Edgar Filing: BIO IMAGING TECHNOLOGIES INC

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------

FORM 10-QSB

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2002
Commission File No. 1-11182

BIO-IMAGING TECHNOLOGIES, INC.
---------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)

Delaware 11-2872047
------------------------------- ----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)

826 Newtown-Yardley Road, Newtown, Pennsylvania 18940-1721
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)

(267) 757-1360
--------------
(Issuer's Telephone Number,
Including Area Code)

Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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: X No:
---- ----

State the number of shares outstanding of each of the Issuer's classes of
common stock, as of March 31, 2002:

Class Number of Shares
----- ----------------

Common Stock, $0.00025 par value 8,308,810

Transitional Small Business Disclosure Format (check one):

Yes: No: X
---- ----

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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TABLE OF CONTENTS
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Page
----

PART I. FINANCIAL INFORMATION.

Item 1. Financial Statements....................................... 1

CONSOLIDATED BALANCE SHEETS
as of March 31, 2002 and
December 31, 2001 (unaudited)................................. 2

CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2002 and 2001
(unaudited)................................................... 3

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2002 and 2001
(unaudited)................................................... 4

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)........................................ 5

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 13

Results of Operations......................................... 16

Liquidity and Capital Resources............................... 19

Critical Accounting Policies, Estimates and Risks............. 22

PART II. OTHER INFORMATION.

Item 4. Submission of Matters to a Vote of Security Holders........ 24

Item 6. Exhibits and Reports on Form 8-K........................... 26

SIGNATURES.............................................................. 27

-i-

PART I. FINANCIAL INFORMATION.
------------------------------

ITEM 1. FINANCIAL STATEMENTS.

Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the following
consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission, although Bio-Imaging Technologies, Inc. (the
"Company") believes that such financial disclosures are adequate so that the
information presented is not misleading in any material respect. The following
consolidated financial statements should be read in conjunction with the
year-end consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended September 30,
2001.

On November 6, 2001, the Company's Board of Directors approved a change in
the Company's annual reporting period from a fiscal year ending September 30 to
December 31. Accordingly, the 2002 fiscal year commenced on January 1, 2002 and
will end on December 31, 2002, and the fiscal quarters will end on March 31,
2002, June 30, 2002, September 30, 2002 and December 31, 2002.

The results of operations for the interim periods presented herein are not
necessarily indicative of the results to be expected for the entire fiscal year.

-1-

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(unaudited)

March 31, December 31,
2002 2001
-------------- ---------------

ASSETS
Current assets:

Cash and cash equivalents................................ $ 433,503 $ 499,710
Accounts receivable, net................................. 3,423,483 3,447,155
Prepaid expenses and other current assets................ 393,259 274,313
Deferred income taxes.................................... 417,000 417,000
-------------- --------------
Total current assets................................... 4,667,245 4,638,178

Property and equipment, net................................. 2,290,903 2,111,360

Other assets ............................................... 297,800 225,524
-------------- --------------

Total assets........................................... $ 7,255,948 $ 6,975,062
============== ===============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable......................................... $ 621,230 $ 605,057
Accrued expenses and other current liabilities........... 553,960 445,134
Deferred revenue......................................... 1,583,535 1,711,972
Current maturities of long-term debt and other current
liabilities............................................. 335,093 343,201
-------------- --------------

Total current liabilities.............................. 3,093,818 3,105,364
Long-term debt and other liabilities........................ 1,484,170 1,508,705
-------------- --------------
Total liabilities...................................... 4,577,988 4,614,069
-------------- --------------

Commitments and contingencies

Stockholders' equity:
Common stock - $.00025 par value; authorized
18,000,000 shares, issued and outstanding
8,308,810 shares at March 31, 2002
and 8,278,141 shares at December 31, 2001............... 2,083 2,070

Additional paid-in capital............................... 9,307,055 9,286,871
Accumulated deficit...................................... (6,631,178) (6,927,948)
-------------- --------------
Stockholders' equity................................... 2,677,960 2,360,993
-------------- --------------

Total liabilities and stockholders' equity............. $ 7,255,948 $ 6,975,062
============== ==============

See Notes to Consolidated Financial Statements

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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(unaudited)

For the Three Months Ended
March 31,
--------------------------
2002 2001
---- ----

Service revenues................................. $ 3,872,845 $ 2,132,694

Reimbursement revenues........................... 870,262 413,645
---------- -----------

Total revenues................................... 4,743,107 2,546,339
---------- -----------
Cost and expenses:

Cost of revenues............................. 3,397,071 1,467,828

General and administrative expenses.......... 592,130 445,279

Sales and marketing expenses................. 416,032 413,044
---------- ----------

Total cost and expenses................. 4,405,233 2,326,151
---------- ----------

Income from operations.................. 337,874 220,188

Interest expense - net........................... (18,633) (1,006)
----------- ----------

Income before income tax provision...... 319,241 219,182

Income tax provision............................. 22,471 --
---------- ----------

Net income applicable to common stock... $ 296,770 $ 219,182
========== ==========

Basic earnings per common share.................. $ 0.04 $ 0.03
========== ==========

Weighted average number of common shares......... 8,292,565 8,190,545
========== ==========

Diluted earnings per common share................. $ 0.03 $ 0.03
========== ==========

Weighted average number of common
shares and dilutive common equivalent shares.... 9,904,006 8,307,506
========== ==========

See Notes to Consolidated Financial Statements

-3-

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(unaudited)

For the Three Months Ended
March 31,
--------------------------
2002 2001
---- ----

