##### Table of Contents





SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  ANNUAL
    REPORT PURSUANT TO SECTIONS 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File
    No. 0-51149
 EMAGEON INC.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Delaware

63-1240138(State or Other Jurisdiction of
    
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)1200 Corporate Drive, Suite 200
    Birmingham, Alabama(Address of Principal
    Executive Offices)

35242(Zip Code)   (205) 980-9222
 (Registrants Telephone Number, Including Area Code)
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.001 Par Value Per Share

NASDAQ Global Market   Securities registered pursuant to Section 12(g) of the
    Act:
  None
  (Title of Class)
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





TABLE OF
    CONTENTS
   
 PART IITEM 1:


Business


1ITEM 1A:


Risk Factors


13ITEM 1B:


Unresolved Staff Comments


23ITEM 2:


Properties


23ITEM 3:


Legal Proceedings


23ITEM 4:


Submission of Matters to a Vote of Security
    Holders


23PART IIITEM 5:


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


24ITEM 6:


Selected Consolidated Financial Data


26ITEM 7:


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


27ITEM 7A:


Quantitative and Qualitative Disclosures About
    Market Risk


43ITEM 8:


Financial Statements and Supplementary Data


44ITEM 9:


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


44ITEM 9A:


Controls and Procedures


44ITEM 9B:


Other Information


45PART IIIITEM 10:


Directors, Executive Officers, and Corporate
    Governance


46ITEM 11:


Executive Compensation


46ITEM 12:


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


46ITEM 13:


Certain Relationships and Related Transactions,
    and Director Independence


46ITEM 14:


Principal Accounting Fees and Services


46PART IVITEM 15:


Exhibits and Financial Statement Schedules


46INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


F-1EX-21.1 SUBSIDIARIES OF EMAGEON INC.EX-23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEO AND CFO   i




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PART I  SPECIAL
    NOTE REGARDING FORWARD-LOOKING STATEMENTS
  Form 10-K
    ITEM 1.
    BUSINESS  Overview
       1




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Our
    Opportunity
        Increasing Number, Size and Complexity of Imaging
    Exams.
  Need for Advanced Visualization Tools.
 2




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Our
    Solutions
  Overview
    
      Group

Benefits from our SolutionsAdministration

   Demonstrable return on investment(CEO, CFO and COO)

   Better service to physicians   Improved staff productivity   Improved satisfaction of referring
    physicians   Elimination of many routine,
    non-productive and non-clinical tasksInformation Technology

   Lower total cost of operation(CIO and IT Department)

   Highly available, redundant and reliable   Ease of integration with different
    clinical information systems   Multi-site, standards-based integration   Focused, high quality implementation
    servicesDiagnostic Physicians

   Productivity gains(Radiologists, Cardiologists)

   Multi-point access to visualization
    tools and images   Efficient tools for collaboration with
    treating physiciansTreating Physicians 
    (Cardiologists, Surgeons, etc.)

   Availability of easy-to-use, specialty
    specific visualization tools   Faster turnaround of information for
    treatment planning   Facilitates collaborative analysis with
    diagnostic physicians   Improved treatment planningPayor

   Ability to avoid duplicate exams through
    cross-enterprise access  3




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Enterprise Content Management.
  Enterprise Visualization Technology.
  Integration with Third Party Systems.
  Specialty-Specific Clinical Applications.
  Open Standards-Based Software.
  Implementation, User Adoption, and Support
    Services.
  Our
    Product Offerings
    Enterprise Content Manager.
 4




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Enterprise Visualization.
  RadSuite.
  HeartSuite.
  Third-party Components.
  
    Servers.  Our software and the database run on
    single server or a cluster of standard redundant servers.
    Data Storage.  We support industry standard
    storage configurations, including high-availability redundant
    array of independent disks, or RAID, systems.
    Backup/recovery.  Our solution typically
    includes a tape library-based backup and recovery system that
    provides backup for our database, configuration files, and
    digital medical images. We also offer an optional configuration
    with mirrored archives in two locations, enabling uninterrupted
    operation in the event of loss of one archive.
    Workstations and Monitors.  Customers typically
    implement our enterprise visualization software using standard
    personal computer workstations and high resolution monitors for
    visualization within the facility. 5




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
    Database.  Our software applications operate on
    Oracle database technology and other standard relational
    database applications.
    Computed Radiography.  We offer computed
    radiography devices manufactured by Carestream Health. Computed
    radiography devices convert analog X-ray images into digital
    images.
    Advanced Three-Dimensional Analysis Tools.  We
    offer Vital Images and Teracon as options for advanced clinical
    applications and integrated analysis tools that complement our
    enterprise native visualization and workflow capabilities.
    Through the desktop integration of our respective products,
    physicians can access these advanced visualization and analysis
    tools and review the image data seamlessly without interrupting
    workflow.
    Dictation.  We offer a voice recognition
    dictation system from Lanier Worldwide for radiology reporting.
    OrthoSuite.  We offer a software toolset for
    orthopedic surgeons which is licensed from Orthocrat. Our
    integration with the system provides for seamless launch from
    our Enterprise Visualization software and storage of the images
    in our Enterprise Content Manager.
    MammoSuite.  We offer a mammography
    visualization and analysis solution from Cedara. Our integration
    with the system provides for seamless launch from our Enterprise
    Visualization software and storage of images in our Enterprise
    Content Manager.
    RadSuite RIS.  We offer a radiology information
    system (RIS) from Swearingen to complement our RadSuite
    visualization software for customers who desire to replace their
    current RIS solution.
    HeartSuite ECG.  We offer an ECG solution from
    Epiphany which provides seamless integration of ECG information
    with our HeartSuite VERICIS solution.  Support
    Services
    
    Adoption Success Managementis our services program that
    facilitates rapid and complete adoption by all relevant
    constituents during the implementation phase, which typically
    lasts several months.
    Total Solution Managementis an ongoing set of support
    services to ensure that our systems are highly available and
    optimally configured for users. Through continuous remote
    monitoring of our solution, we analyze system and user behaviors
    and, when appropriate, intervene and make the necessary
    adjustments to prevent anticipated problems from occurring. We
    provide standard twenty-four hour service and support for our
    software and any third-party components we provide to the
    customer.  Our
    Strategy
    Expand Our Market Share by Attracting New
    Customers.
 6




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Increase Penetration With Existing
    Customers.
  
    Increase Installations with Existing Multi-Facility
    Customers.As of December 31, 2007, we had customer
    relationships with multi-facility healthcare providers that
    control 279 hospitals. Our initial contracts with these
    customers often provide for implementation of the content
    management functions and sometimes the advanced visualization
    functions of our EVMS solution at only a portion of the
    facilities managed by the parent company. We believe there are
    opportunities to expand our installed base at facilities that
    are part of multi-facility systems in which we have a customer
    relationship with the parent company.
    Cross Sell to Existing Customers.  We are also
    in a strong position to sell additional functionality to our
    existing customers, including enterprise content management,
    enterprise visualization, specialty-specific clinical suites
    such as RadSuite, HeartSuite, OrthoSuite, and MammoSuite, and
    third-party applications and services that may not have been
    part of the initial sale. As follow-on sales opportunities, we
    offer our advanced visualization software and other products and
    additional functionality to radiologists, cardiologists and
    other specialty groups within the organization.  Enhance Our Product Offerings.
  Continue to Deliver Superior Implementation, User Adoption,
    and Customer Support Services.
  Maintain Our Open-Standards Focus.
  Our
    Technology
    
    Native DICOM Compatibility.  Our software
    conforms to the DICOM standard for medical image storage and
    workflow management. DICOM is an industry standard in medical
    imaging that defines the data elements, communication protocols,
    storage formats, and workflow methods associated with medical
    imaging data and processes. Our software stores and manages
    medical images using native DICOM communications, preserves the
    DICOM information associated with the image, and follows DICOM
    workflow methods. Using native DICOM communication means our
    solution does not require translation devices for
    converting the DICOM information into a proprietary storage
    format. We believe our commitment to DICOM as the underlying
    protocol for our software is a competitive 7




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advantage, delivering faster streaming, more efficient storage
    of the image, and the ability to integrate our software to new
    imaging devices.  
    Native DICOM-Toolkit.  While DICOM is an
    industry standard protocol for medical image data management and
    storage, the software toolsets used to process, manage, and use
    DICOM information are generally unique to particular software
    vendors. We have developed and own a DICOM-toolkit that we
    believe permits us to more rapidly integrate DICOM-based
    information into our software and believe that the ownership and
    continued development of our DICOM-toolkit is a core technology
    strategy.
    Commitment to the IHE Technical Framework.  The
    Radiological Society of North America and the Healthcare
    Information Management Systems Society created the Integrated
    Healthcare Enterprise (IHE) technical framework. IHE is a
    protocol for the integration of DICOM image information and HL7
    text-based patient information. We believe our commitment to IHE
    helps to ensure that our software integrates seamlessly with
    HL7-based billing and patient record information systems.
    Compatibility with the OPEN GL Graphics
    Standard.  Our enterprise visualization software
    performs sophisticated 3D rendering and other graphics intensive
    functions that provide physicians the ability to view 3D medical
    images for diagnosis and treatment planning. Our enterprise
    visualization software uses the OPEN GL graphics standard, which
    permits our customers to purchase inexpensive personal computers
    and graphics hardware to perform sophisticated image analysis.
    Component-Based Software Engineering.  Our
    software architecture is based on a component-based services
    model. Our software development framework supports common and
    domain specific components that can be plugged in while the
    system is operating. By building flexible, dynamic, reusable
    components, we gain flexibility to add functionality to, and
    increase the reliability of, our system because we can remedy
    problems at the component rather than the entire application
    level.  Customers
      Sales and
    Marketing
      Research
    and Development
   8




