UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)2)

x ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

IMPAC MEDICAL SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

100 West Evelyn Avenue, Mountain View, California 94041

(Address of principal executive offices) (Zip Code)

Telephone Number: (650) 623-8800

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨.    No  x.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K/A or any amendment to this Form 10-K/A.  ¨

At November 18, 2003, the aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant was approximately $149.9 million.

At November 18, 2003, the number of shares outstanding of the registrant’s Common Stock was 9,759,514.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  ¨.    No  x.

DOCUMENTS INCORPORATED BY REFERENCE

Definitive Proxy Statement for the Company’s 2004 Annual Meeting of Stockholders—Part III of this Form 10-K/A.

IMPAC MEDICAL SYSTEMS, INC.

Explanatory Note

The purpose of this Amendment No. 12 on Form 10-K/A to the Annual Report on Form 10-K of IMPAC Medical Systems, Inc. (the “Company”) for the fiscal year ended September 30, 2003 is to restate our consolidated financial statements for the years ended September 30, 2003, 2002 and 2001, and related disclosures, including the selected financial data included herein as of and for the years ended September 30, 2003, 2002, 2001 and 2000.

Generally, no attempt has been made in this Amendment No. 12 to modify or update other disclosures presented in the original report on Form 10-K except as required to reflect the effects of the restatement. This Form 10-K/A generally does not reflect events occurring after the filing of the Form 10-K or modify or update those disclosures affected by subsequent events. Information not affected by the restatement is unchanged and reflects the disclosures made at the time of the original filing of the Form 10-K on November 24, 2003. Accordingly, this Form 10-K/A should be read in conjunction with our filings made with the Securities and Exchange Commission subsequent to the filing of the original Form 10-K, including any amendments to those filings. The following items have been amended as a result of the restatement:

Our Chief Executive Officer and Chief Financial Officer have also reissued their certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act.

We have restated our financial results for the fiscal years ended September 30, 2003, 2002, 2001 and 2000 to conform certain of our revenue recognition policies to Statement of Position (SOP) 97-2 “Software Revenue Recognition.”Recognition” and the judgment it requires as to when it can be considered that all elements of a multiple element arrangement have been delivered (except for those for which there is vendor specific objective evidence of fair value) and revenue for those delivered elements can be recognized. As a result of the restatement, some previously recognized revenues have been shifted to earlier or later quarters (resulting in a change to previously reported deferred revenue) and others have been reclassified to deferred revenue at September 30, 2003 and will be recognized in periods subsequent to fiscal year 2003 in accordance with SOP 97-2. In addition, certain previously deferred revenues and related deferred costs have been recognized as revenue and expenses in the restatement period. The restatement also gives effect to the recognition of a deferred tax liability associated with the acquisition of Intellidata, Inc. in April 2002. The restatement does not impact previously reported total cash flows from operations. As a result of the impact of changes in the timing of revenue recognition, net sales decreasedincreased (decreased) by $2.6 million, $4.4$(555,000), $(1.5) million and $6.2$1.5 million in the fiscal years ended September 30, 2001, 2002 and 2003, respectively, from the amounts reported in our Form 10-K/A filed April 16, 2004 with corresponding increasesdecreases (increases) in deferred revenues. We also deferred the recognition of the related direct incremental commission expense and certain direct incremental travel expenses associated with installations at customer sites as well as the federal income tax provision (benefit) and allowance for doubtful accounts. Net income decreasedincreased (decreased) by $1.5 million, $2.2 million$(293,000), $(707,000) and $3.5 million$937,000 in the fiscal years ended September 30, 2001, 2002 and 2003, respectively.respectively, from the amounts reported in our Form 10-K/A filed April 16, 2004. Due to the effects of the restatement on operating results during the year ended September 30, 2000, the opening retained earnings balance in fiscal 2001 was reducedincreased by $1.4 million,$35,000, net of tax.

Additional detail regarding the restatement is included in Note 3 of the Notes to Consolidated Financial Statements included in Part II—Item 8 of this Amendment No. 12 on Form 10-K/A.

i

INDEX TO ANNUAL REPORT ON FORM 10-K/A

For the fiscal year ended September 30, 2003

ii

FORWARD-LOOKING STATEMENTS

This Form 10-K/A includes “forward-looking statements.” Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, our competitive strengths and weaknesses, our business strategy and the trends we anticipate in the industry and economies in which we operate and other information that is not historical information. When used in this Form 10-K/A, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, our examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them, but we cannot assure you that our expectations, beliefs and projections will be realized.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-K/A. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this Form 10-K/A are set forth in this Form 10-K/A, including the factors described in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Factors.” If any of these risks or uncertainties materialize, or if any of our underlying assumptions are incorrect, our actual results may differ significantly from the results that we express in or imply by any of our forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect future events or circumstances. Presently known risk factors include, but are not limited to, the following factors:

MARKET, RANKING AND OTHER DATA

This Form 10-K/A contains various estimates related to the IT and healthcare markets. These estimates have been included in studies published by market research and other firms or our estimates are based on management’s knowledge and experience in the markets in which we operate. These estimates have been produced by industry analysts based on trends to date, their knowledge of technologies and markets, and customer research, but these are forecasts only and are thus subject to inherent uncertainty. Our estimates have been based on information provided by customers, suppliers, trade and business organizations and other contacts in the markets in which we operate. We believe these estimates to be accurate as of the date of this Form 10-K/A. However, this information may prove to be inaccurate because of the method by which we obtained some of the data for our estimates or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in a survey of market size. As a result, you should be aware that market, ranking and other similar data included in this Form 10-K/A, and estimates and beliefs based on that data, may not be reliable.

iii

PART I

Item 1. Business

We provide information technology systems for cancer care. Our products provide electronic medical record, imaging, decision support, scheduling and billing applications in an integrated platform to manage the information-related complexities of cancer care, from detection and diagnosis through treatment and follow-up. Cancer centers require specialized IT to administer complex treatments, to integrate advanced medical devices, to provide data aggregation and to meet reporting requirements. In addition to satisfying these needs, our systems also improve the delivery of cancer care by enhancing patient safety, enabling advanced therapies, streamlining process management and facilitating communications.

We market and sell our systems to university teaching hospitals, community and government hospitals, freestanding cancer centers and private practices. Our information technology, or IT, solutions include point of care systems and cancer registry systems. In North America, we have sold and installed over 1,000 of our point of care systems and over 400 of our cancer registry systems in over 1,200 customer facilities. Based on our internal competitive analysis of the oncology IT market, we believe we have completed significantly more installations than our closest competitors. Our customers include 33 of the top 50 U.S. cancer hospitals, as ranked by U.S. News & World Report in July 2003. Outside of North America, our point of care systems are installed in over 400 facilities located in over 55 countries. Our modular design provides cancer centers the flexibility to fulfill their initial IT needs and easily expand their systems over time. We install our systems in facilities that range from small departments with less than five users to national delivery networks with hundreds of users.

We were incorporated in California in January 1990 and shipped our first product in 1991. Our growth has been primarily organic, supplemented by several small acquisitions. In October 1997, we acquired our cancer registry product from ELM Services, Inc. In April 2000, we acquired MC² Scientific Systems, Inc., which added a virtual simulator product and standard medical imaging interface products to our product line. In April 2002, we acquired Intellidata, Inc., a laboratory information systems provider, which added laboratory information management capabilities to our product line. In June 2000, we signed a merger agreement with Varian Medical Systems, Inc., but the merger transaction was never consummated due to objections from the U.S. Department of Justice, Antitrust Division. In November 2002, we reincorporated as a Delaware corporation.

Industry Overview

Oncology IT Market

There are approximately 7,400 facilities in the United States that provide cancer treatment services, including hospitals, freestanding cancer centers and physician offices. We believe there are also more than 4,000 accessible cancer treatment facilities outside the United States. These facilities provide surgery, chemotherapy and/or radiation therapy. Vendors in this market include companies whose primary business is oncology IT solutions, vendors who offer capital equipment with oncology IT solutions and healthcare IT providers that offer general solutions to all healthcare segments.

Specialized Treatment of Cancer

Cancer is the second leading cause of death in the United States after heart disease, and, as of 1997, there were approximately nine million cancer survivors in the United States, either cured of the disease or living with it while undergoing long-term treatment.