Cash flows from operating activities:
Net income.......................................................... $ 296,770 $ 219,182
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization..................................... 203,627 131,113
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable...................... 23,672 (484,338)
(Increase) decrease in prepaid expenses and other current
assets.......................................................... (118,946) 24,210
(Increase) decrease in other assets............................. (80,058) 5,120
Increase in accounts payable.................................... 16,173 61
Increase in accrued expenses and other
current liabilities.......................................... 108,826 148,879
Decrease in deferred revenue.................................... (128,437) (50,204)
----------- ---------
Net cash provided by (used in) operating activities............. 321,627 (5,977)
----------- ---------
Cash flows from investing activities:
Purchases of property and equipment................................. (314,660) (56,748)
----------- ----------
Net cash used in investing activities........................... (314,660) (56,748)
----------- ----------
Cash flows from financing activities:
Payments under equipment lease obligations.......................... (51,704) (37,176)
Payments under promissory note...................................... (41,667) --
Proceeds from exercise of stock options............................. 20,197 --
----------- ---------
Net cash used in financing activities........................... (73,174) (37,176)
----------- ---------

Net decrease in cash and cash equivalents.............................. (66,207) (99,901)
Cash and cash equivalents at beginning of period....................... 499,710 661,155
----------- ---------

Cash and cash equivalents at end of period............................. $ 433,503 $ 561,254
=========== =========

Supplemental schedule of noncash investing and financing
activities:
Equipment purchased under capital lease obligations.................. $ 60,728 $ --
=========== =========

See Notes to Consolidated Financial Statements

-4-

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)

Note 1 - Basis of Presentation:

The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles in the United States of America have been condensed or
omitted pursuant to such rules and regulations. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-KSB for the year ended September 30, 2001.

In the opinion of the Company's management the accompanying unaudited
consolidated financial statements contain all adjustments, consisting solely of
those which are of a normal recurring nature, necessary for a fair presentation
of its financial position as of March 31, 2002 and December 31, 2001 and the
results of its operations and its cash flows for the three months ended March
31, 2002 and 2001.

Certain reclassifications have been made to the prior period financial
statements in order to conform to the current period financial statements.

Interim results are not necessarily indicative of results for the full
fiscal year.

Service revenues are recognized over the contractual term of the Company's
customer contracts using the percentage-of-completion method based on costs
incurred as a percentage of total estimated costs. Service revenues are first
recognized when the Company has a signed contract from the customer, with fixed
or determinable fees and for which collectability is reasonably assured. Any
change to recognized service revenue as a result of revisions to estimated total
costs are recognized in the period the estimate changes. Direct and incremental
costs incurred at the outset of an arrangement that are directly related to a
customer contract are deferred, so long as their recoverability from that
contract is probable. Deferred costs are expensed upon recognition of revenue
associated with the contract.

In addition, the Emerging Issues Task Force recently issued accounting
pronouncement EITF 01-14, which states that fees reimbursed by customers on a
pass-through basis, should be recorded as revenue. Historically, the Company had
offset such reimbursements against the related expenses. The consolidated
statement of income for the three months ended March 31,

-5-

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)

2001 has been reclassified to conform to the current year's presentation. For
the three months ended March 31, 2002 and 2001, the Company recorded $870,262
and $413,645 of reimbursed revenues, respectively.

In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets," which establishes accounting and reporting standards governing goodwill
and intangible assets. SFAS No. 142 states that goodwill is no longer subject to
amortization over its estimated useful life. Rather, goodwill will be subject to
at least an annual assessment for impairment by applying a fair-value based
test. Under the new rules, an acquired intangible asset should be separately
recognized and amortized over its useful life (unless an indefinite life) if the
benefit of the intangible asset is obtained through contractual or other legal
rights, or if the intangible asset can be sold, transferred, licensed, rented or
exchanged regardless of the acquirer's intent to do so. The Company adopted this
standard on January 1, 2002, at which time the Company ceased to amortize its
existing goodwill and intangible assets. The adoption of SFAS No. 142 did not
have a material effect on the Company's consolidated results of operations or
financial position.

In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which is
effective for fiscal years beginning after December 15, 2001, and addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. This statement supersedes SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the
accounting and reporting provisions of Accounting Principles Board Opinion No.
30, "Reporting the Results of Operations - Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," for the disposal of a segment of a business. The
Company adopted this standard on January 1, 2002. The adoption of SFAS No. 144
did not have a material effect on the Company's consolidated results of
operations or financial position.

Note 2 - Earnings Per Share:

Basic earnings per common share for the three months ended March 31, 2002
and 2001 was calculated based upon the net income available to common
stockholders divided by the weighted average number of shares of common stock,
$0.00025 par value (the "Common Stock"), outstanding during the period. Diluted
earnings per share for the three months ended March 31, 2002 and 2001 was
calculated based upon net income available to common stockholders divided by the
weighted average number of shares of Common Stock outstanding during the period,
adjusted for dilutive securities using the treasury method.

-6-

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)

The computation of basic earnings per common share and diluted earnings per
common share were as follows:

Three Months Ended
March 31,
----------------------
2002 2001
-------- -------

Net income applicable
to common stock - basic.................... $ 296,770 $ 219,182
---------- ---------

Interest expense on convertible note.......... 19,602 --
---------- ---------

Net income applicable
to common stock - diluted.................. $ 316,372 $ 219,182
---------- ---------
Denominator-Basic:

Weighted average number of common
shares...................................... 8,292,565 8,190,545

Basic earnings per common share............. $ 0.04 $ 0.03
=========== =========

Denominator-Diluted:

Weighted average number of
common shares............................ 8,292,565 8,190,545

Common share equivalents of
outstanding stock options and
warrants................................. 551,300 116,961

Common share equivalents related to the
convertible promissory note.............. 1,060,141 --
----------- ---------

Weighted average number of common
shares and dilutive common equivalent
shares................................... 9,904,006 8,307,506
----------- ---------

Diluted earnings per common share........... $ 0.03 $ 0.03
=========== =========

As of March 31, 2002 and 2001, 332,000 and 955,250 stock options and
warrants, respectively, have been excluded from the calculation of diluted
earnings per common share as they are antidilutive.