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
    improving physician and technologist workflow and productivity;
    expanding content management to cover medical documents beyond
    DICOM data;
    expanding content management to service communities;
    integrating with other information systems and acquisition
    devices;
    developing and refining visualization capabilities including new
    3D and analysis applications; and
    extending imaging tools to referring physicians in multiple
    specialties.      Competition
    
    companies that manufacture and sell digital imaging devices such
    as GE Healthcare, Siemens Medical Solutions, and Philips Medical
    Systems, who may integrate some of the functionality provided by
    our products into their equipment or bundle it with the
    equipment sale;
    companies that have traditionally sold imaging films such as
    Carestream Health, Inc., Agfa, and Fujifilm Medical Systems USA,
    Inc.;
    companies that have traditionally sold healthcare information
    technology applications such as McKesson Corp. and
    a number of smaller companies that sell department-level or
    cardiology-specific PACS or specialty visualization tools.      
    product innovation, regulatory decisions, product quality and
    performance;
    customer service and support;
    the experience of our sales, marketing, and service
    professionals; 9




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
    rapid development of new products and features; and
    price, product and policy decisions announced by competitors.  Intellectual
    Property
            ® ® ®
  Employees
    Government
    Regulation
   10




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Food and Drug Administration.
          Health Canada.
 11




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HIPAA Privacy and Security Regulations.
    Government Reimbursement.
  Fraud and Abuse. fraud-and-abuse
  
    Anti-Kickback Law.  The anti-kickback
    provisions of the Social Security Act prohibit the exchange of
    anything of value with the intent to encourage utilization of
    items or services payable under a federal health care program.
    Courts have construed the anti-kickback law to mean that a
    financial arrangement will violate such law if even one of the
    purposes of one of the parties is to encourage patient referrals
    or other Medicare/Medicaid business, regardless of whether
    legitimate purposes also exist for the arrangement. Penalties
    for federal anti-kickback violations are severe. Conviction can
    result in up to five years imprisonment, a $25,000 fine per
    offense, and exclusion from participation under federal health
    care programs. Violators may also be assessed civil monetary
    penalties ranging from $10,000 to 12




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$50,000 per offense, as well as damage assessments equal to
    three times the total amount of the kickback. We believe that
    all of our arrangements with physicians and health care
    facilities have been fully lawful. But given the broad sweep of
    the federal anti-kickback law, we cannot assure you that all
    such arrangements will be found compliant with such law if
    examined by government regulators, to the extent that such
    regulators determine that any of our arrangements are subject to
    such law.  
    Stark Law.  The Ethics in Patient Referrals
    Act, known as the Stark Law, also prohibits certain
    types of referral arrangements between physicians and health
    care entities. Physicians are prohibited under the Stark Law,
    its subsequent Stark II amendment, and its implementing
    regulations from referring patients for designated health
    services reimbursed under the Medicare program to entities
    with which they or a family member have a compensatory
    relationship or an ownership or investment interest, unless such
    referrals fall within a Stark exception. Violations of the
    statute can result in civil monetary penalties of up to $15,000
    per improper referral and exclusion from the Medicare and
    Medicaid programs. We do not believe that our arrangements with
    physician consultants or other health care providers violate the
    Stark Law, but we cannot provide assurances to such effect, nor
    can there be assurance that we will not in the future be subject
    to Stark Law penalties.
    State Law.  Various states have enacted
    equivalents of the foregoing federal statutory and regulatory
    provisions. These state law equivalents would apply to items or
    services reimbursed by any third-party payor, including
    commercial payors. Many of these laws vary significantly from
    state to state, rendering compliance a costly and uncertain
    endeavor.  Available
    Information
  Form 10-K, Form 10-Q, Form 8-K,
  ITEM 1A.
    RISK
    FACTORS  Our business involves various risks and uncertainties, some
    of which are discussed in this section. The information
    discussed below should be considered carefully with the other
    information contained in this Annual Report on
    Form 10-K
    and the other documents and materials we file with the SEC, as
    well as news releases and other information we may publicly
    disseminate from time to time. The risks and uncertainties
    described below are not the only ones we face. Additional risks
    and uncertainties not presently known to us, or that we
    currently believe to be immaterial, may also adversely affect
    our business. Any of the following risks or uncertainties that
    develop into actual events could have a materially adverse
    effect on our business, financial condition, or results of
    operations, or on the market price of our common stock.
  Our
    industry includes many large companies that have significantly
    greater resources and other competitive advantages, and we may
    not be able to compete successfully against these
    competitors.
   13




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Our
    business is subject to the cyclical nature of our industry and
    changes in economic conditions in general. Adverse changes with
    respect to these factors may reduce demand for our products,
    lower our revenues and affect our financial
    condition.
    Changes
    in our primary market for PACS radiology systems have resulted
    in a significant decline in PACS radiology system sales
    orders.
    Our
    operating results may fluctuate, which makes quarterly results
    difficult to predict and could cause our stock price to decline
    or exhibit volatility.
    
    Long Sales Cycle:  Many of our customers are
    large organizations with lengthy and unpredictable purchasing
    processes. Because our solution is a major capital expenditure
    involving a multi-year commitment, it can take a significant
    period of time to close a sale. We typically have to educate our
    prospective customers on the benefits of our solution and obtain
    approval from senior management. Consolidation in the health
    care industry may also delay or extend the sales cycle for
    affected customers. As a result, our solution has a typical
    sales cycle, from the initial contact to the placing of an
    order, of six to nine months, and sometimes much longer. This
    long and unpredictable sales cycle may contribute to substantial
    fluctuations in our quarterly operating results.
    Timing of Revenue:  A significant portion of
    our revenue each quarter comes from sales made in prior periods,
    as we implement our solution and perform services under
    multi-year maintenance and support agreements with our
    customers. As a result, a decline in sales, client renewals, or
    market acceptance of our products in a particular quarter will
    not necessarily be reflected in revenue in that quarter and may
    adversely affect our revenue and profitability in future
    quarters. Moreover, a majority of our customers now purchase
    perpetual licenses from us. Unlike term licenses, where license
    revenue and certain implementation fees are recognized over the
    life of an initial term typically ranging from two to seven
    years, with perpetual licenses the full software license fee and
    associated implementation fees are recognized as revenue in the
    month when all revenue recognition criteria are met. Because
    revenue recognition may not be achieved in the period expected,
    our revenue could fluctuate from quarter to quarter solely due
    to the timing of satisfying our revenue recognition criteria. 14




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
    Implementation Delays:  Once we enter into a
    customer contract, our recognition of revenue from that contract
    depends, to a significant extent, on the timing of our
    implementation of the project. Customer implementation schedules
    may be delayed for reasons beyond our control, such as customer
    scheduling changes, delays in acceptance testing by customers,
    unusual integration issues, or delays in obtaining equipment
    from third-party vendors. Delays in the implementation of a
    particular project may require us to delay the recognition of
    anticipated revenue from one quarter to another and may
    contribute to substantial fluctuations in our quarterly
    operating results.    Our
    products are complex and are operated in a wide variety of
    network configurations, which could result in errors or product
    failures.
    We may
    not be able to respond to changes in our industry, competitive
    technologies, changes in customer requirements, or evolving
    industry standards, which would result in reduced revenue and
    profit margins.
    If the
    market for digital medical imaging products and services does
    not develop as we expect, our business strategy may be
    ineffective, and we may not be able to grow our
    business.
    
    the availability of high performance computers and storage
    systems at reduced prices; 15




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
    the continuing development of industry standards for the
    generation, transmission, and storage of medical imaging data;
    changing dynamics in the health care industry, including
    consolidation and third-party reimbursement, which are driving
    increased automation across multiple sites; and
    changing medical practices, including demand for more and better
    medical imaging.    The
    recent decline in the market price of our common stock may
    impede our ability to execute our business plan and create
    adverse effects on our results of operations and financial
    condition.
    One of
    our largest stockholders has nominated a competing slate of
    directors for election in conjunction with this years
    annual meeting of stockholders.
    We may
    not be successful in implementing the expansion of our sales and
    marketing efforts into new market segments, which may have an
    adverse impact on our growth strategy.
      
