offered at lower prices. 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. New healthcare
information Internet companies may become direct

                                       33
<PAGE>
competitors in the future. Many of our competitors have greater financial,
research and development, technical, marketing and sales resources than we do.
In addition, other entities not currently offering products and services similar
to ours may enter our market. We may not be able to compete successfully with
current and/or future competitors. Failure to do so could prevent us from
increasing or sustaining revenues and achieving profitability.

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.

ANY FAILURE TO COMPLY WITH REGULATIONS GOVERNING THE CONFIDENTIALITY AND
INTEGRITY OF HEALTHCARE INFORMATION 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 healthcare information 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. We
may also fail to enter into appropriate HIPAA compliance contracts with our
customers. Such failures could also result in harm to our business reputation
and a significant loss of customers.

FUTURE STATE OR FEDERAL LEGISLATION MAY IMPOSE RESTRICTIONS ON THE ABILITY TO
TRANSMIT PATIENT DATA OVER THE INTERNET WITHOUT SPECIFIC PATIENT CONSENT AND
COULD DIMINISH THE VALUE OF OUR INTERNET-ENABLED SOFTWARE PRODUCTS AND SERVICES
AND LOWER OUR REVENUES AND PROFITS

    The confidentiality of patient records is the subject of substantial
regulation by state and federal governments. Such regulations may impose
restrictions on the ability of third-party processors, like us, to transmit
certain patient data without specific patient consent. Such restrictions may
cause the value of our Internet-enabled products and services to be diminished,
causing our revenues to decrease.

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

                                       34
<PAGE>
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 INTERNET-ENABLED 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 Internet-enabled 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. These restrictions could decrease the demand
for our products and could prevent us from growing our business and attaining
profitability.

                                       35
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

    Interest Rate Risk.

    The primary objective of the Company's investment activities is to preserve
principal while at the same time maximize yields without significantly
increasing risk. To achieve this objective, the Company maintains its portfolio
of cash equivalents, short-term and long-term investments in A-1/P-1 or better-
rated Commercial Paper and U.S. Government Agencies. All investments have been
classified as available-for-sale and, accordingly, are stated at fair value. The
difference between amortized cost (cost adjusted for amortization of premiums
and accretion of discounts which are recognized as adjustments to interest
income) and fair value, representing unrealized holding gains or losses, are
recorded as a separate component of stockholders' equity until realized. As of
December 31, 2000, the Company had approximately $16.5 million in total
available-for-sale investment securities.

    Market risk represents the risk of loss that may impact our financial
position, operating results or cash flows due to adverse changes in financial
and commodity market prices and rates. The Company's investment portfolio is
exposed to market risk and will decline in value if interest rates increase.
However, due to the short duration of our investment portfolio, an immediate
10 percent increase in interest rates is not expected to have a material effect
on the Company's near-term financial condition or results of operations.

    Historically, and as of December 31, 2000, we have not used derivative
instruments or engaged in hedging activities.

                                       36
<PAGE>
ITEM 8. FINANCIAL STATEMENTS

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

                         INDEX TO FINANCIAL STATEMENTS
                             VANTAGEMED CORPORATION

<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
Financial Statements:
  Report of Independent Public Accountants..................     38
  Consolidated Balance Sheets as of December 31, 1999 and
    2000....................................................     39
  Consolidated Statements of Operations for each of the
    three years in the period ended December 31, 2000.......     40
  Consolidated Statements of Stockholders' Equity for each
    of the three years in the period ended December 31,
    2000....................................................     41
  Consolidated Statements of Cash Flows for each of the
    three years in the period ended December 31, 2000.......     42
  Notes to Consolidated Financial Statements................     43

Financial Statement Schedule:
  Schedule II--Valuation and Qualifying Accounts for each of
    the three years in the period ended December 31, 2000...     70
</TABLE>

                                       37
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To VantageMed Corporation:

    We have audited the accompanying consolidated balance sheets of VANTAGEMED
CORPORATION (a Delaware corporation) and subsidiaries as of December 31, 1999
and 2000, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended
December 31, 2000. These consolidated financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits 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 financial statements referred to above present fairly,
in all material respects, the financial position of VantageMed Corporation and
subsidiaries as of December 31, 1999 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.

    Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule listed
as Schedule II on page 70 is presented for purposes of additional analysis and
is not a required part of the basic financial statements. This information has
been subjected to the auditing procedures applied in our audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP

Sacramento, California
February 16, 2001

                                       38
<PAGE>
                             VANTAGEMED CORPORATION
                          CONSOLIDATED BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                              -------------------
                                                                1999       2000
                                                              --------   --------
<S>                                                           <C>        <C>
                           ASSETS

CURRENT ASSETS:
  Cash and cash equivalents.................................  $    250   $  3,788
  Short-term investments....................................        --     12,507
  Accounts receivable, net of allowance of $287 and $240,
    respectively............................................     2,463      2,130
  Current portion of notes receivable.......................        64         76
  Inventories...............................................       480        455
  Prepaid expenses and other................................     2,064        281
                                                              --------   --------
      Total current assets..................................     5,321     19,237
LONG-TERM INVESTMENTS.......................................        --      1,001
NOTES RECEIVABLE, net of current portion....................       128        301
PROPERTY AND EQUIPMENT, net.................................     2,564      1,736
INTANGIBLES, net............................................    28,451     11,914
                                                              --------   --------
      Total assets..........................................  $ 36,464   $ 34,189
                                                              ========   ========
            LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Current portion of long-term debt.........................  $  5,574   $    525
  Accounts payable..........................................     2,352      1,274
  Accrued liabilities.......................................     2,501      1,666
  Customer deposits and deferred revenue....................     2,906      2,771
                                                              --------   --------
      Total current liabilities.............................    13,333      6,236
LONG-TERM DEBT, net of current portion......................     2,639      1,155
                                                              --------   --------
      Total liabilities.....................................    15,972      7,391

COMMITMENTS AND CONTINGENCIES (Notes 11 and 18)
STOCKHOLDERS' EQUITY:
  Preferred stock, $0.001 par value, 5,000,000 shares
    authorized
    Series A-1 1,795,300 and 0 shares issued and
      outstanding, respectively.............................         2         --
    Series B 120,000 and 0 shares issued and outstanding,
      respectively..........................................        --         --
  Common stock, $0.001 par value, 20,000,000 shares
    authorized; 4,355,325 and 8,625,971 shares issued and
    outstanding, respectively...............................         4          9
  Additional paid-in capital................................    35,357     72,654
  Unrealized loss on available-for-sale securities..........        --         (3)
  Deferred compensation.....................................       (78)       (32)
  Accumulated deficit.......................................   (14,793)   (45,830)
                                                              --------   --------
      Total stockholders' equity............................    20,492     26,798
                                                              --------   --------
      Total liabilities and stockholders' equity............  $ 36,464   $ 34,189
                                                              ========   ========
</TABLE>

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

                                       39
<PAGE>
                             VANTAGEMED CORPORATION
                     CONSOLIDATED STATEMENTS OF OPERATIONS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                           ------------------------------------
                                                              1998         1999         2000
                                                           ----------   ----------   ----------
<S>                                                        <C>          <C>          <C>
REVENUES:
  Software and systems...................................  $    3,943   $    9,429   $    7,736
  Customer support and electronic services...............       5,430        9,983       16,171
                                                           ----------   ----------   ----------
    Total revenues.......................................       9,373       19,412       23,907
                                                           ----------   ----------   ----------
OPERATING COSTS AND EXPENSES:
  Software and systems...................................       2,146        4,078        2,899
  Customer support and electronic services...............       3,606        6,226       10,122
  Selling, general and administrative....................       4,706       10,382       15,496
  Product development....................................       1,500        4,120        5,572
  Depreciation and amortization..........................       1,445        3,873        5,656
  Restructuring, impairment and other charges............          --           --       12,899
                                                           ----------   ----------   ----------
    Total operating costs and expenses...................      13,403       28,679       52,644
                                                           ----------   ----------   ----------
LOSS FROM OPERATIONS.....................................      (4,030)      (9,267)     (28,737)
                                                           ----------   ----------   ----------
INTEREST INCOME (EXPENSE):
  Interest income........................................          45           74        1,202
  Interest expense.......................................        (252)      (1,022)      (3,484)
                                                           ----------   ----------   ----------
    Total interest expense, net..........................        (207)        (948)      (2,282)
                                                           ----------   ----------   ----------
LOSS BEFORE INCOME TAXES.................................      (4,237)     (10,215)     (31,019)
INCOME TAXES.............................................          --           --           18
                                                           ----------   ----------   ----------
    Net loss.............................................  $   (4,237)  $  (10,215)  $  (31,037)
                                                           ==========   ==========   ==========
Basic and diluted net loss per share.....................  $    (1.96)  $    (3.13)  $    (3.84)
                                                           ----------   ----------   ----------
Weighted-average shares-basic and diluted................   2,158,314    3,261,712    8,086,410
                                                           ----------   ----------   ----------
</TABLE>