-7-

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)

Note 3 - Long-term Debt:

On April 30, 2002, the Company entered into an agreement with Wachovia
Bank, National Association ("Wachovia") for a committed line of credit up to
$1,000,000 collateralized by the Company's assets. Interest is payable at
Wachovia's Prime Rate plus 0.5%. The agreement requires the Company, among other
things, to maintain a debt service coverage ratio of not less than 1.25 to 1,
measured annually. The committed line of credit matures May 31, 2003 and may be
renewed on an annual basis.

Note 4 - Recent Acquisition:

On October 1, 2001, the Company acquired effective control of the
Intelligent Imaging(TM) business unit ("Intelligent Imaging") of Quintiles,
Inc., a North Carolina corporation ("Quintiles"), and a wholly-owned subsidiary
of Quintiles Transnational Corporation (the "Intelligent Imaging Acquisition").
The Intelligent Imaging Acquisition closed on October 25, 2001. All Intelligent
Imaging personnel (approximately 47) have become employed by the Company and all
of the clinical projects, which were handled by Intelligent Imaging, are now
being managed by the combined Company.

Intelligent Imaging specializes in providing digital medical imaging
services for clinical trials and the health care industry, a line of business
the Company intends to continue. In the Intelligent Imaging Acquisition, the
Company acquired substantially all of the assets of Intelligent Imaging and
assumed certain liabilities of Intelligent Imaging.

The assets acquired primarily included Intelligent Imaging's accounts
receivable and equipment. In consideration for the assets purchased, the Company
issued an unsecured, subordinated convertible promissory note, dated as of
October 25, 2001, in the principal amount of $1,000,000 (the "Note"). The Note
bears interest at the rate in effect on the business day immediately prior to
the date on which payments are due under the Note equal to the Three-Month
London Interbank Offering Rate (the "LIBOR Rate") as published from time to time
in the Wall Street Journal plus 3%, compounded annually based on a 365-day year.

-8-

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)

The Company is obligated to pay quarterly payments of principal of $41,667
under the Note, plus accrued interest thereon, and one payment of principal of
$500,000 on November 1, 2004, unless the Note is previously converted into the
Company's Common Stock. The Company has recorded $166,667 as a current
liability, representing the May 1, 2002, August 1, 2002, November 1, 2002 and
February 1, 2003 quarterly installments of principal.

The number of shares of Common Stock into which the Note may be converted
is calculated by dividing the outstanding principal balance of the Note, plus
all accrued and unpaid interest thereon, by the greater of: (i) 75% of the
average closing price of the Company's Common Stock over the ten consecutive
trading days ending prior to the date of conversion; or (ii) $0.906 per share.
At March 31, 2002, the Note would have been convertible into approximately
1,064,937 shares of the Company's Common Stock. This was calculated by dividing
the unpaid principal balance ($958,333 as of March 31, 2002) plus accrued
interest (approximately $6,500 as of March 31, 2002) of $964,833 by $0.906.

The Company may pay additional consideration if certain financial results
are achieved (the maximum number of shares that may be issued to Quintiles
pursuant to such provision is 646,247 shares of Common Stock which is to be paid
out no later than February 15, 2003). The Company has recorded a long-term
liability of $585,499 (based on the price per share of $0.906) for the
contingent consideration under the provisions of Statement of Financial
Accounting Standards No. 141, "Business Combinations." SFAS No. 141 requires a
liability to be recognized in an amount equal to the lesser of the maximum
amount of the contingent consideration or the excess of net tangible assets
acquired over the purchase price when fair value of net assets acquired exceeds
the cost. When the contingency is resolved and the consideration is issued or
becomes issuable, any excess of the fair value of the contingent consideration
issued or issuable over the amount that was recognized as if it was a liability
will be recognized as an additional cost of the Intelligent Imaging Acquisition.
If the amount initially recognized as a liability exceeds the fair value of the
consideration issued or issuable, that excess will be allocated as a pro rata
reduction of noncurrent assets or property, plant and equipment. The maximum
amount of contingent consideration from the Intelligent Imaging Acquisition of
approximately $585,000 is classified in the Consolidated Balance Sheets at March
31, 2002 and December 31, 2001 as long-term debt and other liabilities. The
payment to Quintiles of any additional consideration is to be paid out no later
than February 15, 2003 and must be paid in the form of shares of the Company's
Common Stock.

-9-

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)

The total purchase price of the Intelligent Imaging Acquisition has been
allocated to the assets and liabilities based on management's best estimates of
fair value. The excess of the net tangible assets acquired over the purchase
price resulted in the reduction of property, plant and equipment.

Net tangible assets acquired.............................. $ 2,130,684

--------------------------------------------------------------------------------
Less - purchase price:
Convertible promissory note............................. (1,000,000)
Contingent liability.................................... (585,499)
Transaction costs....................................... (98,000)

--------------------------------------------------------------------------------
Total purchase price................................ (1,683,499)

--------------------------------------------------------------------------------
Excess of net tangible assets over purchase price........ 447,185
Less - write-down of property, plant and equipment....... (447,185)

--------------------------------------------------------------------------------
Remaining excess of net tangible assets over
purchase price...................................... $ --

--------------------------------------------------------------------------------

The Company assumed effective control of Intelligent Imaging on October 1,
2001, therefore, transactions occurring subsequent to October 1, 2001 have been
included in the Company's historical operating results.

-10-

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)

The following unaudited consolidated pro forma information has been
prepared assuming Intelligent Imaging was acquired as of January 1, 2001, with
pro forma adjustments for interest expense and income taxes. The pro forma
information is presented for informational purposes only and is not indicative
of what would have occurred if the Intelligent Imaging Acquisition had been made
on January 1, 2001. In addition, this pro forma information is not intended to
be a projection of future operating results.