    refine and adapt our products and services for new or different
    applications;
    offer our products and services at price points that are
    competitive in the market segment;
    create and develop demand for and market acceptance of our
    products and services in the market segment; 16




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
    market, promote, and distribute our products and services, and
    establish public awareness of our brand in the market segment;
    compete with other companies already in the market
    segment; and
    establish and maintain sufficient internal marketing, sales, and
    customer service infrastructures to support these efforts.    We
    have incurred substantial operating losses in the
    past.
    We may
    not be able to raise additional capital on acceptable terms to
    fund our operations and develop product enhancements, which
    could adversely affect our growth prospects.
    
    develop new technologies;
    enhance existing product lines, such as expanding our advanced
    visualization tools product line to apply to additional clinical
    specialties;
    fund additional sales and marketing programs; or
    hire additional personnel, particularly to expand sales,
    marketing, and research and development.    The
    loss of Ascension Health or other major customers could
    materially and adversely affect our results of operations and
    financial condition because portions of our future revenues are
    tied to continuing relationships with significant
    customers.
   17




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In the
    future we may undertake additional acquisitions, which could
    result in integration risks, operating difficulties, dilution,
    or other adverse financial consequences.
    We are
    dependent on our senior executive management, and the loss of
    any member of senior executive management may prevent us from
    managing and growing our businesses effectively.
  day-by-day
  We
    depend on highly specialized personnel, and the loss or failure
    to identify, hire, motivate, and retain additional highly
    specialized personnel could adversely affect our ability to grow
    our business.
     18




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Changes
    in our third-party reselling arrangements may affect our
    revenues and our ability to deliver a complete solution, which
    may adversely impact our revenue and cause customer
    dissatisfaction.
    Our
    customers depend on third-party reimbursement. A reduction or
    other change in third-party reimbursements to our customers
    could negatively affect our business by reducing the demand for
    our products or adversely impacting our pricing.
    If we
    fail to obtain or maintain necessary FDA clearances for our
    products, if such clearances are delayed, or if our products are
    subject to FDA recall, we will be unable to distribute and
    market some of our products.
     19




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If we
    fail to comply with other potentially applicable health care
    regulations, we could face substantial penalties.
    
    The Federal Anti-Kickback Statute prohibits the exchange of
    anything of value with the intent to encourage utilization of
    services payable under a federal health care program. Courts
    have construed this statute as being implicated even when only
    one of the purposes of one of the parties is to encourage
    patient referrals or other federal health care business, even if
    legitimate purposes also exist for the arrangement.
    The Federal Ethics in Patient Referrals Act, known as the Stark
    Law, prohibits (absent an applicable Stark exception) referrals
    for designated health services reimbursable under Medicare or
    Medicaid by a physician to an entity with which the physician,
    or an immediate family member, has a financial relationship.
    The Federal Health Insurance Portability and Accountability Act
    of 1996, or HIPAA, has increased the scope of federal
    fraud-and-abuse
    laws by applying them to prohibit fraudulent conduct in
    connection with any health care benefit program, not only
    federal health care programs. Although we are not a covered
    entity that is directly subject to liability under the HIPAA
    privacy and security standards, we could be impacted by such
    regulations through contractual relations with those of our
    customer base who are covered entities.
    State law equivalents of each of the above federal laws, such as
    anti-kickback, self-referral, and false claims laws, may apply
    to items or services reimbursed by any third-party payor
    (including commercial insurers). State laws governing the
    privacy of health information in certain circumstances, many of
    which differ from each other in significant ways and often are
    not preempted by HIPAA (thus complicating compliance efforts)
    and some of which may apply to us directly, may also affect our
    operations.   20




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Product
    liability claims may require us to pay damages, reduce the
    demand for our products, and harm our reputation.
    If we
    fail to protect our intellectual property rights, our
    competitors may take advantage of our ideas to compete more
    effectively with us.
     21




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Our
    operating results could suffer if we become subject to a
    protracted infringement claim or litigation or a significant
    damage award.
    
    costly litigation and damage awards;
    diversion of management attention and resources;
    product sales and distribution delays or suspensions, either
    temporary or permanent; and
    the need to enter into royalty or licensing agreements, which
    may not be available on terms acceptable to us, if at all.    Our
    directors may not be held personally liable for certain actions,
    which could discourage stockholder suits against
    them.
    Delaware
    law and certain anti-takeover provisions of our corporate
    documents could delay or prevent a third party from acquiring us
    or a change in control even if it would benefit our
    stockholders.
    
    our board of directors may issue 200,000 shares of blank
    check preferred stock without stockholder approval and that may
    be substantially dilutive or contain preferences or rights
    objectionable to an acquiror;
    our board of directors is comprised of classes of directors with
    staggered, three-year terms so that only a portion of our
    directors is subject to election at each annual meeting;
    our board of directors can amend our bylaws without stockholder
    approval;
    stockholders cannot call special meetings of stockholders;
    stockholders cannot act by written consent;
    stockholders must give advance notice to nominate directors for
    election or to submit proposals at stockholder meetings; 22




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
    we may be obligated to make payments under executive employment
    agreements in the event of a change in control; and
    some Delaware statutes restrict or prohibit certain transactions
    with affiliated or interested parties and permit the adoption of
    poison pills without stockholder approval.    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES      ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   23




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PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    for Common Stock
      2006 Quarter Ended

High


LowMarch 31, 2006

$
18.82


$
15.30June 30, 2006


17.90



12.90September 30, 2006


15.96



13.39December 31, 2006

$
16.53


$
13.79   2007 Quarter Ended

High


LowMarch 31, 2007

$
15.58


$
9.75June 30, 2007


11.89



7.42September 30, 2007


10.25



7.90December 31, 2007

$
8.66


$
3.08   Dividends
    Use of
    Proceeds from Initial Public Offering
  Form S-l No. 333-120621)
    Purchases
    of Equity Securities by the Issuer and Affiliated
    Purchasers
   24




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Stock
    Performance Graph
    COMPARISON
    OF CUMULATIVE TOTAL RETURN
    AMONG EMAGEON INC.,
    NASDAQ MARKET INDEX AND HEMSCOTT GROUP INDEX
  
 25




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##### Table of Contents



ITEM 6.
    SELECTED
    CONSOLIDATED FINANCIAL DATA    Year Ended December 31,2003


2004


2005


2006


2007Consolidated Statements of Operations Data(1)(2):Revenue:System sales

$
17,234


$
33,441


$
50,041


$
75,340


$
51,140Support services


6,341



13,059



25,023



48,165



53,485Total revenue


23,575



46,500



75,064



123,505



104,625Cost of revenue:System sales


10,227



21,452



28,316



43,333



28,551Support services


7,777



11,426



15,921



24,331



27,819Total cost of revenue


18,004



32,878



44,237



67,664



56,370Gross profit


5,571



13,622



30,827



55,841



48,255Operating expenses:Research and development


4,875



6,197



11,652



17,368



20,179Sales and marketing


6,403



9,377



12,238



18,459



18,285General and administrative


4,802



7,498



10,945



17,028



13,750Amortization and write-off of intangible assets related to
    Camtronics acquisition










993



3,540



1,381Integration costs related to Camtronics acquisition










244



5,369



Employee severance and related expenses


















2,001Loss on disposal of property and equipment














437



553Total operating expenses


16,080



23,072



36,072



62,201



56,149Operating loss


(10,509
)


(9,450
)


(5,245
)


(6,360
)


(7,894
)Interest (expense) income, net


(850
)


(1,022
)


248



328



809Net loss

$
(11,359
)

$
(10,472
)

$
(4,997
)

$
(6,032
)

$
(7,085
)Net loss per share, basic and diluted

$
(5.79
)

$
(4.07
)

$
(0.28
)

$
(0.29
)

$
(0.33
)Weighted average shares, basic and diluted


1,973



2,590



17,975



20,936



21,385Selected Cash Flow Data:Cash (used in) provided by operations

$
(2,377
)

$
4,959


$
(1,881
)

$
7,263


$
(3,177
)  26




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##### Table of Contents



As of December 31,2003


2004


2005


2006


2007Consolidated Balance Sheet Data:Cash and cash equivalents

$
2,340


$
5,995


$
15,520


$
23,008


$
17,034Marketable securities










4,951







Intangible assets, net


8,000



6,873



34,277



30,090



27,604Total assets


29,050



41,768



117,944



113,012



99,294Total debt and capital lease obligations


8,467



9,489



3,749



961



89Redeemable preferred stock


30,282



30,348











Total (deficit) stockholders equity

$
(23,535
)

$
(32,370
)

$
63,639


$
65,107


$
62,296     (1)
    
    On November 1, 2005, we acquired Camtronics Medical
    Systems, Ltd., and on May 30, 2003, we merged with
    Ultravisual Medical Systems Corporation. Both the acquisition
    and the merger were accounted for as purchases under Statement
    of Financial Accounting Standards No. 141, Business
    Combinations. Accordingly, the results of operations of
    Camtronics Medical Systems, Ltd. and Ultravisual Medical Systems
    Corporation have been included in the accompanying consolidated
    financial statements since the respective dates of acquisition.
    For more information, see Note 4 of the notes to our
    consolidated financial statements.(2)
    