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

                                       40
<PAGE>
                             VANTAGEMED CORPORATION
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                                                    PREFERRED STOCK
                                     ---------------------------------------------
                                           SERIES A-1               SERIES B             COMMON STOCK       ADDITIONAL
                                     ----------------------   --------------------   --------------------    PAID-IN
                                       SHARES      AMOUNT      SHARES     AMOUNT      SHARES      AMOUNT     CAPITAL
                                     ----------   ---------   --------   ---------   ---------   --------   ----------
<S>                                  <C>          <C>         <C>        <C>         <C>         <C>        <C>
BALANCE, December 31, 1997.........     413,018   $     --          --   $     --    1,819,299      $2       $ 2,507
  Issuance of common stock.........          --         --          --         --      111,753      --           838
  Issuance of common stock in
    connection with acquisitions...          --         --          --         --      474,944      --         3,149
  Issuance of Series B preferred
    stock in connection with
    acquisition....................          --         --     100,000         --           --      --         1,000
  Distribution to shareholders of
    NHS............................          --         --          --         --           --      --            --
  Net loss.........................          --         --          --         --           --      --            --
                                     ----------   ---------   --------   ---------   ---------      --       -------
BALANCE, December 31, 1998.........     413,018         --     100,000         --    2,405,996       2         7,494
  Issuance of common stock.........          --         --          --         --       73,317      --           654
  Issuance of common stock in
    connection with acquisitions...          --         --          --         --    1,845,508       2        21,707
  Issuance of stock options and
    warrants in connection with
    acquisitions...................          --         --          --         --           --      --         1,237
  Conversion of Series A preferred
    stock to Series A-1 preferred
    stock..........................    (413,018)        --          --         --           --      --        (1,200)
  Issuance of Series A-1 preferred
    stock..........................   1,795,300          2          --         --           --      --         4,698
  Issuance of Series B preferred
    stock in connection with
    acquisition....................          --         --      20,000         --           --      --           240
  Conversion of notes payable into
    common stock...................          --         --          --         --       29,549      --           280
  Exercise of stock options........          --         --          --         --          955      --             6
  Deferred compensation............          --         --          --         --           --      --           111
  Amortization of deferred
    compensation...................          --         --          --         --           --      --            --
  Issuance of warrants.............          --         --          --         --           --      --           130
  Net loss.........................          --         --          --         --           --      --            --
                                     ----------   ---------   --------   ---------   ---------      --       -------
BALANCE, December 31, 1999.........   1,795,300          2     120,000         --    4,355,325       4        35,357
  Issuance of common stock in
    connection with IPO............          --         --          --         --    3,000,000       3        31,035
  Conversion of Series A-1
    preferred stock into common
    stock..........................  (1,795,300)        (2)         --         --      599,425       1             1
  Conversion of Series B preferred
    stock into common stock........          --         --    (120,000)        --      120,000      --            --
  Conversion of notes payable into
    common stock...................          --         --          --         --      527,810       1         6,260
  Exercise of stock options........          --         --          --         --       23,411      --             1
  Amortization of deferred
    compensation...................          --         --          --         --           --      --            --
  Unrealized loss on investment....          --         --          --         --           --      --            --
  Net loss.........................          --         --          --         --           --      --            --
                                     ----------   ---------   --------   ---------   ---------      --       -------
BALANCE, December 31, 2000.........          --   $     --          --   $     --    8,625,971      $9       $72,654
                                     ==========   =========   ========   =========   =========      ==       =======

<CAPTION>
                                      UNREALIZED
                                         LOSS
                                     ON AVAILABLE-
                                       FOR-SALE        DEFERRED     ACCUMULATED
                                      SECURITIES     COMPENSATION     DEFICIT      TOTAL
                                     -------------   ------------   -----------   --------
<S>                                  <C>             <C>            <C>           <C>
BALANCE, December 31, 1997.........    $      --        $  --        $   (267)    $  2,242
  Issuance of common stock.........                        --              --          838
  Issuance of common stock in
    connection with acquisitions...           --           --              --        3,149
  Issuance of Series B preferred
    stock in connection with
    acquisition....................           --           --              --        1,000
  Distribution to shareholders of
    NHS............................           --           --             (74)         (74)
  Net loss.........................           --           --          (4,237)      (4,237)
                                       ---------        -----        --------     --------
BALANCE, December 31, 1998.........           --           --          (4,578)       2,918
  Issuance of common stock.........           --           --              --          654
  Issuance of common stock in
    connection with acquisitions...           --           --              --       21,709
  Issuance of stock options and
    warrants in connection with
    acquisitions...................           --           --              --        1,237
  Conversion of Series A preferred
    stock to Series A-1 preferred
    stock..........................           --           --              --       (1,200)
  Issuance of Series A-1 preferred
    stock..........................           --           --              --        4,700
  Issuance of Series B preferred
    stock in connection with
    acquisition....................           --           --              --          240
  Conversion of notes payable into
    common stock...................           --           --              --          280
  Exercise of stock options........           --           --              --            6
  Deferred compensation............           --         (111)             --            0
  Amortization of deferred
    compensation...................           --           33              --           33
  Issuance of warrants.............           --           --              --          130
  Net loss.........................           --           --         (10,215)     (10,215)
                                       ---------        -----        --------     --------
BALANCE, December 31, 1999.........           --          (78)        (14,793)      20,492
  Issuance of common stock in
    connection with IPO............           --           --              --       31,038
  Conversion of Series A-1
    preferred stock into common
    stock..........................           --           --              --           --
  Conversion of Series B preferred
    stock into common stock........           --           --              --           --
  Conversion of notes payable into
    common stock...................           --           --              --        6,261
  Exercise of stock options........           --           --              --            1
  Amortization of deferred
    compensation...................           --           46              --           46
  Unrealized loss on investment....           (3)          --              --           (3)
  Net loss.........................           --           --         (31,037)     (31,037)
                                       ---------        -----        --------     --------
BALANCE, December 31, 2000.........    $      (3)       $ (32)       $(45,830)    $ 26,798
                                       =========        =====        ========     ========
</TABLE>

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

                                       41
<PAGE>
                             VANTAGEMED CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1998       1999       2000
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss..................................................  $(4,237)   $(10,215)  $(31,037)
  Adjustments to reconcile net loss to net cash used for
    operating activities-
  Depreciation and amortization.............................    1,445       3,873      5,656
  Loss on disposal of assets................................       --          14        750
  Bad debt expense..........................................      344          86        164
  Impairment of intangibles.................................       --          --     11,935
  Beneficial interest conversion............................       --          --      3,000
  Amortization of deferred compensation.....................       --          33         46
  Amortization of warrants..................................       --          50         --
  Changes in assets and liabilities, net of effects from
    acquisitions-
    Accounts receivable.....................................     (436)       (322)       169
    Inventories.............................................      (15)       (181)        25
    Prepaid expenses and other..............................       50      (1,233)     1,783
    Book overdraft..........................................    1,632      (1,632)        --
    Accounts payable and accrued liabilities................      411         756     (1,842)
    Customer deposits and deferred revenue..................      508        (531)      (135)
                                                              -------    --------   --------
  Net cash used for operating activities....................     (298)     (9,302)    (9,486)
                                                              -------    --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment, net of effects from
    acquisitions............................................   (1,637)       (526)      (493)
  Purchase of intangible asset..............................       --          --       (147)
  Purchase of investments, net..............................       --          --    (13,511)
  Proceeds from sale of property and equipment..............       --          --         18
  Issuance of notes receivable..............................       --          --       (185)
  Cash paid from businesses acquired, net...................      270       3,423         --
                                                              -------    --------   --------
  Net cash provided by (used for) investing activities......   (1,367)      2,897    (14,318)
                                                              -------    --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Issuance of common stock and options......................      588         660     31,039
  Issuance of preferred stock...............................       --       3,000         --
  Proceeds from issuance of long-term debt..................    1,339       3,256      1,200
  Payments on long-term debt................................     (433)       (696)    (4,897)
  Distributions to shareholders of Northern Health
    Solutions, Inc..........................................      (74)         --         --
                                                              -------    --------   --------
  Net cash provided by financing activities.................    1,420       6,220     27,342
                                                              -------    --------   --------
  Net change in cash and cash equivalents...................     (245)       (185)     3,538
CASH AND CASH EQUIVALENTS, beginning of year................      680         435        250
                                                              -------    --------   --------
CASH AND CASH EQUIVALENTS, end of year......................  $   435    $    250   $  3,788
                                                              =======    ========   ========
</TABLE>

    See Note 15 for supplemental cash flow information.

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

                                       42
<PAGE>
                             VANTAGEMED CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  ORGANIZATION AND RISKS:

    VantageMed Corporation (the Company) was incorporated in California on
June 11, 1995. On April 9, 1997, the Company was reincorporated in Delaware. In
February 2000, the Company completed its initial public offering (IPO) of
3,000,000 shares of its common stock, the gross proceeds of which aggregated
approximately $36 million. The Company is a diversified healthcare information
systems supplier headquartered in Sacramento, California with regional offices
in Los Angeles and San Francisco, California; Honolulu, Hawaii; Seattle,
Washington; Kansas City, Missouri; Pompton Plains, New Jersey; Milford,
Michigan; Pittsburgh, Pennsylvania; Boston, Massachusetts; Boulder, Colorado;
Salt Lake City, Utah; Houston, Texas; Birmingham, Alabama; Greensboro, North
Carolina; and Little Rock, Arkansas. The Company develops, sells, installs and
supports software products and services that assist physicians, dentists,
physician organizations and other healthcare providers in the operation of their
practices and organizations. The Company has built a national distribution
network by acquiring established regional healthcare practice management systems
companies to sell and support its new generation software and services.