Three Months Ended
March 31, 2001
--------------

Revenues............................. $ 3,880,844
------------

Net income........................... $ 183,800
------------

Basic earnings per common share...... $ .02
------------

Diluted earnings per common share.... $ .02
------------

Note 5 - Recently Issued Accounting Standards:

In August 2001, the Financial Accounting Standards Board issued SFAS No.
143, "Accounting for Asset Retirement Obligations". SFAS No. 143 addresses
financial accounting and reporting obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. SFAS No.
143 is effective for fiscal years beginning after June 14, 2002. The Company
does not expect that the adoption of SFAS No. 143, which is effective for the
Company as of January 1, 2003, will have a material effect on its consolidated
results of operations or financial position.

Note 6 - Income Tax Provision:

The Company's income tax provision of $22,471 relates to estimated state
income taxes. The Company has no remaining net operating loss carry forwards in
the Commonwealth of Pennsylvania. During the three months ended March 31, 2002,
the federal income tax provision has been offset by a reduction in the Company's
valuation allowance of approximately $74,000. Management has determined that it
is more likely than not that a portion of the Company's Federal net operating
loss carryforwards will be realized in the future. The determination took into
account that the Company has been profitable for the last seven quarters and the
Company's 2002 budget. The Company has approximately $5,200,000 of Federal net
operating loss carryforwards as of March 31, 2002. The deferred tax asset of
approximately $417,000 at March 31, 2002 has been recorded net of a valuation
allowance of approximately $1,900,000.

-11-

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)

The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires the use of the liability
method where deferred taxes are determined based on the estimated future tax
effects of differences between the financial statement and tax basis of assets
and liabilities at currently enacted tax laws and rates. The Company records a
valuation allowance to reduce its deferred tax assets to the amount that is more
likely than not to be received.

-12-

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

OVERVIEW

Bio-Imaging Technologies, Inc. (the "Company") is a pharmaceutical contract
service organization, providing services that support the product development
process of the pharmaceutical, biotechnology and medical device industries. The
Company specializes in assisting its clients in the design and management of the
medical-imaging component of clinical trials for all modalities including
computerized tomography, magnetic resonance imaging, x-rays, dual energy x-ray
absorptiometry, position emission tomography single photon emission computerized
tomography and ultrasound. The Company provides services which include the
processing and analysis of medical images and the data-basing and regulatory
submission of medical images, quantitative data and text. In September 2000, the
Company offered a new service called, Bio-Imaging ETC(SM). Bio-Imaging ETC
focuses on education, training and certification for medical imaging equipment,
facilities and staff.

-13-

The Company's sales cycle (the period from the presentation by the Company
to a potential client to the engagement of the Company by such client) has
historically been 12 months but is shortening as the awareness of these services
increases and regulatory guidelines become better defined. In addition, the
contracts under which the Company performs services typically cover a period of
12 to 60 months and the volume and type of services performed by the Company
generally vary during the course of a project. No assurance can be made that the
Company's project revenues will remain at levels sufficient to maintain
profitability. Service revenues were generated from 52 clients encompassing 104
distinct projects for the three months ended March 31, 2002. This compares to 41
clients encompassing 75 distinct projects for the three months ended March 31,
2001. This represents an increase of 26.8% in clients and 38.7% in projects for
the three months ended March 31, 2002 as compared to the three months ended
March 31, 2001. Management believes that the operations of the Company and
Intelligent Imaging have been fully integrated since the Intelligent Imaging
Acquisition. The Company's contracted/committed backlog was approximately
$31,742,000 as of March 31, 2002. This

-14-

compares to approximately $18,800,000 as of March 31, 2001, an increase of
68.8%. Contracted/committed backlog is the amount of service revenue that
remains to be earned and recognized on both signed and agreed to contracts. Such
contracts are subject to termination by the Company's clients at any time.

The Company believes that demand for its services and technologies will
grow during the long-term as the use of digital technologies for data
acquisition and management increases in the radiology and drug development
communities. The Company also believes that there is a growing recognition
within the bio-pharmaceutical industry regarding the use of an independent
centralized core laboratory for analysis of medical-imaging data that is derived
from clinical trials and the regulatory requirements relating to the submission
of this data. In addition, the Food and Drug Administration ("FDA") is gaining
experience with electronic submissions and is continuing to develop guidelines
for computerized submission of data, including medical images. Furthermore, the
increased use of digital medical images in clinical trials, especially for
important drug classes such as anti-inflammatory, neurologic and oncologic
therapeutics and diagnostic image agents, generate large amounts of image data
that will require processing, analysis, data management and submission services.
Due to several factors, including, without limitation, competition from
commercial competitors and academic research centers, there can be no assurance
that demand for the Company's services and technologies will grow, sustain
growth, or that additional revenue generating opportunities will be realized by
the Company.

Certain matters discussed in this Form 10-QSB are "forward-looking
statements" intended to qualify for the safe harbors from liability established
by the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements may be identified by, among other things, the use of forward-looking
terminology such as "believes," "expects," "may," "will," "should," or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy that involve risks and uncertainties.
In particular, the Company's statements regarding the integration of Intelligent
Imaging into the Company, the demand for the Company's services and
technologies, growing recognition for the use of independent centralized core
laboratories, trends toward the outsourcing of imaging services in clinical
trials, realized return from the Company's marketing efforts and increased use
of digital medical images in clinical trials are examples of such
forward-looking statements. The forward-looking statements include risks and
uncertainties, including, but not limited to, the timing of revenues due to the
variability in size, scope and duration of projects, estimates made by
management with respect to the Company's critical accounting policies,
regulatory delays, clinical study results which lead to reductions or
cancellations of projects, and other factors, including general economic
conditions and regulatory developments, not within the Company's control. The
factors discussed herein and expressed from time to time in the Company's
filings with the Securities and Exchange Commission could cause actual results
and developments to be materially different from those expressed in or implied
by such statements. The forward-looking statements are made only as of the date
of this filing and the Company undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.