    Certain reclassifications have been made to prior years
    financial data to conform to the current year presentation.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Company
    Overview
    Form 8-K Form 8-K. Form 10-K.
    Results
    Overview
   27




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##### Table of Contents



Significant
    Events in 2007
    
    In the third quarter of 2007 we introduced RadSuite Express, our
    standardized offering of content management, advanced
    visualization and workflow tools originally aimed at the less
    penetrated market of hospitals with fewer than 200 beds. As the
    architecture and configuration have matured, we have come to
    believe that RadSuite Express is an appropriate solution for a
    larger portion of the market than originally anticipated.
    We added new customers and deepened relationships with existing
    customers. At December 31, 2007 we had contractual
    relationships with 604 hospitals, up from 588 at the end of
    2006. Of these hospitals, 504 had installed one or more of our
    products, up from 460 at the end of 2006.
    We converted 81 cardiology customers to five year maintenance
    and support agreements in place of the historical one year
    renewal agreements.
    We began a systematic process to thoroughly evaluate every area
    of our business and, as a part of that process, we implemented a
    plan to reorganize our management team. Notably, in 2007 Chris
    E. Perkins succeeded Grady O. Floyd as our Chief Operating
    Officer, and on March 31, 2008 John W. Wilhoite will
    succeed W. Randall Pittman as our Chief Financial Officer and
    Treasurer. As a result, in 2008 there will be new leadership at
    the executive levels in our operations, finance, sales, and
    marketing areas with a commitment to rationalize our cost
    structure, focus on product development and product management,
    and improve our profitability.
    In May 2007, we acted to align our operating expenses with the
    current level of our revenue by reducing our workforce through
    elimination of existing positions and normal attrition,
    eliminating thirty positions in the customer service and
    research and development areas.  Sources
    of Revenue
     28




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##### Table of Contents



year-to-year
  not-for-profit
  Cost of
    Revenue
      Gross
    Profit
    
    actual sales prices negotiated in the contracting process;
    costs associated with purchasing and manufacturing third-party
    components;
    fluctuations in prices received from third-party component
    manufacturers and distributors relative to the
    mark-up
    percentages provided for in customer contracts; and
    the relative mix of the hardware and software components
    comprising system sales in a given period. 29




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##### Table of Contents




    actual services fees negotiated during the contracting process;
    productivity of our professional service team;
    costs of service agreements related to third-party components
    included in our solution; and
    costs associated with the use of outside contractors.  Operating
    Expenses
  Research and Development.
  Sales and Marketing.
  General and Administrative.
  Initial
    Public Offering And Camtronics Integration
      Critical
    Accounting Policies and Estimates
      Revenue Recognition and Deferred
    Revenue. 97-2, (SOP 97-2), Software Revenue Recognition
 30




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##### Table of Contents




    Perpetual licenses:  software licensed on a
    perpetual basis to a customer based on a fixed number of users
    and/or
    estimates of annual study volumes with no right to return the
    licensed software.
    Enterprise licenses:  software licensed on a
    perpetual basis to a customer (typically a multi-facility health
    care provider), as opposed to licensing based on a fixed number
    of users or on estimates of annual study volumes, with no right
    to return the licensed software.
    Term licenses:  software licensed on a term
    basis according to a fixed number of users
    and/or
    estimates of annual study volumes.    
    Persuasive evidence of an arrangement
    exists:  It is our customary practice to have a
    written contract, which is signed by both the customer and us,
    or a purchase order from those customers that have previously
    negotiated a standard end-user license arrangement, prior to
    recognizing revenue on an arrangement.
    Delivery has occurred:  It is our customary
    practice to obtain acceptance for our software, which is
    evidenced by written customer acknowledgement. In the event that
    we grant a customer the right to specified upgrades, we defer
    recognition of the entire arrangement fee until we deliver the
    specified upgrades as we have not established vendor-specific
    objective evidence (VSOE) of fair value for specified upgrades.
    Specified upgrades include, but are not limited to, future
    software deliverables that are stated in the customer contract.
    The customers payment is deemed fixed or
    determinable:   We assess whether fees are fixed
    or determinable and free of contingencies or significant
    uncertainties at the time of sale and recognize revenue when all
    other revenue recognition requirements are met. If the fee is
    determined not to be fixed or determinable, we recognize revenue
    as the amounts become due and payable.
    Collection is probable:   Likelihood of
    collection is assessed on a
    customer-by-customer
    basis. If it is determined from the outset of an arrangement or
    at the time of add-on sales to existing customers that
    collection is not probable based upon our credit review process,
    revenue is recognized on a cash-collected basis if all other
    criteria are met.       31




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##### Table of Contents




    Our sales agreements with customers generally contain
    infringement indemnity provisions. Under these agreements, we
    agree to indemnify, defend and hold harmless the customer in
    connection with patent, copyright or trade secret infringement
    claims made by third parties with respect to the customers
    authorized use of our products and services. Our sales
    agreements with customers sometimes also contain indemnity
    provisions for death, personal injury or property damage caused
    by our personnel or contractors in the course of performing
    services to customers. Under these agreements, we agree to
    indemnify, defend and hold harmless the customer in connection
    with death, personal injury and property damage claims made by
    third parties with respect to actions of our personnel or
    contractors. The indemnity obligations contained in sales
    agreements generally have no specified expiration date but
    typically limit the amount of award covered to a portion of the
    fees paid by the customer over a portion of the contract term.
    We have not previously incurred costs to settle claims or pay
    awards under these indemnification provisions. Accordingly, we
    have no liabilities recorded for these provisions as of
    December 31, 2007.
    We warrant that our software products will perform in all
    material respects in accordance with our standard published
    specifications in effect at the time of delivery of the licensed
    products to the customer as long as the contract remains in
    effect. Additionally, we warrant that our services will be
    performed by qualified personnel in a manner consistent with
    normally accepted industry standards. We provide for the
    estimated cost of product and service warranties based on
    specific warranty claims and claim history. As of
    December 31, 2007 we have a liability of $0.44 million
    in our balance sheet for these obligations.   32




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##### Table of Contents



SOP 97-2
    Research and Development Costs.
  product-by-product
  Intangible and Other Long-Lived
    Assets.
   33




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##### Table of Contents



Results
    of Operations
  Revenue
    Year Ended December 31,


Year Ended December 31,2007


2006


Change


Change (%)


2006


2005


Change


Change(%)(In thousands except percentages)


(In thousands except percentages)System sales

$
51,140


$
75,340


$
(24,200
)


(32.1
)%

$
75,340


$
50,041


$
25,299



50.6
%Support services


53,485



48,165



5,320



11.0
%


48,165



25,023



23,142



92.5
%Total revenue

$
104,625


$
123,505


$
(18,880
)


(15.3
)%

$
123,505


$
75,064


$
48,441



64.5
%          34




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##### Table of Contents



Gross
    Margin
    Year Ended December 31,2007


2006


2005Revenue:System Sales

$
51,140


$
75,340


$
50,041Support Services


53,485



48,165



25,023Total


104,625



123,505



75,064Cost of Revenue:System Sales


28,551



43,333



28,316Support Services


27,819



24,331



15,921Total


56,370



67,664



44,237Gross Profit:System Sales


22,589



32,007



21,725Support Services


25,666



23,834



9,102Total

$
48,255


$
55,841


$
30,827Gross Margin:System Sales


44.2
%


42.5
%


43.4
%Support Services


48.0
%


49.5
%


36.4
%Total


46.1
%


45.2
%


41.1
%      35




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##### Table of Contents



Research
    and Development, Sales and Marketing, and General and
    Administrative Expenses
   36




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##### Table of Contents



Research
    and Development (R&D)
  Year Ended December 31,


Year Ended December 31,2007


2006


Change


Change (%)


2006


2005


Change


Change(%)(In thousands except percentages)


(In thousands except percentages)R&D Expense

$
20,179


$
17,368


$
2,811



16.2
%

$
17,368


$
11,652


$
5,716



49.1
%% of Revenue


19.3
%


14.1
%










14.1
%


15.5
%       Sales
    and Marketing (S&M)
  Year Ended December 31,


Year Ended December 31,2007


2006


Change


Change (%)


2006


2005


Change


Change(%)(In thousands except percentages)


(In thousands except percentages)S&M Expense

$
18,285


$
18,459


$
(174
)


(0.9
)%

$
18,459


$
12,238


$
6,221



50.8
%% of Revenue


17.5
%


14.9
%










14.9
%


16.3
%    37




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##### Table of Contents



General
    and Administrative (G&A)
  Year Ended December 31,


Year Ended December 31,2007


2006


Change


Change (%)


2006


2005


Change


Change (%)(In thousands except percentages)