Cancer is a general term for over 100 diseases characterized by uncontrolled growth and spread of abnormal cells. Cancer may attack anywhere in the body, varies significantly in structure and behavior, and can be detected at any stage in its progression. The diagnosis and treatment of cancer requires the careful coordination of many different healthcare specialists through a long and complex process. Cancer may be detected in many ways, such

as a physical exam, a routine mammogram or a standard blood test. Once cancer is detected, physicians determine the type and extent of the disease by radiological imaging studies and various diagnostic tests, such as the pathological examination of a tumor biopsy. Upon diagnosis of the patient, an oncologist, a physician specializing in the study and treatment of cancer, assumes responsibility for the patient’s cancer treatment as well as many of the responsibilities of the primary care physician. The oncologist prescribes the best course of treatment based on the location, type and extent of the disease, and oversees the patient’s therapy, often lasting several months or years. Upon completion of therapy, the patient’s progress is tracked for five or more years to evaluate the effectiveness of the treatment.

Oncologists are generally segmented into three disciplines: surgical oncologists specialize in the surgical removal of cancerous tumors; medical oncologists treat cancer patients with chemotherapy; and radiation oncologists treat cancer patients with radiation. Oncologists treat patients in a variety of settings, including university teaching hospitals, community and government hospitals, freestanding cancer centers and physician offices. In the United States, approximately 3,400 hospitals and 4,000 other practice locations provide cancer treatment services. These facilities offer specialized services and are equipped either to mix and administer highly toxic chemotherapy drugs or to deliver large radiation doses using sophisticated medical devices, and in many cases both.

Need for Specialized Information Technology in Cancer Care

Many healthcare IT systems provide basic administrative and clinical functions, but do not satisfy the specialized requirements of cancer care. Cancer care is an information intensive discipline that requires sophisticated and specialized information systems to manage the complex detection, diagnosis, treatment and follow-up processes. Cancer treatment is becoming increasingly complex due to the rapid introduction of new chemotherapy drugs and the evolution of sophisticated radiation therapy planning and delivery technologies. Cancer care requires specialized information technology solutions that address the following factors:

report identified medication and pharmacy errors as significant causes of death and injury and called for the expanded use of information technology to improve patient safety. Similarly, the Leapfrog Group, a consortium of large employers whose members reportedly spend $55 billion annually on healthcare, has encouraged healthcare providers to invest in information technology to prevent avoidable medical errors, enhance patient safety and improve the quality of clinical processes.

The IMPAC Solution

We develop specialized IT solutions that improve the delivery of cancer care by enhancing patient safety, enabling advanced therapies, streamlining process management and improving communications. Our IT systems are currently installed in over 1,200 cancer treatment facilities, which is significantly more than our closest competitors. Our IT systems typically range from $75,000 to more than $500,000 depending on the number of site locations, users and features. Key elements of our solutions include:

device integration, connecting radiation therapy planning, imaging and treatment devices, to streamline complex treatment methods, such as IMRT. Our systems connect to laboratory devices and drug dispensing systems to expedite the chemotherapy process. Our systems’ ability to integrate many devices allows cancer centers to make medical device and IT purchasing decisions without being bound to a particular equipment manufacturer.

Our Strategy

Our objective is to enhance our leadership position in oncology IT systems, become the leading provider of healthcare IT solutions for cancer care generally, and expand into new markets for the treatment of other chronic diseases. Key elements of our strategy include:

•

Expand Our Worldwide Sales. We intend to continue to expand internationally, particularly in Western Europe and the Pacific Rim. In fiscal 2003, less than 10% of our net sales were outside the United States, most of which were sold through our distribution relationship with Siemens Medical Systems. In January 2002, we initiated a direct marketing and sales effort in Europe with the opening of our first international sales and support office in the United Kingdom. We have also engaged additional distributors for Italy and Japan. We believe our systems are particularly applicable to international cancer centers, which typically provide centralized, comprehensive cancer care.

We also intend to pursue selective acquisitions that will add incremental functionality to our oncology solution and open new market opportunities for us in medical specialties beyond oncology. For example, in April 2002, we acquired a laboratory information system that imports laboratory results into our oncology IT systems. We intend to target strategic acquisitions of businesses or products that we believe will help us achieve our overall goals.

Our Products

Our oncology IT systems integrate business functions, such as scheduling and billing, with an electronic medical record, or EMR, specialized for oncology. The result is a comprehensive integrated solution that improves overall communication, efficiency and quality of care. Our modular design allows cancer centers to acquire a system to meet their initial needs and easily expand it over time. Installation sizes range from small departments with less than five users to national delivery networks with hundreds of users. Our systems are available in both single and multi-department configurations, and are designed to exchange data and images with hospital information and imaging systems to easily co-exist in a hospital environment. Our software applications can be installed on the customer’s conventional or wireless networks, or accessed through the Internet using our remote application hosting service.

IMPAC ONCOLOGY IT SOLUTION

Electronic Medical Record

Our EMR is a computerized patient record with specialized features for chemotherapy and radiation therapy, thereby providing clinicians with a complete picture of cancer care. Major functions include:

Device Connectivity

Our systems connect directly to the devices that are integral to the oncology treatment process, including all devices required to deliver complex radiation therapy treatments such as IMRT. Our systems connect to virtual simulation systems, radiation therapy planning systems, linear accelerators and imaging devices, thereby streamlining radiation therapy planning, setup, verification, delivery and ongoing quality assurance. Our systems are also capable of downloading lab results from a variety of devices and efficiently managing drug administration and billing through our interface with a leading chemotherapy drug dispensing system.

Medical Imaging

Our medical imaging products provide clinicians with the integrated ability to manage both the data and the images that are critical to the diagnosis, planning and delivery of high quality cancer care. Major functions include:

Practice Management

We provide a full-featured practice management system that is integrated with our clinical system, enabling cancer care centers to improve communication, streamline workflow, improve data reporting and minimize process inefficiencies. Major functions include:

Data Aggregation and Reporting

Federal, state and other foreign regulators require hospital-based cancer programs to collect and report cancer incidents. In addition, accreditation as a “Comprehensive Cancer Center” requires that centers also contribute data to studies conducted by the American College of Surgeons, or ACoS, in the format established by the North American Association of Central Cancer Registries. Our registry products support the collection and

reporting of cancer cases in accordance with all national and ACoS requirements. Our registry products also provide the ability to create and access clinical data repositories for cancer research. For example, our National Oncology Database consists of more than 1.9 million cancer cases occurring throughout the United States from 1985 to the present and is updated monthly.

Electronic Data and Image Interchange

Our oncology IT system provides cancer centers with a solution that meets their specific requirements, and supports the exchange of information and images with hospital and payor IT systems through established communications standards. Major functions include:

Our Services

We also offer a range of services as part of our healthcare IT system. These services consist of the following:

Research and Development

We believe that our future success will depend on our ability to continue supporting new and emerging cancer treatment methods. Our engineering organization applies a mature software design control process to develop software with the high level of quality required of a medical device manufacturer, and the timeliness

required of a commercial software vendor. Our software design control process was implemented to meet rigorous federal and international quality standards. We spent $6.3 million on research and development in fiscal 2001, $7.8 million in fiscal 2002 and $9.9 million in fiscal 2003.

Customers

We sell our products to university teaching hospitals, community hospitals, freestanding cancer centers, private practices and corporate and government organizations. Through our direct sales efforts and the efforts of our distribution partners, we have directly or indirectly installed our products in over 1,600 facilities in over 55 countries. Increasingly, we have seen our installed base and prospects move from single center entities to multi-site entities.

On April 25, 2001, we entered into a five-year agreement with Siemens Medical Systems, Inc., our largest customer and one of the world’s largest manufacturers of radiotherapy systems, granting Siemens a non-exclusive worldwide right to sublicense and distribute our software products to their customers. The agreement allows Siemens to package our software products with their cancer treatment equipment, and to market our products throughout the world under their LANTIS trademark and trade name. Under the terms of the agreement, we provide post-contract support to Siemens; Siemens provides post-contract support directly to the end users. The agreement continues our distribution relationship with Siemens that we first established in 1992, and may be terminated before the end of its five-year term only upon a breach of the agreement by either Siemens or us or if either of us seeks bankruptcy court protection or makes an assignment for the benefit of creditors.

