U.S. Securities & Exchange Commission
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U.S. Securities and Exchange Commission

Before the

Release No. 48629 / October 15, 2003

Release No. 1897 / October 15, 2003

File No. 3-11298

In the Matter of




The Securities and Exchange Commission ("Commission") deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act"), against VantageMed Corporation ("VantageMed" or "Respondent").


In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over it and the subject matter of these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order Pursuant to Section 21C of the Securities Exchange Act of 1934 ("Order") as set forth below.


On the basis of this Order and Respondent's Offer, the Commission finds1 that:

A. Respondent

VantageMed is a Delaware corporation, headquartered in Rancho Cordova, California, and is a national provider of healthcare information systems and services. VantageMed's common stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act and is traded on the over-the-counter bulletin board.

B. Summary

This matter involves misleading financial reporting by former officers of VantageMed, a Rancho Cordova, California, healthcare information systems and services provider. In May 2002, VantageMed restated its financial results for the third quarter of its fiscal year ending December 31, 2001 (the quarter ended September 30, 2001). The restatement revealed that VantageMed had understated its operating costs and expenses by $399,000 (4.9%), its net loss by $429,000 (20.5%), and diluted loss per share by $0.05 (20.8%) for the quarter ended September 30, 2001.

VantageMed issued the restatement because it had improperly recognized a gain on the sale of a business line (the "DentalMate" business). The gain on the sale of the DentalMate business should not have been recognized in the Company's Form 10-Q for the quarter ended September 30, 2001, because by the time the Form 10-Q was filed it was uncertain the buyers of the DentalMate business would be able to pay. By recording the gain on the sale, VantageMed improperly improved its results for that quarter.

C. The DentalMate Sale and VantageMed's Earnings Release for the Quarter Ended September 30, 2001

On September 28, 2001, the Company executed an agreement to sell the DentalMate business to third parties. The agreement provided for a total sales price of $425,000, of which $250,000 was to be paid by the sooner of November 12, 2001, or financing by the buyer's initial funding source. The balance of $175,000 was evidenced by two promissory notes from the buyer, with payments due through March 2004. The promissory notes were secured by a security agreement and personal guarantees from the principals of the buyer, with the first note being due March 30, 2002.

On October 11, 2001, VantageMed issued an earnings release for the September 30, 2001 quarter that included a gain on the DentalMate sale. The Company's Form 10-Q for the quarter was due to be filed on November 14, 2001.

D. Prior to Filing its Form 10-Q, Certain Former Officers Learned of Additional Facts that Made it Improper to Record a Gain on the DentalMate Sale

Beginning in late September 2001 and continuing in October and November of that year, VantageMed, through certain former officers, became aware of problems with the DentalMate purchaser. In late September 2001, VantageMed learned that the principals of the purchaser of the DentalMate business had limited financial resources. This weakened their personal guarantees. In late October 2001, several former officers learned that the buyer's expected initial financing for the DentalMate transaction had fallen through; over the course of several weeks in October and November, the buyers were unable to obtain replacement financing. In early November 2001, VantageMed's then-chief financial officer entered into an additional agreement with the buyer that effectively extended the due date for the $250,000 initial payment until December 15, 2001.

Based on guidance provided by certain members of VantageMed's outside auditors, by early November 2001, former VantageMed officers knew, or were reckless in not knowing, that the above facts made it improper to record a gain on the DentalMate sale in VantageMed's financial statements for the September 30, 2001 quarter. Despite this, on November 14, 2001, the Company filed its Form 10-Q for the quarter ended September 30, 2001, which included a gain on the DentalMate sale. Prior to filing its Form 10-Q, certain of VantageMed's former officers failed to inform the Company's outside auditors of the issues discussed above.

E. VantageMed's Outside Auditor Resigned

In January 2002, prior to its year-end audit work, VantageMed's outside auditor learned of the problems with the DentalMate transaction described in Section D, above. Several weeks later, they determined that VantageMed had improperly included the gain on the DentalMate sale in its Form 10-Q for the September 30, 2001 quarter. The auditors also elected to resign from the VantageMed account on February 8, 2002. The Company's Form 8-K/A, filed on February 27, 2002, attached the auditors resignation letter, which stated in part:

We informed the audit committee that we were resigning as the Company's auditor because we could no longer rely upon management's representations on important matters affecting the financial statements.  At the time the Form 10-Q for the third quarter ended September 30, 2001 was filed, we believe management did not inform us of material facts it had that would have changed our conclusion on the accounting treatment of the dental care [sic] transaction.  Based on these facts, which we now have, we believe the Company should not have recognized the $30,000 of revenue previously deferred and the $391,000 gain in connection with the sale of its dental business in the third quarter ended September 30, 2001.

F. VantageMed Restated its Results for the September 30, 2001 Quarter

In February 2002, following the default by the buyer of the DentalMate business under the terms of the asset sale agreement, VantageMed regained possession of that business. On May 8, 2002, following an internal investigation by its audit committee, VantageMed restated its financial results for the quarter ended September 30, 2001. The previously recognized $391,000 gain on the sale and $30,000 of previously deferred revenue was reversed, and an additional $8,000 of bad debt expense was recorded. The restatement revealed that as originally reported, VantageMed's operating costs and expenses were understated by $399,000 (4.9%), its net loss by $429,000 (20.5%), and diluted loss per share by $0.05 (20.8%).

G. Legal Conclusions

As described in Parts III (B) through (F) above, for the third quarter of fiscal year 2001, VantageMed engaged in conduct that improperly reduced its expenses, net loss and diluted loss per share. As a result of this conduct, VantageMed's Form 10-Q for the period ended September 30, 2001 (which was filed with the Commission and disseminated to investors) was materially false and misleading. In addition, the Company failed to maintain books, records and accounts that, in reasonable detail, accurately and fairly reflected its transactions and dispositions of assets.

Based on the foregoing, the Commission concludes that the Company violated Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder.


In determining to accept the Offer, the Commission considered remedial acts promptly undertaken by the Respondent and cooperation afforded the Commission staff.


In view of the foregoing, the Commission deems it appropriate to impose the sanctions specified in Respondent VantageMed's Offer.

Accordingly, it is hereby ORDERED that:

Respondent VantageMed shall cease and desist from committing or causing any violation and any future violation of Sections 13(a) and 13(b)(2)(A) of the Exchange Act, and Rules 12b-20 and 13a-13 thereunder.

By the Commission.

Jonathan G. Katz


1 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.



Modified: 10/16/2003