(In thousands except percentages)G&A Expense

$
13,750


$
17,028


$
(3,278
)


(19.3
)%

$
17,028


$
10,945


$
6,083



55.6
%% of Revenue


13.1
%


13.8
%










13.8
%


14.6
%        38




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##### Table of Contents



Amortization
    of Intangible Assets Related to Camtronics
    Acquisition
    Integration
    Costs Related to Camtronics Acquisition
    Employee
    Severance and Related Expenses
    Operating
    Loss
    Other
    Income and Expense
     39




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##### Table of Contents



Quarterly
    Results of Operations
      Quarter EndedMarch 31,


June 30,


September 30,


December 31,


March 31,


June 30,


September 30,


December 31,2006


2006


2006


2006


2007


2007


2007


2007(Dollars in thousands, except per share data)Revenue:System sales

$
17,269


$
17,601


$
19,370


$
21,100


$
13,668


$
11,235


$
10,706


$
15,531Support services


9,732



12,415



13,641



12,377



13,682



14,341



12,022



13,440Total revenue


27,001



30,016



33,011



33,477



27,350



25,576



22,728



28,971Cost of revenue:System sales


13,284



9,977



10,712



9,360



8,722



6,310



6,327



7,192Support services


6,218



6,534



6,187



5,392



7,160



6,894



7,311



6,454Total cost of revenue


19,502



16,511



16,899



14,752



15,882



13,204



13,638



13,646Gross profit


7,499



13,505



16,112



18,725



11,468



12,372



9,090



15,325Operating expenses:Research and development


4,130



4,032



4,601



4,605



5,139



4,668



5,567



4,805Sales and marketing


4,002



4,589



4,435



5,433



4,392



4,500



4,121



5,272General and administrative


4,338



3,851



4,495



4,344



3,454



2,752



3,136



4,408Amortization and write-off of intangible assets related to
    Camtronics acquisition


885



885



885



885



345



345



346



345Integration costs related to Camtronics acquisition


1,204



1,077



2,062



1,026















Employee severance and related expenses






















578



298



1,125(Gain) loss on disposal of property and equipment


(20
)


4







453



169



44



115



225Total operating expenses


14,539



14,438



16,478



16,746



13,499



12,887



13,583



16,180Operating (loss) income


(7,040
)


(933
)


(366
)


1,979



(2,031
)


(515
)


(4,493
)


(855
)Interest income, net of interest expense


47



76



93



112



196



227



213



173Net (loss) income

$
(6,993
)

$
(857
)

$
(273
)

$
2,091


$
(1,835
)

$
(288
)

$
(4,280
)

$
(682
)Net (loss) income per share-basic and diluted

$
(0.34
)

$
(0.04
)

$
(0.01
)

$
0.10


$
(0.09
)

$
(0.01
)

$
(0.20
)

$
(0.03
)     Revenue.
  Gross Margin.
 40




---



##### Table of Contents



Operating Expenses.
    quarter-to-quarter
  Liquidity
    and Capital Resources
    December 312007


2006Working
    capital*

$
21,304


$
21,392Current
    ratio**


1.66:1.0



1.52:1.0Cash and cash equivalents

$
17,034


$
23,008Short-term borrowings and long-term debt

$
89


$
961     *
    
    Working capital is total current assets less total current
    liabilities.**
    
    Current ratio is the ratio of current assets to current
    liabilities.    Operating
    Activities
       41




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##### Table of Contents



Investing
    Activities
          Financing
    Activities
      Payment Due By Period (In thousands)Less than








More thanContractual Cash Obligations

Total


1 year


1-3 years


3-5 years


5 years(Dollars in thousands)Capital lease obligations

$
89


$
36


$
53







Operating leases


5,085



1,616



2,344


$
1,051


$
74Total contractual cash obligations

$
5,174


$
1,652


$
2,397


$
1,051


$
74      42




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##### Table of Contents



Off-Balance
    Sheet Arrangements
    Recently
    Issued Accounting Pronouncements
  Fair Value Measurements (No. 157-2)
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK     43




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  page F-1
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f) 15d-15(f)
  
    pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect the transactions and
    dispositions of our assets;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with GAAP, and that our receipts and expenditures are
    being made only in accordance with authorizations of our
    management and directors; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition or use of our assets that
    could have a material effect on our financial statements.    Internal Control Integrated
    Framework
 44




---



##### Table of Contents



page F-3 Form 10-K.
  Changes
    in Internal Control Over Financial Reporting
  Rules 13a-15(f) 15d-15(f)
  ITEM 9B.
    OTHER
    INFORMATION   45




---



##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    www emageon com
  ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES   PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES    1.
    Financial
    Statements  Page NumberDescription

in ReportReport of Independent Registered Public
    Accounting Firm on Financial Statements


F-2Report of Independent Registered Public
    Accounting Firm on Internal Control Over Financial Reporting


F-3Consolidated Balance Sheets as of
    December 31, 2007 and 2006


F-4Consolidated Statements of Operations for the
    years ended December 31, 2007, 2006 and 2005


F-5Consolidated Statements of Cash Flows for the
    years ended December 31, 2007, 2006 and 2005


F-6Consolidated Statements of Stockholders
    Equity for the years ended December 31, 2007, 2006 and
    2005


F-7Notes to Consolidated Financial Statements


F-8  46




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##### Table of Contents



2.
    Financial
    Statement Schedules  Page NumberDescription

in ReportSchedule II  Valuation and Qualifying Accounts
    and Reserves for the three years ended December 31, 2007

Follows page
    F-28     3.
    Exhibits  Regulation S-K:
  ExhibitNo.

Description2
.1

Agreement and Plan of Merger, dated as of April 30, 2003,
    by and among Emageon, Inc., Emageon  UV Development
    Corporation, Ultravisual Medical Systems Corporation and Jeff
    Rusinow as Stockholders Representative (incorporated by
    reference to Exhibit 2.1 to the Companys Registration
    Statement on
    Form S-1,
    Registration
    No. 333-120621,
    filed on November 19, 2004)3
.1

Emageon Inc. Amended and Restated Certificate of Incorporation
    (incorporated by reference to Exhibit 3.2 to the
    Companys Registration Statement on
    Form S-1/A,
    Registration
    No. 333-120621,
    filed on February 4, 2005)3
.2

Emageon Inc. Amended and Restated Bylaws (incorporated by
    reference to Exhibit 3.5 to the Companys Current
    Report on
    Form 8-K
    filed on November 15, 2007)4
.1

Form of Emageon Inc. common stock certificate (incorporated by
    reference to Exhibit 3.4 to the Companys Registration
    Statement on
    Form S-1/A,
    Registration
    No. 333-120621,
    filed on February 4, 2005)10
.1#

Imageon Solutions, Inc. 2000 Equity Incentive Plan (incorporated
    by reference to Exhibit 10.1 to the Companys
    Registration Statement on
    Form S-1,
    Registration
    No. 333-120621,
    filed on November 19, 2004)10
.2#

Emageon, Inc. 2000 Equity Compensation Plan (incorporated by
    reference to Exhibit 10.2 to the Companys
    Registration Statement on
    Form S-1,
    Registration
    No. 333-120621,
    filed on November 19, 2004)10
.3#

Emageon Inc. 2005 Equity Incentive Plan (incorporated by
    reference to Exhibit 10.3 to the Companys
    Registration Statement on
    Form S-1/A,
    Registration
    No. 333-120621,
    filed on February 4, 2005)10
.4#

Emageon Inc. 2005 Non-Employee Director Stock Incentive Plan
    (incorporated by reference to Exhibit 10.4 to the
    Companys Registration Statement on
    Form S-1/A,
    Registration
    No. 333-120621,
    filed on February 4, 2005)10
.5#

Employment Agreement of Charles A. Jett, Jr. (incorporated by
    reference to Exhibit 10.5 to the Companys
    Registration Statement on
    Form S-1,
    Registration
    No. 333-120621,
    filed on November 19, 2004)10
.6#

Employment Agreement of Milton G. Silva-Craig (incorporated by
    reference to Exhibit 10.6 to the Companys
    Registration Statement on
    Form S-1,
    Registration
    No. 333-120621,
    filed on November 19, 2004)10
.7#

Employment Agreement of W. Randall Pittman (incorporated by
    reference to Exhibit 10.7 to the Companys
    Registration Statement on
    Form S-1,
    Registration
    No. 333-120621,
    filed on November 19, 2004)10
.8#

Employment Agreement of Mark A. Gehring (incorporated by
    reference to Exhibit 10.8 to the Companys
    Registration Statement on
    Form S-1,
    Registration
    No. 333-120621,
    filed on November 19, 2004)10
.9#

Employment Agreement of Noel D. Gartman (incorporated by
    reference to Exhibit 10.9 to the Companys
    Registration Statement on
    Form S-1,
    Registration
    No. 333-120621,
    filed on November 19, 2004) 47




---



##### Table of Contents



ExhibitNo.