Siemens accounted for 8.2%8.0% of our net sales in fiscal 2003 13.0%and 13.5% in fiscal 2002 and 13.3% in fiscal 2001. The decline in Siemens’ sales as a percentage of net sales is attributable to a higher growth rate in our direct sales. Revenues from the sale of our products and services outside the United States accounted for $2.1 million, or 3.9%3.8%, of our net sales in fiscal 2003; $3.6 million, or 8.7%9.0%, of our net sales in fiscal 2002 and $1.9 million, or 5.9%6.0%, of our net sales in fiscal 2001.

On May 31, 2002, we executed a five-year agreement to be the exclusive provider of radiation oncology IT systems and to provide administrative and clinical systems to US Oncology’s 85 comprehensive cancer centers. US Oncology is the largest provider of oncology services in the United States. The systems will either be deployed as local area networks or hosted by our ASP data center depending on the needs of the specific comprehensive cancer center. Under the ASP model, we will also supply and support the complete computer and local and wide- area networking and, in partnership with AT&T, will address all of US Oncology’s wide-area telecommunications requirements. The agreement may be terminated before the end of its five-year term only upon a breach of the agreement by either US Oncology or us. Prior to this agreement, our systems had been installed in 24 US Oncology comprehensive cancer centers.

Sales and Marketing

We market and sell our products and services worldwide through a direct sales force as well as through several distributors. Management of our North American sales force is centralized and organized into five regions, each with a district manager reporting to our Vice President of Sales for North America. Sales outside of North America are managed by our Senior Vice President of Worldwide Sales. In addition to our direct sales efforts, we have a distributor relationship with Siemens Medical Systems, which markets and sells our products on a non-exclusive basis, primarily in Western Europe and North America. We also have non-exclusive distributor relationships in Italy and Japan for the marketing and sales of our products.

We market our products to individuals who either make or influence the decision to purchase an oncology IT solution, including oncologists, nurses, physicists, therapists, IT staff, registrars and oncology administrators. As healthcare personnel, our customers are required to remain active in the associations that administer their professional certification, attending their meetings, subscribing to their publications and maintaining membership

in their national and regional organizations. Therefore, we deliver our message to our potential customers by exhibiting and presenting at trade shows and meetings, by advertising and placing articles in trade publications and by direct mailings to association members. Our marketing plan also includes users’ meetings, symposiums, advisory groups, customer profiles and user publications to promote our customers’ expanded use of our systems.

Competition

We compete primarily in the market for IT systems for cancer care. In addition, we have recently begun to market into other specialties related to cancer, such as urology, and into other functions that support cancer care, such as laboratory information systems. We believe the principal factors affecting the market for our products and services include product functionality, integration, configuration options, open standards, customer service, company reputation, equipment and software bundling and price. The market for our products and services is intensely competitive and characterized by rapidly changing technology, evolving user needs and frequent product introductions. Our principal oncology IT competitor is Varian Medical Systems. We also compete against other oncology IT vendors that provide capital equipment or other oncology-related services, including Nucletron, Elekta AB and IMPATH Inc. In addition, we compete with other companies whose business is primarily comprised of oncology IT, including iKnowMed, OpTx Corporation and IntelliDose/Intrinsiq Data Corporation. Potential future threats include enterprise level healthcare software companies, such as Cerner Corporation and Eclipsys Corporation. In addition, although we have cooperative strategic arrangements with Siemens Medical Systems and other companies for the sale of some of our products, these companies also compete with us on the sale of other products. Other competitors include segment specific providers of practice management, specialized electronic medical record, decision support and imaging systems.

Several of our competitors are better established, benefit from greater name recognition, and have significantly more financial, technical and marketing resources than we do. Despite the greater name recognition and resources of certain competitors, to date we have been able to compete successfully based on the quality of our products and our focus on the oncology IT market. We also anticipate that competition will further increase in the healthcare information technology sector as a result of continued consolidation in both the information technology and healthcare industries.

Government Regulations

Four of our specific products, including two device connectivity products and two imaging products, are statutorily defined as “medical devices” and, therefore, are subject to regulation and oversight by the U.S. Food and Drug Administration, or FDA, the California Department of Health Services Food and Drug Branch, or FDB, and similar foreign regulatory authorities.

FDA Premarket Clearance and Approval Requirements

Premarket Approval. Before we can introduce a new product categorized as a medical device into the U.S. market, we must obtain FDA clearance or approval through either premarket notification under Section 510(k) or premarket approval under Section 515 of the Federal Food, Drug, and Cosmetic Act, unless the product is otherwise exempt from these requirements. The FDA classifies medical devices into three risk-based levels and applies increasing levels of regulation. Devices deemed to pose relatively less risk are placed in either Class I or II, requiring the manufacturer to submit a premarket notification requesting permission for commercial distribution. The FDA may require results of clinical trials in support of a 510(k) submission and generally requires clinical trial results for a premarket approval application. The FDA has classified our four medical device products as Class II devices, all of which have been granted 510(k) clearance by the FDA.

Resubmission for Substantial Changes. After a device receives 510(k) clearance, any modification made to the device requires a determination as to whether the modification significantly affects its safety or effectiveness. If the modification could significantly affect the device’s safety and effectiveness, then the

modification requires a new 510(k) clearance or, in some instances, could require a premarket approval for the modification. The FDA requires each manufacturer to make this determination, but the FDA can review any manufacturer’s decision and the agency may retroactively require the manufacturer to seek 510(k) clearance or premarket approval. The FDA also can require the manufacturer to cease marketing the modified device or recall the modified device, or both, until 510(k) clearance or premarket approval is obtained. We have made minor modifications to our products and, using the guidelines established by the FDA, have determined that two of the modifications did require us to file new 510(k) submissions. We made new 510(k) submissions which were cleared by the FDA. If the FDA disagrees with our other determinations not to submit, we may not be able to sell one or more of our products until the FDA has cleared new 510(k) submissions for these modifications. We continuously evaluate our products for any required resubmission.

Pervasive and Continuing Food and Drug Administration Regulation. Numerous FDA regulatory requirements apply to our products categorized as medical devices. These requirements include:

Class II devices may also be subject to special controls applied to them, such as performance standards, post-market surveillance, patient registries and FDA guidelines that may not apply to Class I devices. Our products are currently subject to FDA guidelines for 510(k) cleared devices and are not subject to any other form of special controls, such as a requirement to conduct a screening in a laboratory within a medical facility. We believe we are in compliance with the applicable FDA guidelines, but we could be required to change our compliance activities or be subject to other special controls if the FDA changes its existing regulations or adopts new requirements.

We are subject to inspection and market surveillance by the FDA to determine compliance with regulatory requirements. If the FDA finds that we have failed to adequately comply, the agency can institute a wide variety of enforcement actions, ranging from a public warning letter to more severe sanctions such as withdrawal of regulatory clearances, recalls or seizures, fines or criminal prosecution.

The FDA also has the authority to require repair, replacement or refund of the cost of any medical device manufactured or distributed by us. Our failure to comply with applicable requirements could lead to an enforcement action that may have an adverse effect on our financial condition and results of operations. To date, our FDA inspections have not resulted in any required action or penalty.

Other Federal and State Regulations

We are also required to obtain a manufacturing license from the FDB before we begin manufacturing our products, and are subject to FDB audits to ensure that we are compliant with all FDA regulations.

As a participant in the healthcare industry, we are subject to extensive and frequently changing regulations under many other laws administered by governmental entities at the federal, state and local levels. Our healthcare service provider customers are also subject to a wide variety of laws and regulations that could affect the nature and scope of their relationships with us.

There is substantial state and federal regulation of the confidentiality of patient medical records and the circumstances under which such records may be disclosed to or processed by us as a consequence of our contacts with various health providers, such as HIPAA. Although compliance with these laws and regulations is presently

the principal responsibility of the hospital, physician or other healthcare provider, regulations governing patient confidentiality rights are rapidly evolving. Additional legislation governing the dissemination of medical record information also has been proposed and may be adopted at the state level. The administrative simplification provisions of HIPAA set standards for electronic transactions, code sets, data security, unique identification numbers, and privacy of individually identifiable health information, which could materially impact our business. We have made changes to our products and business operations to support our customers’ compliance with HIPAA privacy, security and electronic transactions regulatory requirements. During the past several years, the healthcare industry also has been subject to increasing levels of governmental regulation of, among other things, reimbursement rates and certain capital expenditures. We are unable to predict what, if any, changes will occur as a result of such regulation.