    The practice management software products offered by the Company provide
physicians, dentists 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. The Company also
provides software, network and hardware support, training, electronic claims
processing, electronic statement printing and mailing and electronic remittance
advices.

RISKS AND UNCERTAINTIES

    The Company has suffered recurring losses from operations since its
inception. The Company operates with a negative operating cash flow primarily
due to administrative and product development infrastructure. The Company may
never be able to achieve positive operating cash flow or profitability.

    The Company is also subject to a number of additional risks, including, but
not limited to, risks associated with acquisitions (successful integration and
operation of new products, technologies and businesses), uncertainties in the
healthcare industry, and dependence on the medical and dental market.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:

PRINCIPLES OF CONSOLIDATION

    The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.

USE OF ESTIMATES

    The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actually results could differ from those estimates.

CASH AND CASH EQUIVALENTS

    The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.

                                       43
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SHORT-TERM AND LONG-TERM INVESTMENTS

    The Company classifies its existing marketable equity 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 in stockholders' equity as a component of
other comprehensive income (loss). Gains or losses on securities sold are based
on the specific identification method.

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.
Management estimates that the carrying amounts of the Company's financial
instruments included in the accompanying consolidated balance sheets are not
materially different from their fair values.

INVENTORIES

    Inventories are stated at the lower of cost (first-in, first-out method) or
market and consist primarily of supplies and new computer equipment purchased to
fill customer orders.

PREPAID EXPENSES AND OTHER

    At December 31, 1999, prepaid expenses included $1,682,000 representing
capitalized costs incurred in connection with the Company's IPO in process. In
February 2001, these costs were netted against the gross proceeds of the
offering.

PROPERTY AND EQUIPMENT

    Property and equipment are recorded at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the respective
assets, generally three to seven years. Leasehold improvements are amortized
over the remaining lease term. Maintenance and repairs are expensed as incurred.
Software rights included in property and equipment as of December 31, 1999
represented software purchased for internal use and not intended to be resold
(see Notes 5 and 8).

INTANGIBLES

    Intangibles include goodwill, acquired software, customer lists, covenants
not to compete and assembled workforce. Goodwill represents the amount of
purchase price in excess of the fair value of the identifiable assets purchased
in acquisitions completed by the Company and is amortized on a straight-line
basis over a period of two to ten years, depending upon whether the acquisition
is established as a new regional office or is consolidated into an existing one
and whether or not there are continuing sales of the software purchased in the
acquisition. Acquired software consists of software purchased in acquisitions
completed by the Company and is amortized on a straight-line basis over a period
of two to four years, depending on the estimated continued use of the software
product acquired. Covenants not to compete are amortized on a straight-line
basis over two to five years, representing the life of such agreements. Customer
lists are amortized on a straight-line basis over two to ten years, representing
the estimated future life of customer relationships. Assembled workforce is
amortized on a straight-line basis over a period of one to ten years depending
upon the average length of employment for the employees of the acquired
companies.

                                       44
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ASSET IMPAIRMENT

    Long-lived assets, such as property and equipment and intangibles are
periodically evaluated for impairment when events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable through
the estimated undiscounted future cash flows resulting from the use of the
assets. When any such impairment exists, the related assets will be written down
to fair value. A write-down of assets due to impairment in the amount of
$12,685,000 million was recorded for the year ended December 31, 2000 (see Notes
5 and 9).

SOFTWARE DEVELOPMENT COSTS

    The Company capitalizes software development costs incurred after
technological feasibility of the software development projects has been
established. To date, all of the Company's 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 has been immaterial.

REVENUE RECOGNITION

    Software and systems revenue is derived from the licensing of proprietary
software, the sale of third-party software, primarily desktop operating systems
and communication and security software and the sale of computer hardware and
supplies. Customer support and electronic services revenue is derived from
software maintenance and customer service, network and computer hardware
support, training, data conversion, system installation, electronic claims
processing, electronic statement printing, mailing and electronic remittance
advices.

    The Company enters into license agreements with customers, which allow for
the use of the Company's 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," 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. Other customer
support and electronic services are also provided to the Company's licensees of
software products. These services consist primarily of software maintenance and
customer service, network and computer hardware support and installation of
software at customer sites. The revenue from the installations is recognized
upon completion of installation. The revenue from software maintenance, customer
service and support is recognized ratably over the term of the support period.
For arrangements that include multiple elements, the fee is allocated to the
various elements based on vendor-specific objective evidence of fair market
value established by independent sale of the elements sold separately or, if the
element is not yet being sold separately, the price established by management.
Revenues from other services, which include training, data conversion,
electronic claims processing, electronic statement printing, mailing and
electronic remittance advices are recognized as the services are provided.

    Deferred revenue consists of revenue deferred under annual maintenance and
annual support agreements for which amounts have been received from customers
and for which the earnings process has not been completed. Customer deposits
consist of cash collections for undelivered product and related services as of
the reporting period. The Company will recognize these deferred revenues in
accordance with its revenue recognition policy, typically over a period of one
year or less.

                                       45
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INCOME TAXES

    The Company utilizes 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.

RESTRUCTURING COSTS

    The Company records the costs of consolidating acquired operations into
existing Company facilities, including the external costs and liabilities to
close redundant Company facilities and severance and relocation costs relating
to the Company's employees in accordance with Emerging Issues Task Force Issue
(EITF) No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred
in Restructuring)."

LITIGATION DEFENSE COSTS

    Costs incurred by the Company to defend itself against litigation are
expensed as incurred.

NET LOSS PER COMMON SHARE

    Net loss per share is computed using the weighted average number of shares
of common stock outstanding. Common equivalent shares from stock options,
warrants, convertible notes and the conversion of Series A-1 and Series B
convertible preferred stock are excluded from the computation of net loss per
share for the year ended December 31, 1998 and 1999, common equivalent shares
from stock options and warrants have been excluded for the year ended
December 31, 2000, because their effect is antidilutive for all periods, thereby
decreasing net loss per common share. Such securities, had they been dilutive,
would have been included in the computation of diluted net loss per share. There
were 413,018, 1,795,300 and 0 shares of Series A-1 convertible preferred stock
outstanding at December 31, 1998, 1999 and 2000, respectively. There were
100,000, 120,000 and 0 shares of Series B convertible preferred stock
outstanding at December 31, 1998, 1999 and 2000, respectively. Both Series A-1
and Series B preferred stock were converted into common stock on February 14,
2000. In addition, there were 195,000 and 781,000 outstanding options, warrants
and convertible notes as of December 31, 1998 and 1999, respectively and 956,000
outstanding options and warrants as of December 31, 2000.

COMPREHENSIVE INCOME

    Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 (SFAS 130),"Reporting Comprehensive Income."
SFAS 130 establishes standards for reporting comprehensive income and its
components in financial statements. Comprehensive income, as defined, includes
all changes in equity (net assets) during a period from non-owner sources.
During 1998 and 1999, the Company had no comprehensive income components;
therefore, comprehensive loss was the same as net loss for these years. During
2000, other comprehensive income consisted of unrealized holding gains and
losses on available-for-sale investment securities.

STOCK-BASED COMPENSATION

    The Company accounts for stock-based compensation plans under the provisions
of Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock
Issued to Employees." In Note 13,

                                       46
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

the Company presents the disclosure requirements of Statement of Financial
Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-based
Compensation." SFAS 123 requires that companies which elect not to account for
stock-based compensation as prescribed by that statement shall disclose, among
other things, the pro forma effects on net loss and basic net loss per share as
if SFAS 123 had been adopted. For the years ended December 31, 1998, 1999 and
2000, the Company recognized $0, $33,000 and $46,000 in compensation expense
related to stock options.

RECENT PRONOUNCEMENTS

    In June 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133." In June 2000, the FASB issued SFAS 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities--an Amendment of
FASB Statement No. 133." SFAS 133 establishes new standards of accounting and
reporting for derivative investments and hedging activities, and requires that
all derivatives, including foreign currency exchange contracts, be recognized on
the balance sheet at fair value. The Company will adopt SFAS 133, as amended by
SFAS 137 and SFAS 138, in the first fiscal quarter of 2001, and does not expect
the adoption to have any effect on its financial condition or results of
operations.

3.  INITIAL PUBLIC OFFERING:

    In February 2000, the Company completed an initial public offering (IPO) of
3 million shares of its common stock. The shares of common stock sold in the IPO
were registered under the Securities Act of 1933, as amended, on a registration
statement on Form S-1 (Registration No. 333-91657) that was declared effective
by the Securities and Exchange Commission on February 14, 2000. The IPO
commenced on February 15, 2000. All 3 million shares of common stock registered
were sold at a price of $12 per share. The aggregate-offering price of the
shares of common stock registered and sold was $36 million. The Company paid an
aggregate amount of approximately $2,520,000 in underwriting discounts and
commissions. In addition, expenses incurred in connection with the offering
totaled approximately $2,440,000.

    Upon closing of the IPO, all outstanding shares of Series A-1 preferred
stock were converted at the option of the holder into 599,425 shares of common
stock, and all outstanding shares of Series B preferred stock were automatically
converted into 120,000 shares of common stock. Additionally, a secured
convertible promissory note with principal and interest totaling $3,062,000
converted into 510,685 common shares upon closing of the IPO. The beneficial
conversion feature of this note was $3 million and was recognized as non-cash
interest expense on the date of the conversion.