-15-

RESULTS OF OPERATIONS

On November 6, 2001, the Company changed its fiscal year from ending on
September 30 to December 31. The Company believes that the three months ended
March 31, 2001 provides a meaningful comparison to the three months ended March
31, 2002.

Three Months Ended March 31, 2002 and 2001
------------------------------------------

Three Months % of Three Months % of
Ended Total Ended Total
March 31, 2002 Revenue March 31, 2001 Revenue $ Change % Change
---------------------------- ----------------- ---------- -------------------- ----------- -------------- -----------

Service revenues $3,872,845 $2,132,694 $1,740,151 81.6%
Reimbursement
revenues $870,262 $413,645 $456,617 110.4%
---------------------------- ----------------- ---------- -------------------- ----------- -------------- -----------
Total revenues $4,743,107 $2,546,339
============================ ================= ========== ==================== =========== ============== ===========

Cost of revenues $3,397,071 71.6% $1,467,828 57.6% $1,929,243 131.4%
---------------------------- ----------------- ---------- -------------------- ----------- -------------- -----------
General and
administrative
expenses $592,130 12.5% $445,279 17.5% $146,851 33.0%
---------------------------- ----------------- ---------- -------------------- ----------- -------------- -----------
Sales and marketing
expenses $416,032 8.8% $413,044 16.2% $2,988 0.7%
---------------------------- ----------------- ---------- -------------------- ----------- -------------- -----------
Total cost and
expenses $4,405,233 92.9% $2,326,151 91.3% $2,079,082 89.4%
============================ ================= ========== ==================== =========== ============== ===========
Interest expense-net $18,633 $1,006 $17,627 1,752.2%
Income tax
provision $22,471 -- $22,471 --
---------------------------- ----------------- ---------- -------------------- ----------- -------------- -----------
Net income $296,770 6.3% $219,182 8.6% $77,588 35.4%
============================ ================= ========== ==================== =========== ============== ===========

Service revenues for the three months ended March 31, 2002 and 2001 were
approximately $3,873,000 and $2,133,000, respectively, an increase of
approximately $1,740,000 or 81.6%. The increase in service revenues is a result
of an increase in the number of projects from the overall market growth for
medical imaging related services for clinical trials. Service revenues were
generated from 52 clients encompassing 104 distinct projects for the three
months ended March 31, 2002. This compares to 41 clients encompassing 75
distinct projects for the three months ended March 31, 2001. Service revenues
generated from the Company's client base continue to be highly concentrated. One
client encompassing 3 projects represented approximately 22.4% of the Company's
service revenues for the three months ended March 31, 2002, while for the
comparable period last year, three clients encompassing 11 projects represented
approximately 45.2% of the Company's service revenues. No other customers
accounted for more than 10% of service revenues in each of the three month
periods ended March 31, 2002 and 2001. The Company's scope of work in both
periods included primarily medical-imaging core laboratory services and
image-based information management services.

-16-

Reimbursment revenues for the three months ended March 31, 2002 and 2001
were approximately $870,000 and $414,000, respectively, an increase of
approximately $456,000 or 110.4%. Reimbursment revenues consists of pass-through
costs reimbursed by the customer. As required, the Company adopted the guidance
of recently issued accounting pronouncement EITF 01-14, effective January 1,
2002, and, accordingly, has reclassified reimbursed pass-through costs as part
of revenues. The increase in the three months ended March 31, 2002 resulted from
an increase in projects and the associated reimbursed costs.

Cost of revenues for the three months ended March 31, 2002 and 2001 were
approximately $3,397,000 and $1,468,000, respectively, an increase of
approximately $1,929,000 or 131.4%. Cost of revenues for the three months ended
March 31, 2002 and three months ended March 31, 2001 were comprised of
professional salaries and benefits, allocated overhead and pass-through costs.
The increase in cost of revenues is primarily attributable to personnel and
facilities assumed as part of the Intelligent Imaging Acquisition, along with an
increase in staffing levels required for project related tasks for the three
months ended March 31, 2002. The Company anticipates utilizing the excess
Intelligent Imaging resource capacity to fulfill current and anticipated
projects.

The increase in the cost of revenues as a percentage of total revenues in
the three months ended March 31, 2002 of 71.6% from the three months ended March
31, 2001 of 57.6% is primarily due to costs associated with the integration of
Intelligent Imaging. In addition, the inclusion of reimbursable pass-through
costs in revenues has added to this percentage increase since reimbursable
revenues along with the associated reimbursable pass-through costs have
increased in proportion to the Company's number of projects and service
revenues. The cost of revenues as a percentage of total revenues may fluctuate
based on the utilization of staff and the mix of services provided by the
Company.

General and administrative expenses for the three months ended March 31,
2002 and 2001 were approximately $592,000 and $445,000, respectively, an
increase of approximately $147,000 or 33.0%. General and administrative expenses
in each of the three months ended March 31, 2002 and three months ended March
31, 2001 consisted primarily of professional salaries and benefits, depreciation
and amortization, professional and consulting services, office rent and
corporate insurance. The increase during the three months ended March 31, 2002
from the three months ended March 31, 2001, is primarily attributable to an
increase in corporate insurance and professional services associated with
general corporate matters resulting from the increase in the Company's service
revenues and personnel.

The decrease in general and administrative expenses as a percentage of
total revenues in the three months ended March 31, 2002 of 12.5% from the three
months ended March 31, 2001 of 17.5% is primarily due to the Company's increase
in total revenues with a lesser increase in costs associated with depreciation
and amortization, professional and consulting services, office rent and
corporate insurance.