Foreign Regulations

European Union Regulation. The primary regulatory environment in Europe is that of the European Union, which consists of 15 member countries encompassing most of the major countries in Europe. The European Union has adopted numerous directives and standards regulating the design, manufacturing, clinical trials, labeling and adverse event reporting for medical devices. Devices that comply with the requirements of a relevant directive will be entitled to bear a CE Marking to indicate that the device conforms to the essential requirements of the applicable directive, and accordingly, can be commercially distributed throughout the European Union. We hold a certificate to ISO 9001, EN46001, ISO 13485, EN601-1-4, which demonstrates satisfaction of the European Union standards for medical product manufacturers. This certificate is a prerequisite to applying the CE Marking to our products. The CE Marking is required on all medical products sold and used in the European Union. It is also recognized by many countries outside the European Union, such as Australia. The CE Marking indicates that a product was designed, released, produced, sold and serviced using a system that complies with the EU Council Directive 93/42/ECC for medical devices. Our four medical devices are currently eligible to bear the CE Marking.

Canadian Regulation. The Canadian Health Department has granted us licenses to distribute our four medical devices throughout Canada.

Other Foreign Regulations. Our products may also be regulated by other foreign governmental agencies. Some countries grant reciprocity for our U.S. and European clearances. We plan to seek approval to sell our products in additional countries.

Intellectual Property and Proprietary Technology

Our success depends on our proprietary information and technology. We rely on a combination of copyright, trademark and trade secret laws, license agreements, nondisclosure and non-compete agreements and technical measures to establish and protect our rights in our proprietary technology. Our software license agreements grant our customers a nonexclusive, nontransferable, limited license to use our products and contain terms and conditions prohibiting the unauthorized reproduction or transfer of our products. We retain all title and rights of ownership in our software products. In addition, we enter into agreements with our employees, third-party consultants and contractors that prohibit the disclosure or use of our confidential information and require the assignment to us of any new ideas, developments, discoveries or inventions related to our business. We also require other third parties to enter into nondisclosure agreements that limit use of, access to and distribution of our proprietary information.

These protections, however, may not be adequate to prevent misappropriation of our proprietary rights. In addition, U.S. law provides only limited protection of proprietary rights and the laws of some foreign countries may offer less protection than the laws of the United States. Unauthorized third parties may copy aspects of our products, reverse engineer our products or otherwise obtain and use information that we regard as proprietary. Subject to certain contractual limitations, a few of our customers can access source-code versions of our

software. Although our agreements with such customers attempt to prevent misuse of the source code, the possession of our source code by third parties increases the ease and likelihood of potential misappropriation of such software. There can be no assurance that others will not independently develop technologies similar or superior to our technology or design around our proprietary rights.

We also rely on a variety of technologies that are licensed from third parties to perform key functions. These third-party licenses may not be available to us on commercially reasonable terms in the future. The loss of or inability to maintain any of these licenses could delay the introduction of software enhancements and other features until equivalent technology can be licensed or developed. Any such delay could materially adversely affect our ability to attract and retain customers.

We do not believe our software products or our other proprietary rights infringe on the property rights of third parties. However, we cannot guarantee that third parties will not assert infringement claims against us with respect to current or future software products or that any such assertion may not result in costly litigation or require us to enter into royalty arrangements.

Employees

As of September 30, 2003, we had a total of 308 full-time employees, 100 of whom were engaged in research and development, 168 of whom were engaged in sales, marketing and customer support and 40 of whom were engaged in administration and finance. None of our employees is subject to a collective bargaining agreement. We believe that our relations with our employees are good.

EXECUTIVE OFFICERS

The following table sets forth the name, age and position of our executive officers as of November 18, 2003:

Joseph K. Jachinowski co-founded IMPAC in January 1990 and has served as President, Chief Executive Officer and Chairman of the Board since that time. Prior to co-founding IMPAC, Mr. Jachinowski held multiple management positions at Varian Medical Systems, Inc. from 1983 to 1990. Mr. Jachinowski holds an M.S. degree in Electrical Engineering from Washington State University and a B.S. degree in Electrical Engineering from Ohio University.

James P. Hoey co-founded IMPAC in January 1990 and has served as Executive Vice President and a director since that time. Mr. Hoey has also served as Chief Operations Officer since August 1999. Prior to co-founding IMPAC, Mr. Hoey served as Manager of Radiation Product Marketing for Varian Medical Systems, Inc. from 1988 to 1990. Mr. Hoey holds an M.B.A. degree from Santa Clara University and a B.A. degree in Biomedical Engineering and in Business Administrative Sciences from Yale University.

David A. Auerbachco-founded IMPAC in January 1990 and has served as Executive Vice President, Treasurer, Secretary and a director since that time. From January 1990 to February 2000, Mr. Auerbach also served as IMPAC’s Chief Financial Officer. Mr. Auerbach has also served as President of IMPAC Global Systems, Inc., a wholly-owned subsidiary of IMPAC, since October 2001 and as President of IMPAC Medical Systems Limited, a wholly-owned subsidiary of IMPAC, since January 2002. Mr. Auerbach also served as President of CareCore, Inc., a healthcare information technology company, from July 1999 to March 2001. Prior to co-founding IMPAC, Mr. Auerbach served as Manager of Research and Development for Project Management for Varian Medical Systems, Inc. from 1987 to 1990. Mr. Auerbach holds an M.S. degree in Mechanical Engineering from Stanford University and a B.S. degree in Mechanical/Biomedical Engineering from Carnegie Mellon University.

Kendra A. Borrego joined IMPAC in August 1992 and has served as Chief Financial Officer since March 2000. Ms. Borrego served as IMPAC’s Director of Finance from August 1999 to February 2000 and as Controller from August 1992 to July 1999. Ms. Borrego holds an M.B.A. degree from San Jose State University and a B.S. degree in Business from the University of Nevada.

Additional Information

Our Web site ishttp://www.impac.com. We make available free of charge, on or through our Web site, our annual, quarterly and current reports, and any amendments to those reports, as soon as reasonably practicable after electronically filing such reports with the Securities and Exchange Commission (SEC). Information contained on our Web site is not part of this report.

Item 2. Properties

Our principal executive offices occupy approximately 58,000 square feet in Mountain View, California under a lease that expires in 2007. We also lease additional office facilities aggregating approximately 42,000 square feet in Nevada, Massachusetts, Virginia and the United Kingdom. We intend to expand our sales, marketing and technology operations and, therefore, may require additional facilities in the future, which we believe can be obtained on commercially reasonable terms when needed.

Item 3. Legal Proceedings

We are not currently a party to any material legal proceedings.

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

None.

PART II

Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters

Our common stock has been traded on the Nasdaq National Market under the symbol IMPC since our initial public offering on November 20, 2002. The following table sets forth, for the periods indicated, the highest and lowest closing sale prices for our common stock, as reported by the Nasdaq National Market.

The closing sale price for our common stock on November 18, 2003 was $23.27.

As of September 30, 2003, there were approximately 64 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by these record holders.

We have not paid any cash dividends on our common stock in the past. We currently intend to retain any earnings for use in our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future.

Changes in Securities and Use of Proceeds

Our registration statement (Registration No. 333-89724) under the Securities Act of 1933, as amended, for our initial public offering became effective on November 19, 2002. A total of 2,515,625 shares of common stock were registered, and we sold 1,875,000 shares of our common stock to an underwriting syndicate. Thomas Weisel Partners LLC, SG Cowen Securities Corporation and U.S. Bancorp Piper Jaffray Inc. were the managing underwriters of the offering. An additional 640,625 shares of common stock were sold on behalf of selling stockholders as part of the same offering. All shares were sold to the public at a price of $15.00 per share. In connection with the offering, we paid approximately $2.0 million in underwriting discounts and commissions to the underwriters. Offering proceeds, net of aggregate costs to us of approximately $1.8 million, were approximately $24.3 million. We intend to use the net proceeds from our offering for working capital and to expand our business generally, including possible acquisitions.