4.  BUSINESS COMBINATIONS:

BUSINESS COMBINATIONS ACCOUNTED FOR AS PURCHASES

    Each of the following acquisitions was accounted for under the purchase
method of accounting, applying the provisions of Accounting Principles Board
Opinion No. 16, "Business Combinations." As a result, the Company recorded the
identifiable assets and liabilities of the acquired companies at their estimated
fair values with the excess of the purchase price over these amounts being
recorded as goodwill. Intangibles including acquired software, customer lists,
covenants not to compete and assembled workforce are valued based upon
discounted future cash flows associated with the related intangible asset and
its economic life. The acquired deferred revenues were recorded at values which
approximate the present value of cost that will be incurred to fulfill
maintenance and support

                                       47
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

obligations plus a normal profit. The financial statements reflect the
operations of the acquired businesses for the periods after their respective
dates of acquisition. All purchase price allocations reported in historical
financial statements are substantially final and any final adjustments are not
expected to be material. The consideration for the purchases was cash, notes and
company stock. The value of the Company's stock given in consideration was
determined through a combination of negotiation between the buyer and the seller
and by comparing the value used to other shares issued for cash.

PURCHASES DURING THE YEAR ENDED DECEMBER 31, 1998

    The Company acquired Pacific Software, Inc. (Pacific) in April 1998. The
purchase price of $1,254,000 comprised 264,517 shares of common stock issued at
$4.74 per share. Goodwill and customer lists are being amortized over ten years,
acquired software and covenants not to compete over two years, and assembled
workforce over four years.

    The Company acquired Medicom Corporation (Medicom) in July 1998. The
purchase price of $1,000,000 comprised 100,000 shares of Series B preferred
stock issued at $10.00 per share. Goodwill and customer lists are being
amortized over ten years, covenants not to compete over three years, and
assembled workforce over four years.

    The Company acquired CM Healthcare Technologies, Inc. (CMHT) in
August 1998. The purchase price of $1,671,000 comprised 174,095 shares of common
stock issued at $9.60 per share. Goodwill is being amortized over ten years,
acquired software and customer lists over two years, and assembled workforce
over seven years.

    The Company acquired Medsoft, Inc., American Voice Computer, Inc., and DOT
Medical, Inc. (Other 1998 Acquisitions) in 1998. The purchase price of $599,000
comprised $25,000 in cash, $350,000 in notes payable and 36,332 shares of common
stock issued at a weighted-average price of $6.17 per share for a total of
$224,000 in common stock. Goodwill is being amortized over two to five years,
acquired software over two years, customer lists over two to eight years,
assembled workforce over three years and covenants not to compete over two to
three years.

                                       48
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    The following table summarizes the fair values of the assets acquired and
liabilities assumed in connection with the foregoing acquisitions accounted for
as purchases in the year ended December 31, 1998 (in thousands):

<TABLE>
<CAPTION>
                                                                                    OTHER 1998
                                                  PACIFIC    MEDICOM      CMHT     ACQUISITIONS    TOTAL
                                                  --------   --------   --------   ------------   --------
<S>                                               <C>        <C>        <C>        <C>            <C>
Cash............................................   $   23     $   41     $  210       $   21       $  295
Accounts receivable.............................      120        133        112           18          383
Inventories.....................................       31          5          4           --           40
Prepaid expenses and other......................        5          1         74            6           86
Property and equipment..........................      358         69         83           53          563
Goodwill........................................    1,039        712      1,286          591        3,628
Other intangibles...............................      172        185        607          561        1,525
Account payable.................................      (30)       (28)       (71)        (193)        (322)
Accrued liabilities.............................      (27)       (43)      (391)        (107)        (568)
Customer deposits and deferred revenue..........     (110)        --         --         (212)        (322)
Long-term debt..................................     (258)        (1)       (95)         (87)        (441)
Deferred tax liability..........................      (69)       (74)      (148)         (52)        (343)
                                                   ------     ------     ------       ------       ------
Net assets acquired.............................   $1,254     $1,000     $1,671       $  599       $4,524
                                                   ======     ======     ======       ======       ======
</TABLE>

PURCHASES DURING THE YEAR ENDED DECEMBER 31, 1999

    The Company acquired Civitec Healthcare Computers, Inc. (Civitec) in
April 1999. The purchase price of $1,386,000 comprised $127,000 in cash,
$408,000 in notes payable and 88,667 shares of common stock issued at $9.60 per
share for a total of $851,000 in common stock. Goodwill and customer lists are
being amortized over ten years, acquired software over two years, covenants not
to compete over three years, and assembled workforce over eight years.

    The Company acquired Medical Software Solutions, Inc. (MSS) in May 1999. The
purchase price of $1,278,000 comprised $460,000 in notes payable and 85,156
shares of common stock issued at $9.60 per share for a total of $818,000 in
common stock. Goodwill and customer lists are being amortized over ten years,
acquired software over two years, covenants not to compete over three years, and
assembled workforce over seven years.

    The Company acquired Brand Software, Inc. (Brand) in July 1999. The purchase
price of $2,207,000 comprised 160,804 shares of common stock issued at $9.60 per
share for a total of $1,544,000 in common stock, 20,000 shares of Series B
preferred stock issued at $12.00 per share for a total of $240,000 in preferred
stock and 25,837 stock options were assumed and 41,669 stock options were
granted in connection with the acquisition with exercise prices ranging from
$1.89 to $9.60 per share for a total of $423,000 in stock options. The fair
value of the options granted and assumed was determined using the Black-Scholes
option pricing model. Goodwill is being amortized over ten years, acquired
software over four years, customer lists and covenants not to compete over three
years and assembled workforce over two years.

    The Company acquired Mariner Systems, Inc. (Mariner) in August 1999. The
purchase price of $10,397,000 comprised $190,000 in notes payable, 857,554
shares of common stock issued at $11.10 per share for a total of $9,519,000 in
common stock, 80,611 stock options with exercise prices ranging from $.06 to
$62.81 per share and 30,000 warrants issued for services rendered in connection
with the acquisition for a total of $688,000 in stock options and warrants. The
fair value of the options granted

                                       49
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

and assumed was determined using the Black-Scholes option pricing model.
Goodwill and customer lists are being amortized over ten years, acquired
software over four years, and covenants not to compete and assembled workforce
over three years.

    The Company acquired CSS, Inc. (CSS) in October 1999. The purchase price of
$1,350,000 comprised $230,000 in cash and 71,089 shares of common stock issued
at $15.75 per share for a total of $1,120,000 in common stock. Goodwill and
customer lists are being amortized over ten years, acquired software over two
years, covenants not to compete over three years and assembled workforce over
eight years.

    The Company acquired Computerized Doctors Systems, Inc. (CDS) in
October 1999. The purchase price of $2,412,000 comprised $500,000 in cash,
113,413 shares of common stock issued at $15.75 per share for a total of
$1,786,000 in common stock and 17,756 stock options with an exercise price of
$15.75 for a total of $126,000 in stock options. The fair value of the options
granted and assumed was determined using the Black-Scholes option pricing model.
Goodwill and customer lists are being amortized over ten years, acquired
software over two years, covenants not to compete over two years and assembled
workforce over six years.

    The Company acquired Medical Digital Technologies, Inc. (MDT) in
October 1999. The purchase price of $2,620,000 comprised $600,000 in cash,
$500,000 in notes payable and 96,491 shares of common stock issued at $15.75 per
share for a total of $1,520,000 in common stock. Goodwill and customer lists are
being amortized over ten years, acquired software over two years, covenants not
to compete over three years and assembled workforce over four years.

    The Company acquired Data Decisions, Inc. (Data Decisions) in October 1999.
The purchase price of $2,488,000 comprised $78,000 in cash, $222,000 in notes
payable and 138,958 shares of common stock issued at $15.75 per share for a
total of $2,188,000 in common stock. Goodwill and customer lists are being
amortized over ten years, acquired software over two years, covenants not to
compete over three years and assembled workforce over four years.

    The Company acquired Acrotrex Corporation, Metropolitan Information
Systems, Inc., Care Information Systems, Inc., Logos Systems, Inc., Health
Information Network and Pepware Software, Inc. (Other 1999 Acquisitions) in
1999. The purchase price of $2,986,000 comprised $25,000 in cash, $598,000 in
notes payable and 233,376 shares of common stock issued at prices ranging from
$9.60 to $15.75 per share for a total of $2,363,000 in common stock. Goodwill is
being amortized over two to ten years, acquired software over two to four years,
customer lists over four to ten years, covenants not to compete over three years
and assembled workforce over one to ten years.