-17-

Sales and marketing expenses for the three months ended March 31, 2002 and
2001 were approximately $416,000 and $413,000, respectively, an increase of
approximately $3,000 or 0.7%. Sales and marketing expenses in each of the three
months ended March 31, 2002 and three months ended March 31, 2001 were comprised
of direct sales and marketing costs, professional salaries and benefits and
allocated overhead. These expenses have not increased significantly in the three
months ended March 31, 2002 from the comparable period last year.

The decrease in sales and marketing expenses as a percentage of total
revenues in the three months ended March 31, 2002 of 8.8% from the three months
ended March 31, 2001 of 16.2% is primarily due to the Company's increase in
total revenues with a lesser increase in costs associated with professional
salaries and benefits.

Total cost and expenses for the three months ended March 31, 2002 and 2001
were approximately $4,405,000 and $2,326,000, respectively, an increase of
approximately $2,079,000 or 89.4%. Total cost and expenses in each of the three
months ended March 31, 2002 and three months ended March 31, 2001 consisted
primarily of cost of revenues, general and administrative expenses and sales and
marketing expenses. This increase is due primarily to an increase in personnel
resulting from the Intelligent Imaging Acquisition, along with an increase in
professional services associated with general corporate matters.

Total cost and expenses as a percentage of total revenues for the three
months ended March 31, 2002 of 6.3% from the three months ended March 31, 2001
of 8.6% did not change significantly due to the increase in cost of revenues as
a percentage of total revenues offset by the decreases in general and
administrative and sales and marketing expenses as a percentage of total
revenues.

Net interest expense for the three months ended March 31, 2002 and 2001
were approximately $19,000 and $1,000, respectively, an increase of
approximately $18,000 or 1752.2%. Net interest expense for the three months
ended March 31, 2002 resulted from interest expense incurred on both the
convertible promissory note and equipment lease obligations. Net interest
expense in the three months ended March 31, 2001 resulted from interest expense
incurred on equipment lease obligations.

The Company's income tax provision of $22,471 relates to estimated state
income taxes for the three months ended March 31, 2002. The Company has no
remaining net operating loss carry forwards in the Commonwealth of Pennsylvania.
During the three months ended March 31, 2002, the federal income tax provision
has been offset by a reduction in the Company's valuation allowance of
approximately $74,000. Management believes that it is more likely than not that
the net deferred income tax assets, recorded as of March 31, 2002, will be
realized in the future.

-18-

The Company's net income for the three months ended March 31, 2002 was
attributable primarily to increased revenues associated with an increase in the
number of projects for which the Company was engaged to perform services,
offset, in part, by the costs associated with the integration of the Intelligent
Imaging Acquisition.

LIQUIDITY AND CAPITAL RESOURCES

Three Months Three Months
Ended Ended
March 31, 2002 March 31, 2001
-------------------------------------

Net cash provided by (used in) operating activities $321,627 ($5,977)
Net cash used in investing activities ($314,660) ($56,748)
Net cash used in financing activities ($73,174) ($37,176)

At March 31, 2002, the Company had cash and cash equivalents of
approximately $434,000. Working capital at March 31, 2002 was approximately
$1,573,000.

Net cash provided by operating activities for the three months ended March
31, 2002 includes net income of approximately $297,000, approximately $204,000
of depreciation and amortization and changes in certain of the Company's
operating assets and liabilities, such as, an increase of approximately $109,000
in accrued expenses and other current liabilities, offset by an increase in
prepaid expenses and other current assets of approximately $118,000 and a
decrease in deferred revenue of approximately $128,000.

Net cash used in investing activities represents the Company's investment
in capital and leasehold improvements. The Company currently anticipates that
capital expenditures for the remainder of fiscal year ending December 31, 2002
will be approximately $800,000. These expenditures represent additional upgrades
in the Company's networking, data storage and core laboratory capabilities for
both the United States and European operations and software investment in 21 CFR
Part 11 compliance. 21 CFR Part 11 is a regulation published by the Food and
Drug Administration pursuant to its Electronic Records and Electronic Signatures
Rule relating to requirements for electronic records and signatures that support
regulated activities.

Net cash used in financing activities is primarily due to payments under
the Promissory Note and equipment lease obligations.

-19-

The following table lists the Company's cash contractual obligations as of
March 31, 2002:

-------------------------------------------------------------------------------------------------------------------
Payments Due by Period
-------------------------------------------------------------------------------------------------------------------
Contractual Obligations Total Less than 1 year 1-3 years 4 - 5 years After 5 years
-------------------------------------------------------------------------------------------------------------------

Capital Lease Obligations $275,930 $168,426 $107,504 - -
-------------------------------------------------------------------------------------------------------------------
Promissory Note $958,333 $166,667 $791,666 - -
-------------------------------------------------------------------------------------------------------------------
Facility Rent Operating $5,386,747 $761,238 $1,840,137 $1,303,736 $1,481,636
Leases
===================================================================================================================
Total Contractual Cash $6,621,010 $1,096,331 $2,739,307 $1,303,736 $1,481,636
Obligations
===================================================================================================================

On April 30, 2002, the Company entered into an agreement with Wachovia
Bank, National Association ("Wachovia") for a committed line of credit up to
$1,000,000, collateralized by the Company's assets. Interest is payable at
Wachovia's Prime Rate plus 0.5%. The agreement requires the Company, among other
things, to maintain a debt service coverage ratio of not less than 1.25 to 1,
measured annually. The committed line of credit matures May 31, 2003 and may be
renewed on an annual basis.