Item 6. Selected Financial Data

The information in this item reflects the restatement of our consolidated financial statements as of and for the fiscal years ended September 30, 2003, 2002, 2001 and 2000 and for each of the quarters in the fiscal years ended September 30, 2003 and 2002. Consequently, itthe information is different from amounts previously reported in the Company’s reports on Form 10-K and Forms 10-Q for those periods.periods and the Form 10-K/A and Forms 10-Q/A filed in April 2004. See Note 3 to the consolidated financial statements. The consolidated selected financial data set forth below should be read in conjunction with our consolidated financial statements, the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K/A.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and the related notes appearing in Item 8 of this Form 10-K/A. Our discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth below under “Risk Factors” and elsewhere in this Form 10-K/A.

The Management’s Discussion and Analysis of Financial Condition and Results of Operations presented below reflects the effects of the restatement of our consolidated financial statements for the years ended September 30, 2001, 2002 and 2003, as discussed in Note 3 to the consolidated financial statements.

Overview

We provide information technology systems for cancer care. Our systems provide electronic medical record, imaging, decision support, scheduling and billing applications in an integrated platform to manage the complexities of cancer care, from detection and diagnosis through treatment and follow-up. We were founded in 1990, and our growth has been primarily organic, supplemented by several product and small company acquisitions.

Net Sales and Revenue Recognition

We sell our products directly throughout the world and primarily in North America, Europe and the Pacific Rim countries. In addition, we use non-exclusive distributors to augment our direct sales efforts. Sales through distributors represented 13.3%13.5% of our total net sales in fiscal 2001 13.0% inand fiscal 2002 and 8.2%8.0% in fiscal 2003, all of which were sold through Siemens Medical Systems, Inc. Revenues from the sale of our products and services outside the United States accounted for $1.9 million, or 5.9%6.0%, of our net sales in fiscal 2001, $3.6 million, or 8.7%9.0%, of our net sales in fiscal 2002 and $2.1 million, or 3.9%3.8%, of our net sales in fiscal 2003. The decline in distributor sales as a percentage of net sales is attributable to a higher growth rate in our direct sales. We have signed agreements with other distributors, which have not yet generated sales.

We license point-of-care and registry software products. Our point-of-care products are comprised of modules that process administrative, clinical, imaging and therapy delivery information. Our registry products aggregate data on patient outcomes for regulatory and corporate reporting purposes. Currently, a majority of our point-of-care software is licensed on a perpetual basis, and a majority of our registry sales is licensed on a term basis.

Our focus with regard to software licensing and maintenance and support service is to provide flexibility in the structure and pricing of our product offerings to meet the unique functional and financial needs of our customers. For those customers who license on a perpetual basis, we promote annual maintenance and support service agreements as an incremental investment designed to preserve the value of the customer’s initial investment. For those customers who license on a term basis, annual maintenance and support contributes greatly to the value of the annual license, and the two cannot be segregated from each other. For those customers using our application service provider option, independent of the licensing method, these annual fees allow the customer to outsource, in a cost effective manner, support and connectivity functions that are normally handled by internal resources.

The decision to implement, replace, expand or substantially modify an information system is a significant commitment for healthcare organizations. In addition, our systems typically require significant capital expenditures by the customer. Consequently, we experience long sales and implementation cycles. The sales cycle for our systems ranges from six to twenty-four months or more from initial contact to contract execution.

Our implementation cycle generally ranges from three to nine months from contract execution to completion of implementation. In addition to the core system, approximately one-third of our customers purchase additional product modules along with the core system that they intend to implement over a period of time beyond the typical implementation cycle of three to nine months.

We record orders for products licensed on a perpetual basis upon the receipt of a signed purchase and license agreement, purchase order, and a substantial deposit. We record orders for products licensed on a term basis upon receipt of a signed purchase and license agreement, purchase order and a deposit typically equal to the first year’s fees. All contract deposits are held as a liability as outlined in the terms and conditions set forth in the purchase and license agreement. Maintenance and support is recorded as deferred revenue upon the invoice date and held as a current liability on the balance sheet. Under the terms of the original purchase and license agreement, maintenance and support automatically renews on an annual basis unless the customer provides a written cancellation. We recognize revenue from these sales ratably over the underlying maintenance period.

For direct software sales licensed on a perpetual basis, we include one year of maintenance and support as part of the purchase price. Standard annual fees for maintenance and support after the first year equal 12% of the then current list price unless the customer negotiates other terms or service levels.

Our sales arrangements with customers frequently cover multiple products and services. Our revenue is subject to SOP 97-2, as further discussed in Note 3 to our consolidated financial statements. In approximately two-thirds of our arrangements, our customers request delivery and installation of our software products in one phase and we generally can recognize revenue when the software products have been installed and accepted by our customers. In the balance of our arrangements, our customers request that delivery and installation of our software products be delivered in multiple phases. Such multiple phased installations may be requested, for example, when the customer has not installed medical devices with which our software will interact. In those instances, revenue for the entire arrangement generally cannot be recognized until the last software product is installed and accepted. In a few instances, the customer may never request delivery of all the software products included in the arrangement. In those instances, revenue from the arrangement is recognized at the time we make the judgment based on sufficient competent evidence that it is remote that the customer will request delivery of the remaining undelivered software products, i.e., when they have been constructively canceled.

We recognize revenue once software products have been installed, accepted and are in clinical use at the customer site. When a customer accepts only a subset of the products outlined in a multiple-element purchase and license agreement and we have not established vendor specific objective evidence, or VSOE, of the fair value of the undelivered elements, we invoice the customer for the accepted products and record the transaction as deferred software license revenue. We recognize the deferred revenue when all elements in a multiple-element arrangement have been accepted, VSOE of the fair value is established for the remaining undelivered elements, or the undelivered elements for which VSOE of the fair value does not exist have been formally or constructively canceled, whichever occurs first. We recognize revenues on sales arrangements with undelivered products that have been formally or constructively canceled at the date when we have sufficient competent evidence of that cancellation.

The first year of maintenance and support for our software products is included in the purchase price. Upon revenue recognition, we defer 12% of the list price, which is the renewal rate, and recognize that portion over the remaining term of the included maintenance and support period. For example, if revenue recognition occurs four months subsequent to product acceptance, we would recognize one-third of the 12% maintenance and support deferral as revenue and recognize the remaining two-thirds of the deferral over the following eight months. In situations where the first phase of software products are installed more than one year before our ability to recognize the related revenue, it is not necessary to defer 12% of the list price and recognize that portion over the included maintenance and support period as the first year maintenance and support obligation is no longer applicable. In these cases, however, 12% of the list price is classified as maintenance and services revenue at the time of revenue recognition.

For direct software sales licensed on a term basis, the initial term lasts from three to five years with annual renewals after the initial term. The customer pays a deposit typically equal to the initial annual fee upon signing the license agreement, and we invoice the customer for subsequent annual fees 60 days before the anniversary date of the signed agreement. We recognize revenue for the annual fees under these term license agreements ratably over the applicable twelve-month period. The purchase price includes annual maintenance and support.

We recognize revenue from third-party products and related configuration and installation services sold with our licensed software upon acceptance by the customer. We recognize revenue from third-party products sold separately from our licensed software upon delivery. Third-party products represented 4.8%4.7% of our total net sales in fiscal 2003. The increase in third party sales as a percentage of net sales is attributable to a higher growth rate in our third party product sales.

We recognize distributor related revenues upon the receipt of a completed purchase order and the related customer information needed to generate software registration keys, which allow us to distribute the software to

the end user and satisfy our regulatory information tracking requirements. We provide maintenance and support to our distributor. The cost of the first year’s support is included in the fee. Renewal support is purchased for 5% of the transfer price for software licenses sold to their customers. We defer the distributor’s first year post-contract support, based on the renewal rate, and recognize that portion of the revenue ratably over the support period. We invoice renewal maintenance and support annually to our distributor at the beginning of each fiscal year and recognize the revenue ratably over the applicable twelve-month period.

Costs and Expenses

A large part of our company cost structure is driven by the number of employees and all related benefit and facility costs. As a result, a significant amount of strategic and fiscal planning is focused on this area, so we can develop internal resources at a controlled and sustainable rate. Since revenue recognition happens subsequent to all implementation and training activities, we incur the costs of labor, travel and some third party product expenses in advance.