                                       50
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    The following table summarizes the fair values of the assets acquired and
liabilities assumed in connection with the foregoing acquisitions accounted for
as purchases in the year ended December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
                                                                                                        DATA       OTHER 1999
                         CIVITEC      MSS       BRAND     MARINER      CSS        CDS        MDT      DECISIONS   ACQUISITIONS
                         --------   --------   --------   --------   --------   --------   --------   ---------   ------------
<S>                      <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>         <C>
Cash...................   $  234     $   18     $   56    $ 3,962     $   13     $  277     $  321     $   16        $   86
Accounts receivable....       18         92         --        177         57        171        132        126           248
Inventories............        3         --         --          3        102          6         28         41            11
Prepaid expenses and
  other................        7        225         --        390          4         14         89         --           111
Property and
  equipment............       24         --        115        324         11         20         37         83            57
Goodwill...............      735        493      2,214      6,607        850      1,661      1,788      1,924         2,113
Other intangibles......    1,246      1,114      1,096      1,302        713      1,001      1,265        994         2,255
Account payable........      (56)       (34)      (130)       (68)       (41)       (28)      (139)       (85)         (145)
Accrued liabilities....      (38)       (81)      (110)      (799)       (12)       (89)      (178)       (41)         (279)
Customer deposits and
  deferred revenue.....     (289)       (64)      (546)      (379)       (62)      (202)      (217)       (43)         (109)
Long-term debt.........       --        (13)       (50)      (166)        --        (19)        --       (116)         (460)
Deferred tax
  liability............     (498)      (472)      (438)      (956)      (285)      (400)      (506)      (411)         (902)
                          ------     ------     ------    -------     ------     ------     ------     ------        ------
Net assets acquired....   $1,386     $1,278     $2,207    $10,397     $1,350     $2,412     $2,620     $2,488        $2,986
                          ======     ======     ======    =======     ======     ======     ======     ======        ======

<CAPTION>

                          TOTAL
                         --------
<S>                      <C>
Cash...................  $ 4,983
Accounts receivable....    1,021
Inventories............      194
Prepaid expenses and
  other................      840
Property and
  equipment............      671
Goodwill...............   18,385
Other intangibles......   10,986
Account payable........     (726)
Accrued liabilities....   (1,627)
Customer deposits and
  deferred revenue.....   (1,911)
Long-term debt.........     (824)
Deferred tax
  liability............   (4,868)
                         -------
Net assets acquired....  $27,124
                         =======
</TABLE>

PRO FORMA CONSOLIDATED RESULTS OF OPERATIONS (UNAUDITED)

    The following unaudited pro forma information presents the consolidated
results of operations of the Company as if all of the acquisitions had occurred
as of the beginning of 1998. The unaudited pro forma results of operations are
presented after giving effect to certain adjustments for depreciation,
amortization, and interest expense on the acquisition financing. The Company
believes the assumptions used in the unaudited pro forma results of operations
were reasonable. The unaudited pro forma information is not necessarily
indicative of what would have occurred had the acquisitions been made as of
January 1, 1998, nor is it indicative of future results of operations (in
thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                              PRO FORMA
                                                       YEAR ENDED DECEMBER 31,
                                                       ------------------------
                                                          1998         1999
                                                       ----------   -----------
<S>                                                    <C>          <C>
Revenue..............................................   $ 23,388     $ 27,463
Depreciation and amortization........................      5,956        6,369
Loss available to common stockholders................    (11,164)     (13,059)
Basic and diluted loss per share.....................   $  (2.98)    $  (3.04)
</TABLE>

BUSINESS COMBINATIONS ACCOUNTED FOR AS POOLING OF INTERESTS

    In April 1998, the Company acquired all of the outstanding capital stock and
options of Healthcare Information Systems, Inc. (HIS), based in Kansas City,
Missouri, for 384,695 shares of VantageMed common stock and 17,022 options. Upon
closing the acquisition, the assets and liabilities of HIS were recorded at net
book value. Assets consisted primarily of cash, accounts receivable, inventory
and fixed assets. Liabilities consisted primarily of vendor payables, accrued
liabilities and

                                       51
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

deferred revenue. The accompanying consolidated financial statements reflect the
acquisition of HIS as a pooling of interests.

    In December 1998, the Company acquired all of the outstanding capital stock
of Northern Health Solutions, Inc. (NHS), based in Pittsburgh, Pennsylvania, for
210,416 shares of VantageMed common stock and assumption of 17,022 stock
options. Upon closing the acquisition, the assets and liabilities of NHS were
recorded at net book value. Assets consisted primarily of cash, accounts
receivable and fixed assets. Liabilities consisted primarily of vendor payables
and accrued liabilities. The accompanying consolidated financial statements
reflect the acquisition of NHS as a pooling of interests.

    The accompanying consolidated financial statements have been restated to
include the accounts of HIS and NHS as if the companies had combined at the
beginning of the first period presented.

    There were no transactions between the Company and HIS or between the
Company and NHS prior to the combination and no adjustments were necessary to
conform either HIS' or NHS' accounting policies. The results of operations for
the separate companies prior to the date the combination was consummated and the
combined amounts presented in the consolidated statements of operations are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                 YEAR ENDED
                                                              DECEMBER 31, 1998
                                                              -----------------
<S>                                                           <C>
Revenue
The Company.................................................       $ 5,398
HIS.........................................................         2,515
NHS.........................................................         1,460
                                                                   -------
                                                                   $ 9,373
                                                                   =======

Net income (loss)
The Company.................................................       $(3,928)
HIS.........................................................           (81)
NHS.........................................................          (228)
                                                                   -------
                                                                   $(4,237)
                                                                   =======
</TABLE>

                                       52
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5.  RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES:

    The components of restructuring, impairment and other charges include the
following (in thousands):

<TABLE>
<S>                                                           <C>
Impairment of intangibles...................................  $11,935
Write-off of acquired software rights.......................      750
Restructuring charges.......................................      214
                                                              -------
Total restructuring, impairment and other charges...........  $12,899
                                                              =======
</TABLE>

IMPAIRMENT OF INTANGIBLES

    During 2000, the Company determined that the carrying value of certain
intangible assets acquired in connection with business combinations accounted
for as purchases exceeded their fair value and were written down accordingly.
This 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 indicate 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.
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," the Company recorded an impairment charge of $11,935,000 for
the impairment of these intangibles.

WRITE-OFF OF ACQUIRED SOFTWARE RIGHTS

    During 2000, the Company recorded a $750,000 net write-off of software
purchased for internal use that will no longer be used by the Company.

RESTRUCTURING CHARGES

    During 2000, the Company recorded restructuring charges of $214,000,
consisting of $82,000 for facility closure and consolidation, $121,000 for
severance and other termination benefits and $11,000 for other restructuring
costs. These restructuring actions occurred and were substantially completed in
the Company's second quarter of 2000. The remaining accrual for restructuring as
of December 31, 2000 was $8,200 for facility closure and consolidation. The
Company reversed an accrual for $39,000 during the fourth quarter of 2000 due to
overestimating the legal and accounting costs associated with the restructuring.

                                       53
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6.  SHORT-TERM AND LONG-TERM INVESTMENTS:

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

<TABLE>
<CAPTION>
                                                                     DECEMBER 31, 2000
                                                       ----------------------------------------------
                                                       AMORTIZED   UNREALIZED   UNREALIZED     FAIR
                                                         COST         GAIN         LOSS       VALUE
                                                       ---------   ----------   ----------   --------
<S>                                                    <C>         <C>          <C>          <C>
Cash equivalents.....................................   $ 2,946        $ 1          $ 3      $ 2,944
U.S. Government Agency...............................     1,000          1           --        1,001
Commercial Paper.....................................    12,509         10           12       12,507
                                                        -------        ---          ---      -------
Total available-for-sale investment securities.......   $16,455        $12          $15      $16,452
                                                        =======        ===          ===      =======
</TABLE>

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

<TABLE>
<CAPTION>
                                                            DECEMBER 31, 2000
                                                       ---------------------------
                                                       AMORTIZED COST   FAIR VALUE
                                                       --------------   ----------
<S>                                                    <C>              <C>
Due within one year..................................     $15,455         $15,451
Due after one, but within 5 years....................       1,000           1,001
                                                          -------         -------
Total available-for-sale investment securities.......     $16,455         $16,452
                                                          =======         =======
</TABLE>

7.  NOTES RECEIVABLE:

    The Company has four notes receivable. Two notes totaling $127,000, bearing
interest at 6 percent per annum, with each being secured by an irrevocable
letter of credit due March 31, 2003. One note totaling $200,000 is with a former
officer and director of the Company, bears interest at the prime rate and is
secured by shares of the Company's common stock, due November 3, 2002. One note
totaling $50,000 is with an employee of the Company. It bears interest at
8 percent per annum and is unsecured.

8.  PROPERTY AND EQUIPMENT:

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

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       2000
                                                              --------   --------
<S>                                                           <C>        <C>
Software rights.............................................  $ 1,500    $    --
Office and computer equipment...............................    1,210      2,389
Furniture and fixtures......................................      476        413
Vehicles....................................................       43         64
Leasehold improvements......................................      433        119
                                                              -------    -------
                                                                3,662      2,985
Less: accumulated amortization and depreciation.............   (1,098)    (1,249)
                                                              -------    -------
                                                              $ 2,564    $ 1,736
                                                              =======    =======
</TABLE>

                                       54
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    Depreciation expense was approximately $164,000, $851,000 and $907,000 for
the years ended December 31, 1998, 1999 and 2000, respectively. In connection
with the restructuring plans described in Note 5, the Company wrote off certain
software rights with a book value of $750,000 in the year ended December 31,
2000.