Description10
.10

Form of Indemnification Agreement between the Registrant and
    each of its directors and executive officers (incorporated by
    reference to Exhibit 10.10 to the Companys
    Registration Statement on
    Form S-1,
    Registration
    No. 333-120621,
    filed on November 19, 2004)10
.11

Amended and Restated Registration Rights Agreement, dated as of
    October 2, 2001, by and among Emageon UV, Inc. and certain
    stockholders, as amended and joined on May 30, 2003 and
    June 25, 2003 (incorporated by reference to
    Exhibit 10.11 to the Companys Registration Statement
    on
    Form S-1,
    Registration
    No. 333-120621,
    filed on November 19, 2004)10
.12

Enterprise Agreement, dated as of May 5, 2004, by and
    between Emageon UV, Inc. and Ascension Health (incorporated by
    reference to Exhibit 10.12 to the Companys
    Registration Statement on
    Form S-1/A,
    Registration
    No. 333-120621,
    filed on February 8, 2005)10
.13

Lease Agreement, dated as of December 20, 2001, by and
    between Meadow Brook North, L.L.C. and Emageon UV, Inc.
    (incorporated by reference to Exhibit 10.13 to the
    Companys Registration Statement on
    Form S-1,
    Registration
    No. 333-120621,
    filed on November 19, 2004)10
.13A

Sixth Amendment to Lease Agreement, dated as of July 23,
    2004, by and between Meadow Brook North, L.L.C. and Emageon UV,
    Inc. (incorporated by reference to Exhibit 10.13A to the
    Companys Registration Statement on
    Form S-1,
    Registration
    No. 333-120621,
    filed on November 19, 2004)10
.14

Note and Warrant Purchase Agreement, dated as of June 25,
    2004, among Emageon UV, Inc. and Whitecap Alabama Growth
    Fund  I, LLC, Enhanced Alabama Issuer, LLC and
    Advantage Capital Alabama Partners I, L.P. (incorporated by
    reference to Exhibit 10.14 to the Companys
    Registration Statement on
    Form S-1/A,
    Registration
    No. 333-120621,
    filed on January 25, 2005)10
.15

Emageon, Inc. Amended and Restated Stockholders Agreement, dated
    as of October 2, 2001, among Emageon, Inc. and the
    stockholders signatory thereto (incorporated by reference to
    Exhibit 10.15 to the Companys Registration Statement
    on
    Form S-1/A,
    Registration
    No. 333-120621,
    filed on January 25, 2005)10
.15A

Emageon, Inc. First Amendment and Joinder to Amended and
    Restated Stockholders Agreement, dated as of May 30, 2003,
    among Emageon, Inc and the stockholders signatory thereto
    (incorporated by reference to Exhibit 10.15A to the
    Companys Registration Statement on
    Form S-1/A,
    Registration
    No. 333-120621,
    filed on January 25, 2005)10
.15B

Emageon, Inc. Second Amendment and Joinder to Amended and
    Restated Stockholders Agreement, dated as of June 25, 2003,
    among Emageon, Inc. and the stockholders signatory thereto
    (incorporated by reference to Exhibit 10.15B to the
    Companys Registration Statement on
    Form S-1/A,
    Registration
    No. 333-120621,
    filed on January 25, 2005)10
.16#

Employment Agreement of Grady Floyd (incorporated by reference
    to Exhibit 10.1 to the Companys Current Report on
    Form 8-K
    filed on April 4, 2006)10
.17#

Employment Agreement of Chris Perkins (incorporated by reference
    to Exhibit 10.1 to the Companys Current Report on
    Form 8-K
    filed on December 12, 2007)14
.1

Emageon Inc. Code of Ethics (incorporated by reference to
    Exhibit 14.1 to the Companys Report on
    Form 10-K
    for the year ended December 31, 2004)21
.1*

Subsidiaries of Emageon Inc.23
.1*

Consent of Independent Registered Public Accounting Firm31
.1*

Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a)
    or
    Rule 15d-14(a)
    under the Securities Exchange Act of 193431
.2*

Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a)
    or
    Rule 15d-14(a)
    under the Securities Exchange Act of 193432
.1*

Certification of Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     *
    
    Filed herewith.#
    
    Management contract or compensatory plan or arrangement.
    
    Confidential treatment has been granted for portions of this
    exhibit. 48




---



##### 



EMAGEON
    INC.
 INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS  CONTENTS
   
 Report of Independent Registered Public
    Accounting Firm on Financial Statements


F-2Report of Independent Registered Public
    Accounting Firm on Internal Control Over Financial Reporting


F-3Consolidated Balance Sheets


F-4Consolidated Statements of Operations


F-5Consolidated Statements of Cash Flows


F-6Consolidated Statements of Stockholders
    Equity (Deficit)


F-7Notes to Consolidated Financial Statements


F-8




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    ON FINANCIAL STATEMENTS           Share Based
    Payment
  Internal Control Integrated Framework
  
    F-2




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm on Internal
    Control 
    Over Financial Reporting     Internal Control Integrated Framework
                F-3




---



##### Table of Contents



EMAGEON
    INC.
 CONSOLIDATED
    BALANCE SHEETS  December 31,2007


2006(In thousands, except for share data)ASSETSCurrent assets:Cash and cash equivalents

$
17,034


$
23,008Trade accounts receivable, net of allowance for doubtful
    accounts
    of $910 and $277 at December 31, 2007 and 2006, respectively


26,796



26,706Inventories


6,249



8,579Prepaid expenses and other current assets


3,398



4,459Total current assets


53,477



62,752Property and equipment, net


15,143



18,362Other noncurrent assets


3,070



1,808Intangible assets:Goodwill


21,667



21,210Customer relationships, net


5,017



6,399Acquired technology, net


645



1,836Capitalized software development costs, net


275



645Total intangible assets


27,604



30,090Total assets

$
99,294


$
113,012LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
9,581


$
9,738Accrued payroll and related costs


2,877



3,770Deferred revenue


16,382



23,953Other accrued expenses


3,297



2,946Current portion of long-term debt and capital lease obligations


36



953Total current liabilities


32,173



41,360Long-term deferred revenue


4,306



5,851Other long-term liabilities


466



686Long-term debt and capital lease obligations


53



8Total liabilities


36,998



47,905Stockholders equity:Common stock, $0.001 par value; 165,050,000 shares
    authorized;
    21,626,155 shares and 21,483,643 shares issued; and
    21,450,398 shares and 21,307,886 shares outstanding at
    December 31, 2007 and 2006, respectively


22



21Additional paid in capital


126,332



122,538Accumulated other comprehensive income


741



262Accumulated deficit


(64,524
)


(57,439
)62,571



65,382Treasury stock: 175,757 shares


(275
)


(275
)Total stockholders equity


62,296



65,107Total liabilities and stockholders equity

$
99,294


$
113,012  F-4




---



##### Table of Contents



EMAGEON
    INC.
 CONSOLIDATED
    STATEMENTS OF OPERATIONS  Year Ended December 31,2007


2006


2005(In thousands, except share amounts)Revenue:System sales

$
51,140


$
75,340


$
50,041Support services


53,485



48,165



25,023Total revenue


104,625



123,505



75,064Cost of revenue:System sales


28,551



43,333



28,316Support services


27,819



24,331



15,921Total cost of revenue


56,370



67,664



44,237Gross profit


48,255



55,841



30,827Operating expenses:Research and development


20,179



17,368



11,652Sales and marketing


18,285



18,459



12,238General and administrative


13,750



17,028



10,945Amortization and write-off of intangible assets related to
    Camtronics acquisition


1,381



3,540



993Integration costs related to Camtronics acquisition






5,369



244Employee severance and related expenses


2,001







Loss on disposal of property and equipment


553



437



Total operating expenses


56,149



62,201



36,072Operating loss


(7,894
)


(6,360
)


(5,245
)Other income (expense):Interest income


908



655



1,497Interest expense


(99
)


(327
)


(1,249
)Net loss

$
(7,085
)

$
(6,032
)

$
(4,997
)Net loss per share  basic and diluted

$
(0.33
)

$
(0.29
)

$
(0.28
)Weighted average common stock outstanding  basic and
    diluted


21,385,487



20,935,685



17,975,083  F-5




---



##### Table of Contents



EMAGEON
    INC.  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2007


2006


2005(In thousands)Operating activitiesNet loss

$
(7,085
)

$
(6,032
)

$
(4,997
)Adjustments to reconcile net loss to net cash (used in) provided
    by operating activities:Depreciation


5,941



6,990



5,628Provision for doubtful accounts


633







Amortization of intangible assets


3,013



4,969



1,626Write off of intangible assets related to Camtronics
    acquisition,
    net of tax liability










403Amortization and write off of subordinated debt discount










646Employee stock based compensation expense


3,212



3,430



1,211Loss on disposal of property and equipment


553



702



Other operating activities






129



215Changes in operating assets and liabilities, net of
    acquired companies


(9,444
)


(2,925
)