Cost of sales consists primarily of:

System installations require several phases of implementation in the process of accepting product delivery and have led to our development of a highly specialized client service organization. All new orders require multiple site visits from our personnel to properly install, configure and train customer personnel. In transactions where we are required to defer the recognition of software license revenue, the associated incremental direct travel expenses are recorded as a prepaid expense until the associated revenue is recognized. Several point-of-care products are used with various third-party hardware and software products that are also sold and configured during the implementation process. After the initial implementation process, our application support staff provides phone support and any applicable system updates. A substantial percentage of engineering costs are allocated to client services due to continuing engineering efforts related to the support and enhancement of our products. Historically, cost of sales has increased at approximately the same rate as net sales. However, as newly developed products and acquired product lines are released to the customers, additional investments in client service staff could cause gross margins to fluctuate.

Research and development expenses include costs associated with the design, development and testing of our products. These costs consist primarily of:

We currently expense all research and development costs as incurred. Our research and development efforts are periodically subject to significant non-recurring costs that can cause fluctuations in our quarterly research and development expense trends. We expect that research and development expenses will increase in absolute dollars for the foreseeable future as we continue to invest in product development.

Sales and marketing expenses primarily consist of:

We have consistently expanded our sales force, made significant investments in marketing communications and increased trade show activities to enhance market awareness of our products. We expect that sales and marketing expenses will increase in absolute dollars for the foreseeable future as we continue to expand our sales and marketing capabilities. In transactions where we are required to defer the recognition of software license revenue, the associated incremental direct commission expense is recorded as a prepaid expense until the associated revenue is recognized.

General and administrative expenses primarily consist of:

A significant portion of facility, infrastructure and maintenance costs are allocated as overhead to other functions based on distribution of headcount. Our general and administrative expenses increased after our initial public offering, and we expect these expenses will remain higher in absolute dollars in the foreseeable future.

Depreciation and Amortization

Our property and equipment is recorded at our cost minus accumulated depreciation and amortization. We depreciate the costs of our tangible capital assets on a straight-line basis over the estimated economic life of the asset, which is generally three to seven years. Acquisition related intangible assets have historically been amortized based upon the estimated economic life, which is generally two to five years. Leasehold improvements and equipment purchased through a capital lease are amortized over the life of the related asset or the lease term, if shorter. If we sell or retire an asset, the cost and accumulated depreciation is removed from the balance sheet and the appropriate gain or loss is recorded. We expense repair and maintenance costs as incurred.

Acquisitions

In April 2000, we purchased all of the outstanding stock of MC² Scientific Systems, Inc., or MC², for $1.3 million in cash and acquisition costs of $81,000. MC² was a privately held medical software company that developed imaging and simulation software technology. The acquisition included a medical imaging DICOM product and two products in development that will be used to plan radiation therapy treatments. We have just completed the development of the in-process products. At the time of acquisition, MC² generated very little revenue and the impact on operating costs included the addition of two employees. As a result of this transaction, we recorded an expense associated with the purchase of in-process research and development of $308,000, net tangible liabilities of $15,000 and goodwill and intangible assets of $588,000. We recorded the acquisition using

the purchase method of accounting. The amortization of intangible assets other than goodwill is being taken over a range of periods from two to five years. Upon our adoption of Statement of Financial Accounting Standards, or SFAS, No. 142 “Goodwill and Other Intangible Assets” on October 1, 2002, the remaining unamortized balance of goodwill and acquired workforce, which was reclassified to goodwill, of $466,000 has ceased to be amortized. Instead, we perform annual impairment assessments by applying a fair-value based test. The annual goodwill impairment test was completed during the first quarter of fiscal 2003, and it was determined that there was no impairment of goodwill at that time.

In February 2001, we purchased the intellectual property of CareCore, Inc., or CareCore, for extinguishment of notes receivable in the amount of $500,000 held by us and $40,000 in acquisition costs. CareCore was a privately held internet based healthcare company that was developing a web portal for cancer patients and their families. The CareCore asset acquisition brought us additional clinical charting web based intellectual property that we have since incorporated into one of our product lines and a list of registered web site names relating to cancer. The company did not generate any revenues and the impact on operating costs included the addition of two employees both of whom filled open positions within our company. We recorded the transaction using the purchase method of accounting. As a result of this transaction, we recorded an expense associated with the purchase of in-process research and development of $511,000 and intangible assets of $29,000. We recorded amortization of acquired workforce over ten months. This acquisition became fully amortized during fiscal 2002.

In April 2002, we purchased all the outstanding stock of Intellidata, Inc., or Intellidata, for $1.3 million in cash and acquisition costs of $129,000. Intellidata was a privately held laboratory information system company. The Intellidata acquisition adds a laboratory information management capability to our product line, which is complementary to our oncology electronic medical record. Subsequent to the acquisition through September 30, 2003, we have recognized maintenance and support revenues of $806,000 and added 12 employees. We will invest in expanding our support and sales functions by adding additional employees; however, we expect the increase in sales will offset the associated impact of increased operating expenses. We have recorded the transaction using the purchase method of accounting in accordance with SFAS No. 141 “Business Combinations.” As a result of this transaction, we recorded an expense associated with the purchase of in-process research and development of $116,000, net tangible liabilities of $166,000 and goodwill and intangible assets of $1.4 million. During fiscal 2003, we wrote-off acquired accounts receivable balances totaling approximately $25,000. In accordance with SFAS No. 141, this amount was reallocated from accounts receivable to goodwill in the acquisition purchase price allocation. In accordance with SFAS No. 142, goodwill was not amortized. Instead, we perform annual impairment assessments by applying a fair-value based test. The annual goodwill impairment test was completed during the first quarter of fiscal 2003, and it was determined that there was no impairment of goodwill at that time.

Accretion of Redeemable Convertible Preferred Stock

From September 27, 2002 until our initial public offering, the holders of a majority of our then outstanding redeemable convertible preferred stock could have required us to redeem the preferred shares by paying in cash an amount equal to the greater of $3.23 per share or the fair market value plus all declared or accumulated but unpaid dividends within thirty days. These shares automatically converted to common stock upon the closing of our initial public offering in November 2002. We accreted charges that reflected the increase in market value of the redeemable convertible preferred stock as an adjustment to retained earnings and, as a result, decreased net income available to common stockholders or increased the amount of net loss attributable to common

stockholders. After our initial public offering, no further accretion has been or will be required. The redemption value of the redeemable convertible preferred stock was $16.7 million at the time of our initial public offering. This amount was reclassified on our balance sheet from redeemable convertible preferred stock to common stock and additional paid-in capital upon the closing of the initial public offering. See Note 6 of the notes to our consolidated financial statements for a more detailed explanation.

RestatementRestatements of Financial Statements

April 2004 Restatement

We adopted Statement of Position (SOP) 97-2 “Software Revenue Recognition” which became effective for us in October 1999 for the purposes of revenue recognition. Subsequent to filing the Form 10-K for the fiscal year ended September 30, 2003, management determined that we had recognized revenue for certain transactions prematurely. Accordingly, in April 2004, we have restated our financial statements for the fiscal years ended September 30, 2000, 2001, 2002 and 2003 to shift some previously recognized revenues to later quarters and to defer other previously recorded revenues to periods subsequent to September 30, 2003.

The accounting issues that gave rise to the initial restatement in April 2004 fell into three categories. First, we recognized revenue from certain multiple element software contracts once individual elements had been installed, accepted and were in clinical use at the customer site. We have now determined that we did not have vendor specific objective evidence (“VSOE”) of the fair value of the undelivered elements. Accordingly, we should have deferred the recognition of revenue on those contracts until we had VSOE of the fair value for all the undelivered elements, the elements for which VSOE of the fair value did not exist had subsequently been delivered or the elements for which VSOE of the fair value did not exist had been formally or constructively canceled.

Second, we recognized revenue as of the date of first clinical use, unless a customer objected in writing within five business days after first clinical use. We have now determined that formal acceptance could not have occurred without the passage of five days, and, hence, we must adjust the date of revenue recognition of delivered and accepted products forward five business days from the date of first clinical use.