9.  INTANGIBLES:

    Intangibles consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       2000
                                                              --------   --------
<S>                                                           <C>        <C>
Goodwill....................................................  $18,577    $ 7,839
Acquired software...........................................    4,794      4,794
Customer lists..............................................    9,258      8,226
Covenants not to compete....................................      179        169
Assembled workforce.........................................      235        227
                                                              -------    -------
                                                               33,043     21,255
Less: accumulated amortization..............................   (4,592)    (9,341)
                                                              -------    -------
                                                              $28,451    $11,914
                                                              -------    -------
</TABLE>

    Amortization expense related to intangibles was approximately $1,281,000,
$3,022,000 and $4,749,000 for the years ended December 31, 1998, 1999 and 2000,
respectively. In connection with the restructuring plans described in Note 5,
the Company wrote down certain intangibles by $11,935,000 in the year ended
December 31, 2000.

                                       55
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. LONG-TERM DEBT:

    The Company's long-term debt consisted of (in thousands):

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       2000
                                                              --------   --------
<S>                                                           <C>        <C>
Promissory note, owner of acquired company, interest at
  prime plus 1.5%, not to exceed 10.5% per annum (10.5% at
  December 31, 2000), monthly principal payments of $18,750
  plus accrued interest commencing August 1999, due in full
  by August 2002, unsecured.................................  $  1,294   $  1,031
Promissory notes, stockholders, various fixed interest rates
  between 8% and 12%, monthly principal and interest
  payments between $300 and $7,000, principal ranges from
  due on demand to due June 2004, secured by assets of the
  Company...................................................       762        120
Promissory notes to various stockholders, paid in February
  2000......................................................     5,455         --
Promissory notes, financial institution, bearing interest at
  9.5%, monthly principal and interest payments of $300
  through February 2003, secured by Company vehicles........        27          7
Promissory note, stockholder, non-interest bearing, monthly
  payments of $2,000, due on demand.........................        28          4
Lines of credit with financial institutions, paid in
  February 2000.............................................        74         --
Promissory note, financial institution, bearing interest at
  3.9%, principal payments of $500 through March 2003,
  secured by assets of the Company..........................        18         12
Promissory note with financial institution, paid in February
  2000......................................................       113         --
Promissory note to vendor, paid in February 2000............        18         --
Capital lease obligations...................................       424        506
                                                              --------   --------
                                                                 8,213      1,680
Less: current portion.......................................    (5,574)      (525)
                                                              --------   --------
                                                              $  2,639   $  1,155
                                                              ========   ========
</TABLE>

    Future minimum payments under all debt obligations excluding capital lease
obligations subsequent to December 31, 2000 are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S>                                                            <C>
2001........................................................    $  341
2002........................................................       238
2003........................................................       231
2004........................................................       230
2005........................................................       134
                                                                ------
                                                                $1,174
                                                                ======
</TABLE>

                                       56
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. CAPITAL AND OPERATING LEASE OBLIGATIONS:

    The Company leases its headquarters and certain other facilities under
operating leases and a portion of its equipment under capital lease
arrangements. The minimum future lease payments required under the Company's
capital and operating leases at December 31, 2000 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                             CAPITAL    OPERATING
YEAR ENDING DECEMBER 31,                                      LEASES     LEASES
------------------------                                     --------   ---------
<S>                                                          <C>        <C>
2001.......................................................   $ 232      $1,155
2002.......................................................     176         849
2003.......................................................     109         693
2004.......................................................      52         417
2005.......................................................      31         317
Thereafter.................................................      --         147
                                                              -----      ------
  Total minimum payments...................................   $ 600      $3,578
                                                                         ======
Less: interest on capital lease obligations at rates of
  8.13% to 29.62%..........................................     (94)
                                                              -----
Net minimum principal payments.............................     506
Less: current maturities...................................    (184)
                                                              -----
Long-term portion..........................................   $ 322
                                                              =====
</TABLE>

    Rent expense was approximately $509,000, $866,000 and $1,323,000 for the
years ended December 31, 1998, 1999 and 2000, respectively.

12. STOCKHOLDERS' EQUITY:

STOCK SPLITS

    During 1999, the Board of Directors approved a one-for-three reverse stock
split. The split was effective shortly before the completion of the IPO on
February 14, 2000, and affected all outstanding shares of common stock. All
common share and per share data in these financial statements have been
retroactively adjusted to give effect to the reverse stock split. In addition,
the conversion and exercise provisions of the outstanding shares of preferred
stock, stock options and warrants have been adjusted accordingly.

PREFERRED STOCK

    Upon completion of the Company's initial public offering of common stock,
all outstanding shares of Series A-1 preferred stock was converted at the option
of the holder into 599,425 shares of common stock, and all outstanding shares of
Series B preferred stock was automatically converted into 120,000 shares of
common stock.

DEFERRED COMPENSATION

    As of December 31, 1999, the Company recorded deferred compensation related
to options granted to employees in the total amount of $111,000, representing
the difference between the deemed fair value of the Company's common stock and
the exercise price of the options at the grant date. The amortization of the
deferred compensation is charged to operations over the vesting period of the

                                       57
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

options. Total amortization expense recognized was $0, $33,000 and $46,000 for
the years ended December 31, 1998, 1999, and 2000, respectively.

13. STOCK OPTION PLANS AND WARRANTS:

    The Company has two stock option plans, the Healthcare Information Systems
Plan (HIS Plan) and the 1998 Stock Option/Stock Issuance Plan (1998 Plan). No
further options may be granted under the HIS Plan, and all 17,022 options
previously granted and outstanding under the HIS Plan have been converted into
options of the Company's common stock. Each HIS option was converted into
0.13055 of the Company's options at an exercise price of $1.89 per share. Under
the 1998 Plan, the Board of Directors is authorized to grant options for up to
1,000,000 shares of 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 separate equity 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.

    As permitted by SFAS 123, the Company has elected to account for its stock-
based compensation plans under the intrinsic value method as outlined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. Had compensation cost for the Company's
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, the
Company's pro forma net loss would have been as follows (in thousands, except
per share amounts):

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1998       1999       2000
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Net loss available to common stockholders
  As reported...............................................  $(4,237)   $(10,215)  $(31,037)
  Pro forma.................................................   (4,362)    (11,632)   (31,320)
Basic and diluted loss per share
  As reported...............................................  $ (1.96)   $  (3.13)  $  (3.84)
  Pro forma.................................................    (2.02)      (3.57)     (3.87)
</TABLE>

    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 used for
grants in 1998, 1999 and 2000:

<TABLE>
<CAPTION>
                                                                1998       1999       2000
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Dividend yield..............................................        0%         0%         0%
Risk-free interest rate.....................................      4.5%       6.3%       6.0%
Stock price volatility......................................       50%        70%       150%
Expected life...............................................  6 years    6 years    6 years
</TABLE>

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

                                       58
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    A summary of stock option activity and related information is as follows (in
thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                          ------------------------------------------------------------------
                                                  1998                   1999                   2000
                                          --------------------   --------------------   --------------------
                                                     WTD. AVG.              WTD. AVG.              WTD. AVG.
                                           NUMBER    EXERCISE     NUMBER    EXERCISE     NUMBER    EXERCISE
                                             OF      PRICE PER      OF      PRICE PER      OF      PRICE PER
                                           SHARES      SHARE      SHARES      SHARE      SHARES      SHARE
                                          --------   ---------   --------   ---------   --------   ---------
<S>                                       <C>        <C>         <C>        <C>         <C>        <C>
Balance, beginning of period............     17        $1.89       186       $ 7.14        537       $8.00
  Granted...............................    169         7.65       249         9.74        510        2.15
  Assumed...............................     --           --       124         7.10         --          --
  Exercised.............................     --           --        (1)        6.18        (23)        .06
  Forfeited or canceled.................     --           --       (21)       16.07       (111)       7.70
                                            ---                    ---                    ----
Balance, end of period..................    186         7.14       537         8.00        913        4.97
                                            ===                    ===                    ====
Vested, end of period...................     16                    198                     282
                                            ===                    ===                    ====
</TABLE>

    During 1999, the Company assumed 124,204 stock options from Brand, Mariner
and CDS at exercise prices between $0.06 and $62.81 per share. All assumed stock
options were rolled into the Company's 1998 Plan with no change in option terms
from the original grant.

    The following table summarizes information about the Company's outstanding
stock options at December 31, 2000 (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                                                OPTIONS
                                  OPTIONS OUTSTANDING                                         EXERCISABLE
---------------------------------------------------------------------------------------   --------------------
                                              # OF         WTD. AVG.                        # OF     WTD. AVG.
                                             SHARES      CONTRACT LIFE     WTD. AVG.       SHARES    EXERCISE
RANGE OF EXERCISE PRICE                    OUTSTANDING     REMAINING     EXERCISE PRICE    VESTED      PRICE
-----------------------                    -----------   -------------   --------------   --------   ---------
<S>                                        <C>           <C>             <C>              <C>        <C>
$  .06--$ 1.74..........................       326           5.14             $1.60          31       $ 0.66
$ 1.82--$ 4.50..........................       240           8.87              2.78          47         2.34
$ 6.50--$ 8.34..........................       150           3.90              7.38         125         7.33
$ 9.60--$11.10..........................       176           8.55             10.46          72        10.12
$12.56--$62.81..........................        21           8.04             18.95           7        21.64
                                               ---                                          ---
$  .06--$62.81..........................       913           7.02              4.97         282         6.85
                                               ===                                          ===
</TABLE>

WARRANTS

    During 1999, in connection with the issuance of a convertible promissory
note, the Company issued warrants to purchase up to 66,666 shares of the
Company's common stock at a price of $7.50 per share, the fair value on the date
of issuance, and the right to purchase another 50,000 shares of the Company's
common stock at the price of $10.50 per share. The warrants became immediately
exercisable upon the conversion of the note to common stock and all unexercised
warrants were to expire on August 31, 1999. The fair value of the warrants of
approximately $50,000 was calculated using the Black-Scholes option pricing
model and was amortized to interest expense over the two month term of the note.
Subsequently the note was converted to 13,333 shares of common stock at $7.50
per share, and 6,666 warrants were exercised at $7.50 per share. The remaining
warrants expired on August 31, 1999.

