Merge Technologies went from a $9.6 million profit in the third quarter of 2005, to a $10.8 million loss in the same period this year. The dramatic swing is related to a drop in sales from $35 million to $14 million for the quarter. Company executives say the revenue drop is because of one large contract in 2005.

The company is also recovering from the discovery of an accounting issue that forced Merge to restate its financial statements for 2202 through 2005. Merge reports that employee morale has been affected by the accounting problems, and that the company’s reputation with current and potential cusomers may have been damaged.

The net loss for the first nine months of 2006 totals $231.4 million, which includes a write-down of goodwill of $219.4 million. The prior year’s loss for the same period was far lower, at $5.4 million.