Third, we recognized revenue for maintenance and support of perpetually licensed software products during the first year by deferring 12% of the purchase price and recognizing this amount over the 12 months following the customer’s acceptance. We have now determined that we should have deferred 12% of the current list price rather than purchase price.

October 2004 Restatement

The accounting issue that gave rise to the second restatement in October 2004 related to the timing of revenues recognized on sales agreements which we determined had been constructively cancelled with respect to the undelivered software products. In our April 2004 restatement, we applied the concept of constructive cancellation to approximately 40 sales agreements where we determined that the probability of delivering the remaining undelivered element(s) was remote and the undelivered element(s) was not critical to the operation of the delivered elements.

During our initial restatement, we used hindsight and considered the passage of time since the last delivered software product had been accepted as evidence that it was remote that the customer would request delivery of the remaining software products included in the arrangement. If more than one year had lapsed since the last software product was accepted, we deemed the undelivered elements to have been constructively canceled as of the date the last element was delivered. In those instances, we shifted the revenues to the acceptance date of the last products delivered under the applicable sales agreement.

Subsequent to our April 2004 restatement, we determined that we should not have used hindsight and should have instead recognized the revenue related to the previously delivered elements during the period when we determined, based on then available evidence, that it was remote that the customer would request delivery of the remaining undelivered software products. As a result, we had to shift revenue related to arrangements with constructively canceled undelivered elements to the date when sufficient competent evidence of constructive cancellation was obtained for periods prior to and including September 30, 2003, or will be obtained in future periods. This affected approximately 30 sales agreements during the fiscal years 2000 through 2003.

The restatement also gives effect to the recognition of a deferred tax liability associated with the acquisition of Intellidata, Inc. in April 2002. A deferred tax liability should have been created at the time of the acquisition to account for the differences in the amortization periods of related intangible assets for book and tax purposes. The recognition of the additional deferred tax liability of approximately $573,000 in April 2002 caused a corresponding increase to goodwill.

Details regarding the restatementthese restatements are discussed further in Note 3 to the consolidated financial statements.

Results of Operations

The following table sets forth certain operating data as a percentage of net sales for the periods indicated.

Comparison of Years Ended September 30, 2003 and 2002

Net Sales. Net sales increased 33.1%41.8% to $54.9$56.4 million in the fiscal year ended September 30, 2003 from $41.2$39.8 million in fiscal 2002. Net software related sales increased 29.7%41.8% to $34.4$35.8 million in fiscal 2003 from $26.5$25.3 million in fiscal 2002. New system sales in oncology accounted for $3.0$5.0 million of the $7.9$10.6 million increase, sales of imaging systems accounted for $2.5$3.1 million, sales of additional new products in oncology accounted for $2.1$2.3 million, with the remaining increase attributed to new sales in registry, urology and laboratory software. Maintenance and services also increased 39.1%41.7% to $20.5$20.6 million in fiscal 2003 from $14.7$14.5 million in fiscal 2002. Maintenance and support contracts contributed $5.4$5.7 million of the $5.7$6.1 million increase and additional training and installation contributed $358,000. Our continued high customer retention on maintenance and support contracts, the general price increase, and expansion of our service offerings all contributed to the growth of maintenance and services as a percentage of net sales. For a discussion of Deferred Revenue, see Backlog below.

Cost of Sales. Total cost of sales increased 43.9%44.8% from $12.2$12.4 million in fiscal 2002 to $17.6$17.9 million in fiscal 2003. Our gross margin decreased from 70.3%68.9% in fiscal 2002 to 67.9%68.2% in fiscal 2003. Cost of sales relating to net software sales increased 33.4%35.3% from $7.7$7.6 million in fiscal 2002 to $10.3 million in fiscal 2003. Our gross

margin associated with net software sales decreasedincreased from 71.0%69.7% in fiscal 2002 to 70.2%71.1% in fiscal 2003. The increase in expenses related to $1.5 million in employee related costs, $805,000 in supplies and materials and $252,000$383,000 in implementation costs. Cost of sales relating to maintenance and services increased 61.8% from $4.5 million in fiscal 2002 to $7.3 million in fiscal 2003. Our gross margin associated with maintenance and services decreased from 69.1%68.7% in fiscal 2002 to 64.1%64.3% in fiscal 2003. The increase in expenses related to $1.4 million in employee related expenses, $635,000 in continuing engineering costs, $608,000 in telephone costs, $138,000 in travel expenses and $64,000 in supplies and materials. This was an investment year for our client services organization, and we added significant headcount to our application support organization domestically. We also established an installation and support infrastructure in Europe as part of our international expansion plans. Finally, we have begun implementing customers under our US Oncology contract who use our application service provider option out of our data center. During fiscal 2003, we deferred $290,000$206,000 in direct incremental travel expenses associated with software installation and training trips compared to $207,000$255,000 in fiscal 2002. We expect to recognize the deferred travel expenses once the associated product revenues are recognized. In addition, amortization expense associated with purchased technology increased 20.9% from $187,000 in fiscal 2002 to $226,000 in fiscal 2003.

Research and Development. Research and development expenses increased 26.2% from $7.8 million in fiscal 2002 to $9.9 million in fiscal 2003. As a percentage of total net sales, research and development expenses decreased from 19.0%19.8% in fiscal 2002 to 18.0%17.6% in fiscal 2003. Additional engineering headcount and the associated personnel expenses were the primary factors for the increase in absolute dollars. The decrease as a percentage of total net sales in fiscal 2003 was due to increased net sales relative to research and development expenses.

Sales and Marketing. Sales and marketing expenses increased 15.9%17.3% from $12.3$12.2 million in fiscal 2002 to $14.3 million in fiscal 2003. As a percentage of total net sales, sales and marketing expenses decreased from 29.8%30.7% in fiscal 2002 to 26.1%25.4% in fiscal 2003. The increase in absolute dollars was primarily due to $979,000 in employee related expenses, $569,000$720,000 in commissions, $542,000$541,000 in travel expenses and $84,000 in advertising partially offset by a $104,000 reduction in outside services, $61,000 reduction in supplies and a $44,000 reduction in sponsorships. The decrease as a percentage of total net sales in fiscal 2003 was due to increased net sales relative to marketing and sales expenses. During fiscal 2003, we deferred $173,000$94,000 in direct incremental commission expenses compared to $235,000$308,000 in fiscal 2002. We expect to recognize the deferred commission expenses once the associated product revenues are recognized.

General and Administrative. General and administrative expenses increased 33.1% from $4.0 million in fiscal 2002 to $5.3 million in fiscal 2003. As a percentage of total net sales, general and administrative expenses remained constant at 9.7%decreased to 9.5% in fiscal 2002 andfrom 10.1% in fiscal 2003. The increase in absolute dollars was primarily due to

increases in business insurance of $391,000, employee related expenses of $908,000, professional fees of $172,000, rent of $533,000, outside services of $387,000, maintenance costs of $96,000, depreciation expense of $199,000, travel costs of $48,000 and bad debt expense of $41,000. The increase in expenses was partially offset by a reduction in charitable contributions of $45,000 and telephone expense of $119,000.

In-Process Research and Development. During fiscal 2003, we did not have any transactions that required an in-process research and development write-off. During fiscal 2002, we recorded a write-off of in-process research and development in the amount of $116,000 due to an analysis allocating the purchase price paid for certain intellectual property in that period. Intellidata was in the process of adding new functionality to its line of laboratory information system products and we believed there was sufficient risk in completing the technology to qualify the in-process research and development $116,000 write-off.

Amortization of Goodwill and Other Intangible Assets. Amortization expenses decreased 38.6%68.3% from $562,000$375,000 in fiscal 2002 to $345,000$119,000 in fiscal 2003. Our adoption of SFAS No. 142, as of October 1, 2002 was the primary cause of the decline in amortization expense. In accordance with SFAS No. 142, we have ceased amortizing goodwill and instead we perform an assessment for impairment at least annually by applying a fair-value-based test. We have also reclassified the unamortized balance of acquired workforce to goodwill. Accordingly, no goodwill or acquired workforce amortization was recognized fiscal 2003. Remaining

amortization relating to developed core technology acquired from MC² was completed in March 2003. We still amortize certain intangible assets acquired from Intellidata in April 2002 as it relates to developed/core technology, customer base and a covenant-not-to-compete. No goodwill amortization is included in amortization expense related to either transaction during fiscal 2003.