                                       59
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    In August 1999, the Company issued 30,000 warrants at an exercise price of
$11.10 per share in connection with the acquisition of Mariner and expire on
August 1, 2003. The fair value of these warrants was recorded as additional
purchase price in the Mariner acquisition. In October 1999, in connection with
the issuance of a convertible promissory note, the Company issued warrants for
13,333 shares exercisable at a price equal to 60% of the initial price of shares
of the Company's common stock sold in the IPO. This warrant may be exercised at
any time following the completion of the offering and terminates on October 6,
2002. The fair value of the warrants of approximately $80,000 was calculated
using the Black-Sholes option pricing model and is being amortized to interest
expense over the term of the note.

14. RELATED PARTY TRANSACTIONS:

    The Company has two related party note receivables. One full recourse note
totaling $200,000 is with a former officer and director of the Company, bears
interest at the prime rate as reported in the Wall Street Journal on the first
business day of each month and is secured by 300,000 shares of the company's
stock. Monthly interest payments are due beginning December 2001, after payment
of interest for the previous full year has been made. Total principal and any
remaining interest due are payable on November 3, 2002. The second note totaling
$50,000 is with an employee of the Company and bears interest at 8 percent per
annum and is unsecured. Employee shall make annual payments on accrued interest
beginning on May 18, 2001. As long as employment continues, the loan shall be
forgiven over a period of 48 months, with twenty-five percent forgiven one year
from note date of May 18, 2000, and the remaining principal amount and interest
on such unforgiven portion forgiven 1/36th each month until fully forgiven. Such
forgiveness is recorded as compensation expense as forgiveness is earned. Any
loan amount not yet forgiven will become due and payable in full from note
holder 90 days after last day of employment.

    In January 2000, we borrowed $700,000 through Friedli Corporate Finance, an
entity controlled by one of our Directors. The outstanding principal plus
interest on this note was repaid in February 2000 with proceeds from our IPO.

15. SUPPLEMENTAL CASH FLOW INFORMATION:

    Cash payments for interest amounted to approximately $220,000, $922,000 and
$285,000 for the years ended December 31, 1998, 1999 and 2000, respectively. The
Company made cash payments for income taxes of approximately $800, $0 and $0 for
the years ended December 31, 1998, 1999 and 2000, respectively.

    During the year ended December 31, 1998, the Company acquired
Medsoft, Inc., American Voice Computer, Inc., Pacific Software, Inc., DOT
Medical, Inc., Medicom Corporation and CM Healthcare Technologies, Inc.
Aggregate consideration for these acquisitions completed in 1998 was 474,944
common shares, 100,000 shares of Series B preferred stock, $25,000 in cash, and
$350,000 in notes payable for an approximate aggregate value for $4,524,000. The
Company issued stock warrants with an aggregate fair value of approximately
$50,000 for services rendered to the Company. Additionally, the Company financed
the purchase of property and equipment under capital leases of approximately
$114,000 and converted a note payable for $250,000 into common stock.

    During the year ended December 31, 1999, the Company acquired Civitec
Healthcare Computers, Inc., Acrotrex Corporation, Medical Software
Solutions, Inc. and Metropolitan Information Services, Inc., Brand
Software, Inc., Care Information Systems, Inc., Mariner Systems, Inc., Health
Information Network, Logos Systems, Inc., CSS, Inc., Pepware Software, Inc.,
Computerized Doctors

                                       60
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Systems, Inc., Medical Digital Technologies, Inc., and Data Decisions, Inc.
Aggregate consideration for these acquisitions completed in 1999 was 1,845,508
common shares for a total of $21,709,000 in common stock, 20,000 shares of
preferred stock for a total of $240,000 in preferred stock, $1,560,000 in cash,
$2,378,000 in notes payable, and $1,237,000 in stock options for an approximate
aggregate value of $27,124,000. Additionally, the Company converted a $500,000
line of credit to 197,628 shares of Series A-1 preferred stock and financed the
purchase of property and equipment under capital leases of approximately
$82,000.

    During the year ended December 31, 2000, the Company converted one
promissory note with principal and interest totaling $3,062,000 into 510,685
shares of common stock. The beneficial conversion feature of this note was
$3 million and was recognized as interest expense on the date of the conversion.
The Company also converted a promissory note with principal and interest
totaling $199,000 into 17,125 shares of common stock, converted both Series A-1
and Series B preferred stock into common stock and financed $354,000 in the
purchase of property and equipment under capital leases.

16. EMPLOYEE BENEFIT PLANS:

    The Company maintains a 401(k) Savings Plan (the Plan). Under the terms of
the Plan, employees may elect to contribute up to 15% of their pre-tax
compensation to the Plan. Employee contributions are 100% vested at all times.
The Company may make discretionary contributions to the Plan, which vest
annually over a six-year period. Discretionary contributions made to the Plan
were approximately $4,000, $2,500 and $0 for the years ended December 31, 1998,
1999 and 2000, respectively.

                                       61
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17. INCOME TAXES:

    The provision for income taxes consists of (in thousands):

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1998       1999       2000
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Current:
  Federal...................................................  $    --    $    --    $    --
  State.....................................................       --         --         18
                                                              -------    -------    -------
  Total current.............................................       --         --         18
Deferred:
  Federal...................................................   (1,165)    (2,895)    (4,443)
  State.....................................................     (257)      (642)      (784)
                                                              -------    -------    -------
  Total deferred............................................   (1,422)    (3,537)    (5,227)
                                                              -------    -------    -------
Change in valuation allowance...............................    1,422      3,537      5,227
                                                              -------    -------    -------
  Net income tax provision..................................  $    --    $    --    $    18
                                                              =======    =======    =======
</TABLE>

    Deferred taxes result from temporary differences between the bases of assets
and liabilities for financial reporting purposes and such amounts as measured by
tax laws and regulations. At December 31, 2000, the Company had potential tax
benefits from net operating loss carryforwards of approximately $9,528,000 and
$1,068,000 available to offset future federal and state taxable income,
respectively. Such federal and state carryforwards expire through 2021. The
extent to which the loss carryforwards can be used to offset future taxable
income may be limited. The sources of the temporary differences and their effect
on deferred tax assets and liabilities are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       2000
                                                              --------   --------
<S>                                                           <C>        <C>
Deferred tax assets:
  Net operating loss carryforwards..........................  $ 6,270    $10,596
  Accruals and reserves.....................................      468        485
  Depreciation..............................................       --         --
  Difference between book and tax basis of intangibles......      159        114
                                                              -------    -------
                                                                6,897     11,195

Deferred tax liabilities:
  Difference between book and tax amortization related to
    acquired identifiable intangibles other than goodwill...   (3,993)    (3,068)
                                                              -------    -------
Net deferred tax asset before allowance.....................    2,904      8,127
                                                              -------    -------
Valuation allowance.........................................   (2,904)    (8,127)
                                                              -------    -------
  Net deferred tax asset....................................  $    --    $    --
                                                              =======    =======
</TABLE>

    The change in the valuation allowance above is attributed primarily to the
results of operations and the effects of purchase accounting on the valuation
allowance.

                                       62
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    The following table accounts for the differences between the actual tax
provision and amounts obtained by applying the Statutory U.S. Federal rate to
the loss before income taxes (in thousands):

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1998       1999       2000
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Expected tax benefit........................................  $(1,441)   $(3,473)   $(10,552)
Decrease in income taxes resulting from:
  State income benefit......................................     (254)      (613)     (1,862)
  Increase in deferred tax asset valuation allowance,
    resulting primarily from current year operations........    1,422      3,537       5,227
  Nondeductible expenses, including nondeductible
    restructuring charges...................................       77         --       6,734
  Other, net................................................      196        549         471
                                                              -------    -------    --------
Net income tax provision....................................  $    --    $    --    $     18
                                                              =======    =======    ========
</TABLE>

18. 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 have now been
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 purport to represent a class of all persons who purchased the
Company's common stock pursuant to its February 15, 2000 IPO. The Plaintiffs
allege that the prospectus pursuant to which the IPO was effected contained
materially false and misleading statements and it did not state that the Company
would be delayed in introducing a new version of its RidgeMark product, and did
not state that sales of its eMCee product would be lower than expected.

    VantageMed has filed a motion to dismiss the consolidated complaint for
failure to state a claim upon which relief can be granted. The motion is
scheduled for hearing in August 2001.

    The proceedings are in the early stages, and no prediction can be made as to
the outcome. The Company believes these actions are without merit and intends to
defend itself against them vigorously.