(6,613
)Net cash (used in) provided by operating activities


(3,177
)


7,263



(1,881
)Investing ActivitiesPurchases of property and equipment


(2,693
)


(5,229
)


(7,680
)Purchases of marketable securities










(44,198
)Proceeds from maturities of marketable securities






5,000



39,335Capitalized software development costs


(70
)


(652
)


(354
)Other investing activities


(125
)






Purchase price of Camtronics, net of cash received










(40,359
)Net cash used in investing activities


(2,888
)


(881
)


(53,256
)Financing ActivitiesProceeds from issuance of common stock, net of issuance costs


582



3,892



70,630Payment of debt and capital lease obligations


(941
)


(2,788
)


(6,515
)Decrease in restricted cash


445







Other financing activities










432Net cash provided by financing activities


86



1,104



64,547Effect of exchange rate changes on cash


5



2



116Net (decrease) increase in cash


(5,974
)


7,488



9,526Cash at beginning of year


23,008



15,520



5,994Cash at end of year

$
17,034


$
23,008


$
15,520Supplemental disclosure of cash flow information:Interest paid

$
104


$
357


$
1,266  F-6




---



##### Table of Contents





EMAGEON
    INC.
 CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)  Accumulated








TotalPreferred Stock








Additional


Other








StockholdersCarrying


Common Stock


Paid in


Comprehensive


Treasury


Accumulated


EquityShares


Value


Shares


Par Value


Capital


Income


Stock


Deficit


(Deficit)(In thousands, except for share data)Balance at December 31, 2004


19,692,358


$
7,306



3,056,181


$
3


$
6,998


$



$
(275
)

$
(46,402
)

$
(32,370
)Exercise of stock options










417,607



1



1,292















1,293Exercise of stock warrants


105,703



58



24,632







74















132Exercise of mandatorily redeemable stock warrants in connection
    with initial public offering










537,082



1



735















736Proceeds from initial public offering, net of issuance costs










5,750,000



6



67,195















67,201Automatic conversion of non-redeemable preferred stock into
    common stock in connection with initial public offering


(19,798,061
)


(7,364
)


2,402,898



2



7,362















Automatic conversion of redeemable preferred stock into common
    stock in connection with initial public offering










8,440,513



8



30,348















30,356Stock based compensation


















1,211















1,211Foreign currency translation adjustments






















93











93Unrealized loss on available-for-sale marketable securities






















(8
)










(8
)Accretion of redeemable preferred stock






























(8
)


(8
)Net loss






























(4,997
)


(4,997
)Balance at December 31, 2005










20,628,913



21



115,215



85



(275
)


(51,407
)


63,639Exercise of stock options










787,699







3,772















3,772Exercise of warrants










38,117







46















46Other stock issuance










4,400







75















75Stock based compensation


















3,430















3,430Vesting of restricted stock










24,514























Foreign currency translation adjustments






















169











169Realized loss on sale of marketable securities






















8











8Net loss






























(6,032
)


(6,032
)Balance at December 31, 2006










21,483,643


$
21


$
122,538


$
262


$
(275
)

$
(57,439
)

$
65,107Exercise of stock options










108,683



1



582















583Stock-based compensation


















3,212















3,212Vesting of restricted stock










33,829























Foreign currency translation adjustments






















479











479Net loss






























(7,085
)


(7,085
)Balance at December 31, 2007





$




21,626,155


$
22


$
126,332


$
741


$
(275
)

$
(64,524
)

$
62,296  F-7




---



##### Table of Contents





EMAGEON
    INC.
 NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS



Years
    Ended December 31, 2007, 2006, and 2005  Note 1.
    Business
    Description and Background  Business
    Description
    Background
    Note 2.
    Summary
    of Significant Accounting Policies  Presentation
      Reclassification
      Principles
    of Consolidation
    Use of
    Estimates
   F-8




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Fair
    Value of Financial Instruments
    Fair
    Value Measurements
  Fair Value
    Measurements (No. 157-2)
  Cash
    and Cash Equivalents
    Restricted
    Cash
      Trade
    Accounts Receivable and Allowance for Doubtful
    Accounts
   F-9




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Inventories
  first-in,
    Property
    and Equipment
        Business
    Combinations, Goodwill, and Intangible Assets
  Business Combinations Goodwill and Other Intangible Assets
     F-10




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Treasury
    Stock
    Revenue
    Recognition
      97-2, Software Revenue Recognition, (SOP 97-2).
   F-11




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
            SOP 97-2
  Cost
    of Revenue
         F-12




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Customer
    Indemnity and Warranty Costs
      Customer Indemnity:
  Product Warranty:
  Income
    Taxes
        Accounting For
    Uncertainty In Income Taxes Accounting For Income Taxes
   F-13




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Other
    Comprehensive Income
    Computation
    of Net Loss Per Share
      For the Year Ended December 31,2007


2006


2005Net loss

$
(7,085
)

$
(6,032
)

$
(4,997
)Accretion of redemption value related to redeemable preferred
    stock










(8
)Net loss allocable to common stockholders

$
(7,085
)

$
(6,032
)

$
(5,005
)Common stock outstanding at beginning of period


21,283,372



20,453,156



2,709,370Weighted average effect of:Conversion of preferred stock to common stock










9,506,552Issuance of common stock in initial public offering










5,032,877Issuance of common stock pursuant to stock option exercises,
    warrant exercises, and restricted stock vesting


102,115



482,529



576,321Release of escrowed common stock upon completion of initial
    public offering










149,963Weighted average number of shares of common stock 
    basic and diluted


21,385,487



20,935,685



17,975,083Net loss per share  basic and diluted

$
(0.33
)

$
(0.29
)

$
(0.28
)    F-14




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Stock-Based
    Compensation
  Share Based Payment Accounting for Stock Issued to Employees
    Research
    and Development Costs
    product-by-product
  Translation
    of Foreign Currencies
       F-15




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Advertising
    Expense
    Note 3.
    Initial
    Public Offering      Note 4.
    Acquisitions
    and Intangible Assets     F-16




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Accounts receivable

$
7,101Inventories


3,207Property, plant and equipment


10,595Other current assets


693Goodwill


17,325Intangible assets:Customer relationships


10,028Developed technology


1,074Trade names


501In-process technology


248Total assets acquired


50,772Accounts payable and other liabilities


5,312Accrued expenses


844Unearned revenue


4,257Total liabilities assumed


10,413Net assets acquired

$
40,359         F-17




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  WeightedAverage


December 31, 2007


December 31, 2006Amortization


Gross Carrying


Accumulated


Gross Carrying


AccumulatedPeriod (Years)


Amount


Amortization


Amount


AmortizationAcquired Technology


4.6


$
5,240


$
(4,595
)

$
5,240


$
(3,404
)Goodwill


n/a



21,667







21,210



Customer relationships


4.9



8,010



(2,993
)


10,028



(3,629
)Trade names


1.2











501



(501
)Capitalized software development costs


1.4



1,521



(1,246
)


1,451



(806
)$
36,438


$
(8,834
)

$
38,430


$
(8,340
)     2008

$
2,1812009


1,5022010


1,3352011


9192012 and thereafter


Total

$
5,937   Note 5.
    Inventories    December 31,2007


2006Third party components

$
3,086


$
2,716Work-in-process


447



336Completed systems


2,716



5,527$
6,249


$
8,579  F-18




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Note 6.
    Supplementary
    Cash Flow Information    For the Year Ended December 31,2007


2006


2005(Increase) decrease in:Trade accounts receivable, net

$
(723
)

$
1,659


$
(7,659
)Inventories, net


2,330



(548
)


(3,402
)Prepaid expenses and other current assets


1,061



(1,407
)


(885
)Other noncurrent assets


(1,082
)


(389
)


(726
)Increase (decrease) in:Accounts payable


(652
)


(4,120
)


5,775Accrued payroll and related costs


(893
)


(334
)


348Other accrued expenses


(369
)


792



(187
)Deferred revenue


(9,116
)


1,422



123Net changes in operating assets and liabilities

$
(9,444
)

$
(2,925
)

$
(6,613
)     Note 7.
    Property
    and Equipment    Estimated


December 31,Useful Lives


2007


2006Land


Indefinite


$
791


$
791Buildings and improvements


39 years



7,170



7,141Machinery and equipment


5 to 7 years



1,028



990Computers, software and other


3 to 7 years



11,768



10,918Furniture and fixtures


3 to 7 years



2,247



1,973Leasehold improvements


4 to 5 years



572



560Third-party components leased to customers
    under operating leases


5 to 7 years



2,971



11,55326,547



33,926Less accumulated depreciation and amortization






(11,404
)


(15,564
)$
15,143


$
18,362    F-19




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Note 8.
    Major
    Customers and Related Party Transactions    Note 9.
    Defined
    Contribution Benefit Plan    Note 10.
    Income
    Taxes    December 31,2007


