MERGE EFILM ANNOUNCES RECORD REVENUES AND EARNINGS
FOR FOURTH QUARTER AND YEAR END 2002

Revenues of $6.75 million for the fourth quarter highlight the most successful year in company’s history; FUSION Server™ gains market
strength in direct and VAR partner channels

Milwaukee, WI, February 27, 2003

Merge Technologies Incorporated, d.b.a. Merge eFilm, (Nasdaq: MRGE), today announced the financial results for the quarter and fiscal year ended December 31, 2002.

Financial Results:
Revenues in the quarter ended December 31, 2002 were $6,746,000, a 47% increase over revenues of $4,597,000 in the quarter ended December 31, 2001 and a sequential increase of 27% over revenues of $5,322,000 in the quarter ended September 30, 2002. In the quarter ended December 31, 2002, net income was $1,279,000, generating $0.11 diluted EPS compared to net income of $682,000 and $0.07 diluted EPS in the quarter ended December 31, 2001. Net income was $3,629,000 and diluted EPS was $0.33 in the year ended December 31, 2002, compared to net income of $1,271,000 and diluted EPS of $0.15 in the year ended December 31, 2001.

As a result of the eFilm Medical acquisition on June 28, 2002, the Company has presented costs associated with service revenues as a component of cost of sales. All periods presented have been conformed to the current presentation, and net income does not change in any period. Gross margin in the quarter ended December 31, 2002, was 63%. The Company's operating margin, defined as operating income divided by net sales, was 19% in the quarter ended December 31, 2002, compared to 15% in the quarter ended December 31, 2001. Operating margins increased for the year ended December 31, 2002, to 18%, compared to 8% in the year ended December 31, 2001.

At December 31, 2002, the Company had a cash balance of $4,411,000 and no outstanding draws on its $5 million bank line of credit, which was increased from $3 million in December 2002.

Analysis of Results:
“We continue to transition the focus of our business on developing healthcare software solutions and providing professional services that support them, with the end result of streamlining radiology workflow for our customers. The multiple distribution channel approach we have adopted is developing according to our plan, and the results are evident in the financial performance of the Company in 2002,” stated Richard A. Linden, President and CEO of Merge eFilm. “We successfully aligned our product innovation, distribution channel expansion, and professional services with the diagnostic image and information management needs of our target market, which further solidified our position as a provider of PACS solutions to healthcare facilities and imaging centers.

“Augmenting our product innovation efforts this year was the successful acquisition and integration of eFilm Medical and our corporate renaming to Merge eFilm. These actions signaled the acceleration of our strategy to launch our combined Fusion product line and to leverage the brand loyalty of the Merge and eFilm customer bases. This strategy resulted in over 35 hospitals and imaging centers purchasing our Fusion solution since its launch in the second half of 2002, the development of several new OEM/VAR partnerships in the U.S., Europe and Japan, and the continued growth of worldwide sales of eFilm Workstation™. With over 25,000 users of eFilm Workstation, we lead the market in diagnostic imaging desktop software and are very pleased with how this market presence is being leveraged into additional Fusion solution sales.

“Expanding our distribution channels continues to be a key initiative to drive financial growth and market presence. We successfully doubled the size of our direct sales staff, providing broader coverage in the United States. We also expanded our resources focused on professional services, which supports the pre-sales process as well as the post-sale project management activities. We have initiated an e-commerce strategy to complement our sales and service capabilities.

“During the year, we continued to demonstrate our unwavering commitment to customer service, deploying our solutions by leveraging our strong integration proficiencies and our depth of understanding of radiology workflow and clinical practice. As a result, our reputation as a comprehensive solution partner with our customers continues to grow,” continued Linden.

“The market conditions and independent healthcare IT studies suggest continued growth in capital spending in healthcare as the industry moves toward full digitization of patient care records. Now that electronic patient confidentiality standards have been established by the Health Insurance Portability and Accountability Act (HIPAA) regulations, healthcare organizations are ready to confidently invest in their digital future, particularly in clinical specialties such as radiology information systems and PACS.

“Consolidation in the marketplace continues to provide us with opportunities for strategic partnerships. In anticipation of those opportunities, we have established a strong financial position for strategic growth in 2003 with our enhanced $5 million line of credit and our growing positive cash flow. We will maintain the operational and financial discipline that has contributed to our positive financial performance in 2002, and will remain steadfast in our customer-focused model of integrating clinical and operational insights in the development of our solutions,” said Linden.

Guidance:
In 2003 the Company will solidify its position as a global provider of integrated healthcare image and information management software solutions. The mix of the Company’s business will continue to shift towards software and services, and the company will steadily expand sales resources both in support of the direct sales channel and the growing OEM/VAR partnership program. During 2003, an increasing investment is anticipated in both people and capital resources to take advantage of the Company’s momentum and market conditions. The Company will also continue to evaluate strategic partnerships designed to further accelerate revenue and profit growth. Based on these objectives, revenues for 2003 are anticipated to be in the range of $27 million to $28 million, with year-over-year growth of approximately 30% to 35%, yielding a diluted EPS on a pre-tax basis in a range of $0.47 to $0.52.

Click Here for Q402 Financials

Except for the historical information herein, the matters discussed in this news release include forward-looking statements that may involve a number of risks and uncertainties. Actual results may vary significantly based on a number of factors, including, but not limited to, risks in product and technology development, market acceptance of new products and continuing product demand, the impact of competitive products and pricing, changing economic conditions and other risk factors detailed in filings with the Securities and Exchange Commission.

Press Contact
Attn: Beth Frost-Johnson Merge Healthcare 6737 West Washington St. Suite 2250 Milwaukee, WI 53214		Phone: 1-(414) 977-4254
Email Address: marketing@merge.com
Except for the historical information herein, the matters discussed in this news release include forward-looking statements that may involve a number of risks and uncertainties. When used in this press release, the words “will,” “believes,” “intends,” “anticipates,” “expects” and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from those expressed in, or implied by, the forward-looking statements based on a number of factors, including, but not limited to, the uncertainty created by, the adverse impact on relationships with customers, potential customers, suppliers and investors potentially resulting from, and other risks associated with, the changes in the Company’s senior management; costs, risks and effects of the investigation by the Audit Committee of the Board of Directors; the impact of the restatement of financial statements of the Company and other actions that may be taken or required as a result of such restatement; the Company's inability to timely file reports with the Securities and Exchange Commission; risks associated with the Company's inability to meet the requirements of The NASDAQ Stock Market for continued listing, including possible delisting; costs, risks and effects of legal proceedings and investigations, including the informal, non-public inquiry being conducted by the Securities and Exchange Commission and class action, derivative, and other lawsuits; risks in product and technology development, market acceptance of new products and continuing product demand, the impact of competitive products and pricing, ability to integrate acquisitions, changing economic conditions, credit and payment risks associated with end-user sales, dependence on major customers, dependence on key personnel, and other risk factors detailed in the Company’s filings with the Securities and Exchange Commission. Except as expressly required by the federal securities laws, the Company undertakes no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances, or for any other reason.