19. SEGMENT REPORTING:

    In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments
of an Enterprise and Related Information," which was adopted by the Company for
the fiscal year ended December 31, 1998. This statement establishes standards
for reporting selected segment services, geographic areas and major customers.
The Company reported on two operating segments in 1998 and 1999-the software and
systems sales and customer support and electronic services groups. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance
based on margin level before selling general and administrative and other
operating costs. The Company does not manage costs below gross margin by
segment. The Company does not track long-lived assets by segment and therefore
related disclosures are not relevant and are not presented. The software and
systems sales group sells and licenses practice management software products to
physicians, dentists and other professionals with comprehensive office
management software designed to automate the administrative, financial, practice
management and clinical

                                       63
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

requirements of a practice. The customer support and electronic services group
provides software, network and hardware support, training, electronic claims
processing, electronic statement printing and mailing and electronic remittance
advices. The Company's reportable segments offer different products and
services, which are sold and serviced by the same selling and support personnel.

    For the year ended December 31, 1998, 1999 and 2000, the following table
reports selected segment information (in thousands):

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1998       1999       2000
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
SOFTWARE AND SYSTEMS:
SOFTWARE:
  Revenue...................................................   $1,497     $4,713    $ 4,475
  Cost of revenue                                                 170        583        575
                                                               ------     ------    -------
Gross margin................................................   $1,327     $4,130    $ 3,900
                                                               ======     ======    =======
Gross margin percentage.....................................     88.6%      87.6%      87.2%
SYSTEMS:
  Revenue...................................................    2,446      4,716      3,261
  Cost of revenue...........................................    1,976      3,495      2,324
                                                               ------     ------    -------
Gross margin................................................   $  470     $1,221    $   937
                                                               ======     ======    =======
Gross margin percentage.....................................     19.2%      25.9%      28.7%
TOTAL SOFTWARE AND SYSTEMS:.................................
  Revenue...................................................   $3,943     $9,429    $ 7,736
  Cost of revenue...........................................    2,146      4,078      2,899
                                                               ------     ------    -------
Gross margin................................................   $1,797     $5,351    $ 4,837
                                                               ======     ======    =======
Gross margin percentage.....................................     45.6%      56.8%      62.5%
CUSTOMER SUPPORT AND ELECTRONIC SERVICES:
CUSTOMER SUPPORT:
  Revenue...................................................   $4,873     $8,841    $12,713
  Cost of revenue...........................................    3,364      5,801      8,007
                                                               ------     ------    -------
Gross margin................................................   $1,509     $3,040    $ 4,706
                                                               ======     ======    =======
Gross margin percentage.....................................     31.0%      34.4%      37.0%
ELECTRONIC SERVICES:
  Revenue...................................................   $  557     $1,142    $ 3,458
  Cost of revenue...........................................      242        425      2,115
                                                               ------     ------    -------
Gross margin................................................   $  315     $  717    $ 1,343
                                                               ======     ======    =======
Gross margin percentage.....................................     56.6%      62.8%      38.8%
TOTAL CUSTOMER SUPPORT AND ELECTRONIC SERVICES:
  Revenue...................................................   $5,430     $9,983    $16,171
  Cost of revenue...........................................    3,606      6,226     10,122
                                                               ------     ------    -------
Gross margin................................................   $1,824     $3,757    $ 6,049
                                                               ======     ======    =======
Gross margin percentage.....................................     33.6%      37.6%      37.4%
</TABLE>

                                       64
<PAGE>
                             VANTAGEMED CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20. UNAUDITED QUARTERLY CONSOLIDATED FINANICAL DATA:

<TABLE>
<CAPTION>
                                                                 QUARTER
                                                -----------------------------------------    FISCAL
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)          FIRST      SECOND     THIRD      FOURTH      YEAR
---------------------------------------         --------   --------   --------   --------   --------
<S>                                             <C>        <C>        <C>        <C>        <C>
1999:
  Total Revenues..............................  $ 3,163    $ 4,061    $ 5,236    $  6,952   $ 19,412
    Gross margin..............................    1,935      1,500      2,600       3,703      9,108
    Net loss..................................   (1,461)    (2,348)    (2,692)     (3,714)   (10,215)
    Basic and diluted net loss per share......  $ (0.60)   $ (0.89)   $ (0.73)   $  (0.87)  $  (3.13)
2000:
  Total Revenues..............................  $ 6,082    $ 5,437    $ 6,004    $  6,384   $ 23,907
    Gross margin..............................    2,837      2,216      2,809       3,024     10,886
    Net loss..................................   (7,623)    (7,076)    (3,261)    (13,077)   (31,037)
    Basic and diluted net loss per share......  $ (1.17)   $ (0.82)   $ (0.38)   $  (1.52)  $  (3.84)
</TABLE>

                                       65
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE

    None.

                                    PART III

    Certain information required by Part III is omitted from this Report on
Form 10-K in that the Registrant will file its definitive Proxy Statement for
its Annual Meeting of Stockholders to be held in May of 2001 pursuant to
Regulation 14A of the Securities Exchange Act of 1934, as amended (the "Proxy
Statement"), not later than 120 days after the end of the fiscal year covered by
this Report, and certain information included in the Proxy Statement is
incorporated herein by reference.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    (a) Executive Officers--The information required by this Item is
       incorporated by reference to the section entitled "Election of Directors"
       in the Proxy Statement.

    (b) Directors--The information required by this Item is incorporated by
       reference to the section entitled "Election of Directors" in the Proxy
       Statement.

    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 11. 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 12. 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 13. 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.

OTHER MATTERS

    Richard M. Brooks was elected unanimously by the Board of Directors to serve
out the three-year term of a former director that resigned from the Board of
Directors in November of 2000. He was also elected to the Compensation and Audit
Committee of the Board of Directors. Mr. Brooks' three-year term will expire at
our 2003 annual meeting of stockholders.

                                       66
<PAGE>
                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

    (a) The Company's Consolidated Financial Statements and Financial Statement
       Schedule are included in Part II, Item 8 of this Report and are located
       on the pages indicated below:

<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
(1) Financial Statements:
    Report of Independent Public Accountants................     38
    Consolidated Balance Sheets as of December 31, 1999 and
     2000...................................................     39
    Consolidated Statements of Operations for each of the
     three years in the period ended December 31, 2000......     40
    Consolidated Statement of Stockholders' Equity for each
     of the three years in the period ended December 31,
     2000...................................................     41
    Consolidated Statements of Cash Flows for each of the
     three years in the period ended December 31, 2000......     42
    Notes to Consolidated Financial Statements..............     43
(2) Financial Statement Schedule:
    Schedule II--Valuation and Qualifying Accounts for each
     of the three years in the period ended December 31,
     2000...................................................     70
(3) Exhibits--See listing as follows:
</TABLE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                       EXHIBIT TITLE
---------------------        ------------------------------------------------------------
<C>                     <C>  <S>
         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.
        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.
</TABLE>

                                       67
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                       EXHIBIT TITLE
---------------------        ------------------------------------------------------------
<C>                     <C>  <S>
       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.
        21.1*           --   Subsidiaries.
         23.1           --   Consent of Independent Public Accountants
        24.4*           --   Power of Attorney (included on signature page).
</TABLE>

------------------------

*   Previously filed

(b) Reports on Form 8-K:
    During the quarter ended December 31, 2000, the Company filed no current
reports on Form 8-K with the commission.

                                       68
<PAGE>
                                   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
Sacramento, State of California, on the 30th day of March, 2001.

<TABLE>
<CAPTION>

<S>                                                    <C>   <C>
                                                       VantageMed Corporation
                                                       By:
                                                             /s/ James L. Seiler
                                                             ------------------------------------
                                                             James L. Seiler,
                                                             CHIEF EXECUTIVE OFFICER
</TABLE>

    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.

<TABLE>
<CAPTION>
              SIGNATURE                                TITLE                       DATE
-------------------------------------  -------------------------------------  --------------
<S>                                    <C>                                    <C>

/s/ James L. Seiler                    Chief Executive Officer and Chairman
------------------------------------     of the Board (Principal Executive    March 30, 2001
James L. Seiler                          Officer)

/s/ Joel M. Harris
------------------------------------   President and Director                 March 30, 2001
Joel M. Harris

/s/ Peter Friedli
------------------------------------   Director                               March 30, 2001
Peter Friedli

/s/ John Stevens
------------------------------------   Director                               March 30, 2001
John Stevens

/s/ Paul W. Souza                      Chief Financial Officer
------------------------------------     (Principal Financial and Accounting  March 30, 2001
Paul W. Souza                            Officer)
</TABLE>

                                       69
<PAGE>
                                  SCHEDULE II
                       VALUATION AND QUALIFYING ACCOUNTS
                        ALLOWANCE FOR DOUBTFUL ACCOUNTS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                              BALANCE AT          ADDITIONS--                   BALANCE AT
                  YEAR                     BEGINNING OF YEAR   CHARGED TO INCOME   DEDUCTIONS   END OF YEAR
----------------------------------------   -----------------   -----------------   ----------   -----------
<S>                                        <C>                 <C>                 <C>          <C>
1998....................................          $ 68               $344             $101         $311
1999....................................          $311               $ 86             $110         $287
2000....................................          $287               $164             $211         $240
</TABLE>

                                       70