2006Deferred tax assets:Net operating loss carryforward

$
21,700


$
21,281Intangible assets


1,842



1,544Deferred revenue


5,821



4,293Reserves and accrued liabilities


452



428Stock-based compensation


1,285



1,269Other


145



15831,245



28,973Deferred tax liabilities:Depreciation


(1,912
)


(1,220
)Developed technology


(1,638
)


(1,602
)(3,550
)


(2,822
)Net deferred tax assets


27,695



26,151Valuation allowance


(27,695
)


(26,151
)Net deferred tax liability

$



$
    F-20




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Year Ended December 31,2007


2006


2005Tax benefit computed at the statutory federal rate

$
(2,409
)

$
(2,051
)

$
(1,731
)State taxes, net of federal tax benefit


(171
)


(168
)


(137
)Increase in tax from:Change in deferred tax valuation allowance


1,544



2,076



1,591Permanent differences


468



143



184True-up of deferred taxes


592







Other


(24
)






93Benefit for income taxes

$



$



$
   true-up
    Year Ended December 31,2007


2006


2005Balance at beginning of period

$
26,151


$
19,761


$
17,571Income tax expense


1,544



2,076



1,582Other






4,314



608Balance at end of period

$
27,695


$
26,151


$
19,761        F-21




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Note 11.
    Debt and
    Capital Lease Obligations    December 31,2007


2006Secured promissory note payable in 60 monthly installments
    of $38, including interest at 9.88%, due in March 2007, secured
    by hardware and software at customer site

$



$
113Secured promissory note payable in 58 monthly installments
    of $11, including interest at 4.76%, final payment of $10 in
    September 2007, secured by hardware and software at customer site






109Secured promissory note payable to bank in 54 monthly
    installments of $83, including interest at 6.13%, due in June
    2007, secured by hardware and software at customer site






480Promissory note to governmental agency payable in
    57 monthly installments of $5, including interest at 4.0%,
    final payment of $4 in October 2007






47Capital leases of third-party computer hardware and software at
    a customer site and of certain office and computer equipment


89



212Total debt and capital lease obligations


89



961Current portion


(36
)


(953
)Long-term portion of debt and capital lease obligations

$
53


$
8     Note 12.
    Common
    Stock Warrants     F-22




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2007


2006Weighted





WeightedAverage





AverageExercise





ExerciseShares


Price


Shares


PriceCommon stock warrants at beginning of period


10,869


$
5.52



48,986


$
5.04Forfeited or canceled














Exercised










(38,117
)


4.89Granted














Outstanding at end of period


10,869


$
5.52



10,869


$
5.52Exercisable at end of period


10,869


$
5.52



10,869


$
5.52     Note 13.
    Stock-Based
    Compensation       F-23




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Year EndedDecember 31, 2005Net loss:As reported

$
(4,997
)Deduct: Accretion of redemption value related to redeemable
    preferred stock


(8
)Add: Stock-based employee compensation reported in net loss


1,171Deduct: Stock-based employee compensation under the fair value
    method for all awards


(2,045
)Pro-forma net loss

$
(5,879
)Basic and diluted net loss per share:As reported

$
(0.28
)Deduct: Accretion of redemption value related to redeemable
    preferred stock


Add: Stock-based employee compensation reported in net loss


0.06Deduct: Stock-based employee compensation under the fair value
    method for all awards


(0.11
)Pro-forma net loss

$
(0.33
)   Stock
    Options
    Year Ended December 31,2007


2006


2005Dividend yield


0.00
%


0.00
%


0.00
%Expected volatility


50.00
%


70.87
%


70.87
%Risk-free interest rate


4.44
%


4.87
%


4.11
%Expected life of options, in years


5.0



5.0



5.0Weighted average grant date fair value

$
4.70


$
10.09


$
8.53    F-24




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
          2007


2006Weighted





WeightedAverage





AverageExercise





ExerciseShares


Price


Shares


PriceOptions at beginning of period


1,750,543


$
9.27



2,128,560


$
5.91Forfeited


(147,129
)


12.35



(125,657
)


8.99Exercised


(108,683
)


7.52



(787,699
)


4.80Granted


794,650



9.53



535,339



16.15Outstanding at end of period


2,289,381


$
9.36



1,750,543


$
9.27Exercisable at end of period


1,320,187


$
8.23



894,393


$
5.29     Options Outstanding


Options ExercisableWeighted








WeightedAverage


Weighted





Average


WeightedRemaining


Average





Remaining


AverageContractual


Exercise





Contractual


ExerciseRange of Exercise Prices

Number


Life


Price


Number


Life


Price$1.73 to $2.07


107,243



3.52 years


$
1.82



107,243



3.52 years


$
1.82$4.52 to $7.17


890,881



5.37 years



5.15



731,014



4.56 years



5.12$7.93 to $12.46


644,754



9.41 years



10.47



103,815



9.28 years



11.61$12.72 to $14.90


220,787



7.91 years



13.09



156,358



7.94 years



13.24$15.05 to $17.79


425,716



8.30 years



16.43



221,757



8.31 years



16.46Total


2,289,381



7.21 years


$
9.36



1,320,187



5.88 years


$
8.23     Restricted
    Stock
   F-25




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      2007


2006Weighted





WeightedAverage





AverageShares


Fair Value


Shares


Fair ValueRestricted stock at beginning of period


57,250


$
16.41







Granted


94,833


$
9.82



85,496


$
16.30Vested


(33,829
)

$
8.76



(24,514
)

$
15.97Forfeited


(14,390
)

$
14.03



(3,732
)

$
16.56Restricted stock at end of period


103,864


$
11.20



57,250


$
16.41     Note 14.  Operating
    Leases
  Lessee Arrangements.
  2008

$
1,6162009


1,5922010


7522011


5402012


5112013 and Beyond


74$
5,085     Year Ended December 31,2007


2006Beginning liability balance

$
1,057


$
Additions to the liability






1,190Lease payments, net


(282
)


(133
)Reduction in estimated liability


(175
)


Ending liability balance

$
600


$
1,057  F-26




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Lessor Arrangements.
    2008

$
3032009


152Total minimum future rentals

$
455   Note 15.
    Employee
    Severance and Related Expenses         F-27




---



##### Table of Contents



EMAGEON
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Note 16.
    Selected
    Quarterly Financial Data (Unaudited)  Quarters EndedMarch 31


June 30


September 30


December 312007Revenue

$
27,350


$
25,576


$
22,728


$
28,971Gross profit


11,468



12,372



9,090



15,325Operating loss


(2,031
)


(515
)


(4,493
)


(855
)Net loss

$
(1,835
)

$
(288
)

$
(4,280
)

$
(682
)Net loss per share  basic and diluted

$
(0.09
)

$
(0.01
)

$
(0.20
)

$
(0.03
)2006Revenue

$
27,001


$
30,016


$
33,011


$
33,477Gross profit


7,499



13,505



16,112



18,725Operating (loss) income


(7,040
)


(933
)


(366
)


1,979Net (loss) income

$
(6,993
)

$
(857
)

$
(273
)

$
2,091Net (loss) income per share  basic and diluted

$
(0.34
)

$
(0.04
)

$
(0.01
)

$
0.10  F-28




---



##### Table of Contents



SIGNATURES
    Emageon Inc.
  By:
    /s/  Charles
    A. Jett, Jr.        Signature

Title/s/  Charles
    A. Jett, Jr.Charles
    A. Jett, Jr.

Chairman of the Board, President and Chief Executive Officer
    (Principal Executive Officer)/s/  W.
    Randall PittmanW.
    Randall Pittman

Chief Financial Officer and Treasurer
    (Principal Financial Officer)/s/  Arthur
    P. BeattieArthur
    P. Beattie

Director/s/  Roddy
    J.H. ClarkRoddy
    J.H. Clark

Director/s/  Douglas
    D. FrenchDouglas
    D. French

Director/s/  Fred
    C. Goad, Jr.Fred
    C. Goad, Jr.

Director/s/  Mylle
    H. MangumMylle
    H. Mangum

Director/s/  John
    W. ThompsonJohn
    W. Thompson

Director/s/  Hugh
    H. Williamson, IIIHugh
    H. Williamson, III

Director




---



##### Table of Contents



Emageon
    Inc.
  SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
  Balance


Additions Charged To





BalanceBeginning


Costs and


Other





End ofDescription

of Period


Expenses


Accounts


Deductions


Period(In thousands)Allowance for doubtful accounts deducted from accounts
    receivable in the balance sheet:2007

$
277



635







(2
)(1)

$
9102006


126



367







(216
)(1)


2772005


75



57







(6
)(1)


126Accrued liability for product warranty included in other accrued
    expenses in the balance sheet:2007

$
700



148







(408
)(3)

$
4402006


937



254







(491
)(3)


7002005






178



844
(2)


(85
)(3)


937     (1)
    
    Uncollectible accounts written off, and payments received on
    previously written-off accounts(2)
    
    Warranty liability of Camtronics at acquisition in November 2005.(3)
    
    Expenditures in settlement of warranty claims.