In December 1999, the Company entered into an accounts receivable financing
agreement with Silicon Valley Bank ("Silicon Valley Bank"), whereby the Company
may assign up to $500,000 of eligible accounts receivable to Silicon Valley
Bank. In March 2000, Silicon Valley Bank increased the eligible accounts
receivable to $1,000,000. Under the agreement, Silicon Valley Bank may advance
the Company up to 80% of the assigned accounts receivable amount. Upon
collection by Silicon Valley Bank, the balance of the assigned accounts
receivable would be remitted to the Company net of Silicon Valley Bank's finance
charges and administration fees. A 1.00% administrative fee of the face amount
of the assigned receivable may be charged by Silicon Valley Bank along with a
1.75% finance charge per month of the average daily account balance outstanding.
Although the agreement is contractually renewable each year, it is cancelable by
Silicon Valley Bank at any time. During the three months ended March 31, 2002,
the Company did not assign any accounts receivable to Silicon Valley Bank. At
March 31, 2002, the Company had repaid its borrowings and had a $0 balance with
Silicon Valley Bank. This accounts receivable financing agreement with Silicon
Valley Bank was terminated by the Company on May 13, 2002.

In connection with the Intelligent Imaging Acquisition, beginning February
1, 2002, the Company is obligated to pay quarterly payments of principal of
$41,667 under the Note, plus accrued interest thereon, and one payment of
principal of $500,000 on November 1, 2004, unless

-20-

the Note is previously converted into the Company's Common Stock. The Note bears
interest at the rate in effect on the business day immediately prior to the date
on which payments are due under the Note equal to the LIBOR Rate as published
from time to time in the Wall Street Journal plus 3%, compounded annually based
on a 365-day year. During the three months ended March 31, 2002, the Company
paid $41,667 in principal under the Note and $13,102 in interest up to February
1, 2002.

The Company has neither paid nor declared dividends on its Common Stock
since its inception and does not plan to pay dividends on its Common Stock in
the foreseeable future.

The Company anticipates that its cash and cash equivalents as of March 31,
2002, together with anticipated cash from operations, will be sufficient to fund
current working capital needs and capital requirements for at least the next
twelve months. There can be no assurance, however, that the Company's operating
results will continue to achieve profitability on an annual basis in the near
future. The Company's past history of operating losses, together with the risks
associated with: (i) the integration of Intelligent Imaging into the Company;
(ii) the Company's ability to gain new client contracts; (iii) the variability
of the timing of payments on existing client contracts and; (iv) other changes
in the Company's operating assets and liabilities, may have a material adverse
affect on the Company's future liquidity. In connection therewith, the Company
may need to raise additional capital in the foreseeable future from equity or
debt sources in order to; (i) implement its business, sales or marketing plans;
(ii) take advantage of unanticipated opportunities (such as more rapid
expansion, acquisitions of complementary businesses or the development of new
services); (iii) to react to unforeseen difficulties (such as the decrease in
the demand for the Company's services or the timing of revenues due to a variety
of factors previously discussed) or; (iv) to otherwise respond to unanticipated
competitive pressures. There can be no assurance that additional financing will
be available, if at all, on terms acceptable to the Company.

The Company's 2002 operating plan contains assumptions regarding revenue
and expenses. The achievement of the operating plan depends heavily on the
timing of work performed by the Company on existing projects and the ability of
the Company to gain and perform work on new projects. Project cancellation, or
delays in the timing of work performed by the Company on existing projects or
the inability of the Company to gain and perform work on new projects could have
an adverse impact on the Company's ability to execute its operating plan and
maintain adequate cash flow. In the event actual results do not meet the
operating plan, the Company's management believes it could execute contingency
plans to mitigate such effects. Such plans include additional financing, to the
extent available, through the line of credit discussed above. Considering the
cash on hand and based on the achievement of the operating plan and management's
actions taken to date, management believes it has the ability to continue to
generate sufficient cash to satisfy its operating requirements in the normal
course of business. However, no assurance can be given that sufficient cash will
be generated from operations.

-21-

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND RISKS

Financial Reporting Release No. 60, which was recently released by the
Securities and Exchange Commission, requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. The Notes to the Consolidated Financial Statements
includes a summary of significant accounting policies and methods used in the
preparation of the Company's Consolidated Financial Statements. The following is
a brief discussion of the more significant accounting policies and methods used
by the Company.

In addition, Financial Reporting Release No. 61 was recently released by
the SEC to require all companies to include a discussion to address, among other
things, liquidity, off-balance sheet arrangements, contractual obligations and
commercial commitments.

The Company's discussion and analysis of its financial condition and
results of operations are based upon its consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of financial statements in
accordance with generally accepted accounting principles in the Unites States
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, including the recoverability of tangible and
intangible assets, disclosure of contingent assets and liabilities as of the
date of the financial statements, and the reported amounts of revenues and
expenses during the reported period.

On an on-going basis, the Company evaluates its estimates. The most
significant estimates relate to the recognition of revenue and profits based on
the percentage of completion method of accounting for fixed service contracts,
allowance for doubtful accounts and income taxes.

The Company believes the following critical accounting policies affect its
more significant judgments and estimates used in the preparation of its
consolidated financial statements:

Revenue Recognition. Service revenues are recognized over the contractual
term of the Company's customer contracts using the percentage-of-completion
method based on costs incurred as a percentage of total estimated costs. Service
revenues are first recognized when the Company has a signed contract from the
customer, with fixed or determinable fees and for which collectability is
reasonably assured. Any change to recognized service revenue as a result of
revisions to estimated total costs are recognized in the period the estimate
changes. Direct and incremental costs incurred at the outset of an arrangement
that are directly related to a customer contract are deferred, if their
recoverability from that contract is probable. Deferred costs are expensed upon
recognition of revenue associated with the contract.