Operating Income. Operating income increased 77.9%210.0% from $4.2$2.8 million in fiscal 2002 to $7.4$8.8 million in fiscal 2003. Operating income increased significantly due to the higher rate of increase in net sales relative to the rate of increase in operating expenses. In fiscal 2003, we continued to expand our sales force and increase our client service staff, which resulted in increased sales in the 2003 period. In addition, we did not complete any acquisitions and amortization expense decreased due to the adoption of SFAS No. 142 during fiscal 2003.

Interest and Other Income, Net. Interest and other income, net increased 38.0% from $389,000 in fiscal 2002 to $537,000 in fiscal 2003. The increase is related to higher cash balances due to our initial public offering in November 2002, a second public offering in May 2003, and increase positivein cash flow generated from operations in fiscal 2003.

Income Taxes. Our effective tax rate increased slightly from 34.5%29.3% in fiscal 2002 to 34.9%34.4% in fiscal 2003. The increase in the effective tax rate is due to increased profitability and a reduction in the benefits received from research and development tax credits.

Comparison of Years Ended September 30, 2002 and 2001

Net Sales. Net sales increased 32.1%29.7% from $31.2$30.7 million in fiscal 2001 to $41.2$39.8 million in fiscal 2002. Net software related sales increased 28.1%25.1% from $20.7$20.2 million in fiscal 2001 to $26.5$25.3 million in fiscal 2002. Sales of additional products to our existing customers in radiation oncology, such as IMRT interfaces, accounted for $3.5 million of the $5.8$5.1 million increase, imaging system sales accounted for $1.7$1.5 million sales of new installations in radiation oncology accounted for $387,000 and registry annual licenses and clinical lab systems accounted for $125,000.the remaining amount. Maintenance and services also increased 39.8%38.6% from $10.5 million in fiscal 2001 to $14.7$14.5 million in fiscal 2002. Maintenance and support contracts contributed $3.6$3.5 million of the $4.2$4.0 million increase, additional training and installation contributed $354,000 and the billing service contributed $185,000. Our continued high customer retention on maintenance and support contracts, the general price increase, and expansion of our service offerings all contributed to the growth of maintenance and services as a percentage of net sales. For a discussion of Deferred Revenue, see Backlog below.

Cost of Sales. Total cost of sales increased 28.7%29.0% from $9.5$9.6 million in fiscal 2001 to $12.2$12.4 million in fiscal 2002. Our gross margin increased from 69.6%68.7% in fiscal 2001 to 70.3%68.9% in fiscal 2002. Cost of sales relating to net software sales increased 25.5% from $6.1 million in fiscal 2001 to $7.7$7.6 million in fiscal 2002. Our gross margin associated with net software sales increaseddecreased from 70.4%69.8% in fiscal 2001 to 71.0%69.7% in fiscal 2002. The increase in expenses related to $1.0 million in employee related costs, $381,000 in supplies and materials and $173,000$162,000 in implementation costs. Cost of sales relating to maintenance and services increased 34.6% from $3.4 million in fiscal 2001 to $4.5 million in fiscal 2002. Our gross margin associated with maintenance and services increased from 67.9%67.8% in fiscal 2001 to 69.1%68.7% in fiscal 2002. The increase in expenses related to $691,000 in employee related expenses, $307,000 in continuing engineering costs, $67,000 in telephone costs, and $46,000 in travel expenses. During fiscal 2002, we deferred $207,000$255,000 in direct incremental travel expenses associated with software installation and training trips compared to $130,000$167,000 in fiscal 2001. We expect to recognize the deferred travel expenses once the associated product revenues are recognized. In addition, amortization expense associated with purchased technology increased 45.0% from $129,000 in fiscal 2001 to $187,000 in fiscal 2002 due to the Intellidata acquisition.

Research and Development. Research and development expenses increased 24.9% from $6.3 million in fiscal 2001 to $7.8 million in fiscal 2002. As a percentage of total net sales, research and development expenses decreased from 20.1%20.4% in fiscal 2001 to 19.0%19.8% in fiscal 2002. Additional engineering headcount and the associated personnel expenses were the primary factors for the increase in absolute dollars. The decrease as a percentage of total net sales in fiscal 2002 was due to increased net sales relative to research and development expenses.

Sales and Marketing. Sales and marketing expenses increased 34.8%34.5% from $9.1 million in fiscal 2001 to $12.3$12.2 million in fiscal 2002. As a percentage of total net sales, sales and marketing expenses increased slightly from 29.2%29.6% in fiscal 2001 to 29.8%30.7% in fiscal 2002. A significant expansion and restructuring of our domestic sales force as well as an increase in product marketing headcount in late 2001 increased employee-related expenses by $2.1 million and $434,000$392,000 in commission expenses. In addition, marketing communications expenses increased by $614,000 as we continued to focus on promotion, marketing materials and public relations. During fiscal 2002, we deferred $235,000$308,000 in direct incremental commission expenses compared to $128,000$159,000 in fiscal 2001. We expect to recognize the deferred commission expenses once the associated product revenues are recognized.

General and Administrative. General and administrative expenses increased 8.3% from $3.7 million in fiscal 2001 to $4.0 million in fiscal 2002. As a percentage of total net sales, general and administrative expenses decreased from 11.9%12.1% in fiscal 2001 to 9.7%10.1% in fiscal 2002. The increase in absolute dollars was primarily due to increases in employee related expenses of $527,000, depreciation of $296,000, travel expenses of $81,000, business insurance premiums of $74,000, stock-based compensation of $50,000, supplies and materials of $111,000, facility maintenance costs of $36,000 and bad debt expense of $33,000. The increase in expenses was partially offset by a reduction in professional fees of $232,000, recruiting expenses of $66,000, telephone expenses of $46,000 and outside services of $44,000. The decrease as a percentage of total net sales in fiscal 2002 was due to increased product sales relative to general and administrative expenditures.

In-Process Research and Development. We recorded a write-off of in-process research and development in the amount of $116,000 in fiscal 2002 and $511,000 in fiscal 2001 due to an analysis allocating the purchase price paid for certain intellectual property in those periods. For the same period in fiscal 2001, CareCore’s only product was still under development and also qualified for a $511,000 write-off.

Amortization of Goodwill and Other Intangible Assets. Amortization expenses increased 55.7%61.6% from $361,000$232,000 in fiscal 2001 to $562,000$375,000 in fiscal 2002. Our acquisition of Intellidata in April 2002 increased amortization expense as it relates to developed/core technology, customer base and a covenant-not-to-compete. No goodwill is included in the amortization related to this transaction. Our acquisition of intellectual property from CareCore in February 2001 increased amortization expenses as it relates to acquired workforce.

Operating Income. Operating income increased 139.2%125.6% from $1.7$1.3 million in fiscal 2001 to $4.2$2.8 million in fiscal 2002. Operating income increased significantly due to the higher rate of increase in net sales relative to the rate of increase in operating expenses. In fiscal 2001, we expanded our sales and marketing capabilities and research and development efforts, which resulted in increased sales in the 2002 period. Although we wrote off $116,000 in fiscal 2002, our write-off of $511,000 of purchased in-process research and development from CareCore also contributed to lower operating income in fiscal 2001 as compared to fiscal 2002.

Interest and Other Income, Net. Interest and other income, net decreased 24.0% from $512,000 in fiscal 2001 to $389,000 in fiscal 2002. The decline is related to lower interest income from investments in short and long-term marketable securities resulting from lower interest rates in fiscal 2002.

Income Taxes. Our effective tax rate was 32.2%30.1% in fiscal 2001 compared to 34.5%29.3% in fiscal 2002. The higherdecrease in the effective tax rate was primarilyis due to higher operating incomean increase in the benefits received from research and the discontinuation of our foreign sales corporationdevelopment tax advantage in fiscal 2002.credits.

Selected Quarterly Results of Operations

The following table sets forth unaudited financial data for each of our last eight quarters ended September 30, 2003. We believe all material adjustments necessary to present fairly the results of operations of the Company have been made. The amounts under the headings “As Reported” reflect our originally reported andresults as amended by our first restatement in April 2004. The amounts under the headings “Restated” reflect our restated results.results after our second restatement in October 2004. Operating results for any quarter are not necessarily indicative of results for any future period.