-22-

The Company's revenue recognition policy entails a number of estimates
including an estimate of the total costs expected to be incurred on a project,
which is used as the basis for determining the portion of the Company's revenue
to be recognized each period. The revenue recognized may have been materially
effected if different assumptions or conditions prevailed. If there are changes
in the total estimated costs, other than scope changes in a project which
typically result in a revision to the contract, the timing of the Company's
recognition of revenue would change. The Company reviews its total estimated
costs monthly.

The Company also incurs costs at the outset of a customer service
arrangement prior to receiving a final signed contract and, therefore, defer
these costs and delay the recording of any service revenue. If a customer did
not sign the contract, the Company would have to immediately expense the
deferred costs.

Allowance for Doubtful Accounts. The Company maintains allowances for
doubtful accounts for estimated losses resulting from the inability of its
customers to make required payments. If the financial condition of the Company's
customers were to deteriorate, resulting in an impairment of their ability to
make payments, additional allowances may be required.

Income Taxes. The Company records a valuation allowance to reduce its
deferred tax assets to the amount that is more likely than not to be realized.
While the Company has considered future taxable income and on-going prudent and
feasible tax planning strategies in assessing the need for the valuation
allowance, in the event the Company were to determine that it would be able to
realize its deferred tax assets in the future in excess of its net recorded
amount, an adjustment to the deferred tax asset would increase income in the
period such determination was made. Likewise, should the Company determine that
it would not be able to realize all or part of its net deferred tax asset in the
future, an adjustment to the deferred tax asset would be charged to income in
the period such determination was made.

-23-

PART II. OTHER INFORMATION.
---------------------------

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) The Annual Meeting of Stockholders of the Company (the "Meeting") was held
on February 27, 2002.

(b) The following is a list of all of the nominees for Director of the Company
who were elected at the Meeting and whose term of office continued after
the Meeting:

Mark L. Weinstein

James A. Bannon, Pharm.D.

Jeffrey H. Berg, Ph.D.

David E. Nowicki, D.M.D.

Allan E. Rubenstein, M.D.

David M. Stack

Paula B. Stafford

James A. Taylor, Ph.D.

(c) There were present at the Meeting, in person or by proxy, 7,927,593 shares
of Common Stock out of a total of 8,278,141 shares of Common Stock issued
and outstanding and entitled to vote at the Meeting.

(d) The results of the vote of the stockholders taken at the Meeting by ballot
and by proxy as solicited by the Company on behalf of the Board of
Directors were as follows:

(i) The results of the vote taken at the Meeting for the election of the
nominees for Board of Directors of the Company were as follows:

Nominee For Withheld
--------------------------- --------- ----------

Mark L. Weinstein 7,895,093 32,500
James A. Bannon, Pharm.D. 7,283,294 689,299
Jeffrey H. Berg, Ph.D. 7,875,593 52,000
David E. Nowicki, D.M.D. 7,895,793 31,800
Allan E. Rubenstein, M.D. 7,109,794 817,799
David M. Stack 7,895,593 32,000
Paula B. Stafford 7,895,793 31,800
James A. Taylor, Ph.D. 7,297,127 32,500

-24-

(ii) A vote was taken to adopt the Company's 2002 Stock Incentive Plan.
The results of the vote taken at the Meeting with respect to the
adoption of the Company's 2002 Stock Incentive Plan were as follows:

For Against Abstain Broker Non-Votes
--- ------- ------- ----------------

4,225,713 981,616 21,967 2,698,297

(iii) A vote was taken on the proposal to ratify the appointment of Arthur
Andersen LLP as independent auditors of the Company for the fiscal
year ending December 31, 2002. The results of the vote taken at the
Meeting with respect to such appointment were as follows:

For Against Abstain
--- ------- -------

6,790,657 886,966 249,970

-25-

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits.

4.1 Promissory Note for $1,000,000, dated April 30, 2002, made
by the Company in favor of Wachovia Bank, National
Association.

10.1 2002 Stock Incentive Plan, adopted by the stockholders of
the Company on February 27, 2002. (Incorporated by reference
to Exhibit 99.1 to the Company's Form S-8 dated April 2,
2002).

10.2 First Modification of Office Space Lease between 826 Newtown
Associates, LP and the Company dated January 11, 2002.

10.3 Loan Agreement, dated April 30, 2002, by and between the
Company and Wachovia Bank, National Association.

10.4 Security Agreement, dated April 30, 2002, made by the
Company in favor of Wachovia Bank, National Association.

10.5 Employment Agreement, dated February 1, 2002, by and between
the Company and Mark L. Weinstein.*

* The schedules and exhibits to this document are not being
filed herewith because the Company believes that the
information contained therein is not material. Upon request
therefor, the Company agrees to furnish supplementally a
copy of any schedule or exhibit to the Securities and
Exchange Commission.

(b) Reports on Form 8-K.

Report on Form 8-K/A filed on January 8, 2002 (filing Audited
Financial Statements of the Intelligent Imaging division as of and for
the fiscal years ended September 30, 2001 and 2000, and Unaudited
Pro-Forma Combined Condensed Financial Statements of the Company).

Report on Form 8-K filed on April 17, 2002 (reporting the
dismissal of Arthur Andersen LLP as the Company's independent auditors
and the engagement of PricewaterhouseCoopers LLP as the Company's
independent auditors for the fiscal year ending December 31, 2002).

Report on Form 8-K/A filed on April 26, 2002 (amending the letter
from Arthur Andersen LLP filed with the Form 8-K filed on April 17,
2002).

-26-

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

BIO-IMAGING TECHNOLOGIES, INC.

DATE: May 14, 2002 By:/s/ Mark L. Weinstein
------------------------------------
Mark L. Weinstein, President, Chief
Executive Officer and Chief Financial
Officer (Principal Executive Officer
and Principal Financial Officer)

DATE: May 14, 2002 By:/s/ Maria T. Kraus
------------------------------------
Maria T. Kraus, Controller
(Principal Accounting Officer)

-27-