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

                                 FORM 10-Q/A

                                 AMENDMENT #1

(Mark One)

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

         For the quarterly period ended December 31, 2000

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

         For the transition period from ___________ to _____________


                      Commission file number: 000-23955


                      COMPUTERIZED THERMAL IMAGING, INC.
            -----------------------------------------------------
            (Exact name of Registrant as specified in its charter)



            NEVADA                                87-0458721
-----------------------------------       ---------------------------------
(State or other jurisdiction of            (IRS Employer
incorporation or organization)             Identification No.)




         476 Heritage Park Blvd., Layton, UT          84041
         -----------------------------------        ----------------
       (Address of principal executive offices)      (Zip Code)


                                (801) 776-4700
                           ------------------------
             (Registrant's telephone number, including area code)

     Check whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act 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 [ ]

     APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares
outstanding of each of the issuer's classes of common equity, as of the latest
practicable date: Common stock, par value $0.001, of which 80,476,100 shares
were issued and outstanding as of February 7, 2001.


<PAGE>


                               EXPLANATORY NOTE

     This Amendment No. 1 to the Quarterly Report on Form 10-Q for
Computerized Thermal Imaging, Inc. (the "Company") for the quarterly period
ended December 31, 2000 is being filed to amend and restate in its entirety
Item 1 of Part I (Financial Statements) and Item 2 of Part I (Management's
Discussion and Analysis of Financial Condition and Results of Operation) to
give effect to the restatement of the accompanying unaudited condensed
consolidated financial statements as discussed in Note A to the condensed
consolidated financial statements.  The restatements do not have any effect to
the cash flows and to the total stockholders' equity of the Company.  Other
than reflecting these restatements for periods prior to December 31, 2000, and
except as otherwise noted, the information included in this amendment has not
been updated and subsequent reports should be reviewed for developments after
December 31, 2000.

<PAGE>

                        PART I - FINANCIAL INFORMATION


ITEM 1.

     The following comprise our condensed (unaudited) consolidated financial
statements for the three and six-month periods ended December 31, 2000 and
1999.

                      COMPUTERIZED THERMAL IMAGING, INC.
                         (A Development Stage Company)
                    Condensed Consolidated Balance Sheets
                                 (UNAUDITED)


<TABLE>
<CAPTION>

                                  ASSETS
                                  ------
                                                              December 31,            June 30,
                                                                  2000                  2000
                                                              ------------          ------------
<S>                                                           <C>                   <C>
CURRENT ASSETS
  Cash and cash equivalents                                   $  2,213,984          $  8,997,767
  Investment securities   available for sale                    24,026,629            26,034,399
  Accounts receivable, trade   net                                  95,693               177,254
  Inventory                                                        489,439               110,206
  Interest receivable                                              396,788               439,273
  Prepaid expenses                                                 155,421               204,541
  Miscellaneous receivables                                         44,000                     -
  Software maintenance contract                                          -               309,863
                                                              ------------          ------------
    Total Current Assets                                        27,421,954            36,273,303

PROPERTY AND EQUIPMENT, NET                                      1,086,216               567,936
SOFTWARE LICENSES, NET                                           3,061,604             3,447,289
GOODWILL, NET                                                   10,385,402            10,994,561

INTELLECTUAL PROPERTY RIGHTS, NET                                   46,481                49,334
ADVANCES TO AFFILIATES                                                   -               130,247
                                                              ------------          ------------
         TOTAL ASSETS                                         $ 42,001,657          $ 51,462,670
                                                              ============          ============

                   LIABILITIES AND STOCKHOLDERS' EQUITY
                   ------------------------------------

CURRENT LIABILITIES
  Accounts payable   trade                                    $    572,121          $    688,064
  Sales taxes payable                                               15,511                14,809
  Deferred revenues                                                      -             1,750,000
  Accrued liabilities                                              518,210               724,952
                                                              ------------          ------------
    Total Current Liabilities                                    1,105,842             3,177,825

COMMITMENTS AND CONTINGENCIES                                            -                     -

STOCKHOLDERS' EQUITY
  Convertible preferred stock, $5.00 par value,
    3,000,000 shares authorized                                          -                     -
  Common stock, $.001 par value, 200,000,000 shares
    authorized, 80,476,100 and 80,149,516 issued and
    outstanding, respectively                                       80,476                80,150
  Additional paid-in-capital                                    90,039,159            82,774,168
  Accumulated other comprehensive income                           173,831                32,492
  Losses accumulated during development stage                (  49,397,651)        (  34,601,965)
                                                              ------------          ------------
    Total Stockholders' Equity                                  40,895,815            48,284,845
                                                              ------------          ------------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $ 42,001,657          $ 51,462,670
                                                              ============          ============


         See notes to condensed consolidated financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                    COMPUTERIZED THERMAL IMAGING, INC.
                       (A Development Stage Company)
              Condensed Consolidated Statements of Operations
                                (UNAUDITED)

                                                                                        From
                                                                                     Inception
                               Three months ended           Six months ended          through
                                  December 31,                 December 31,         December 31,
                            --------------------------  --------------------------  ------------
                                2000          1999          2000          1999          2000
                            ------------  ------------  ------------  ------------  ------------
<S>                         <C>           <C>           <C>           <C>           <C>
INCOME
  Sales revenues            $    116,042  $          -  $    195,707  $          -  $    524,990
  Cost of goods sold         (    48,780)            -   (    91,799)            -   (   268,735)
                            ------------  ------------  ------------  ------------  ------------
    Gross Margin                  67,262             -       103,908             -       256,255
                            ------------  ------------  ------------  ------------  ------------
COSTS AND EXPENSES
  General and administrative
    costs                      3,890,474       902,776     5,845,011     1,238,836    25,534,279
  Research and development
    costs                      2,378,855     1,251,617     4,002,648     2,005,508    16,149,412
  Depreciation and
    amortization expense         709,237        22,750     1,147,024        39,055     1,904,199
  Litigation settlement                -             -             -             -     1,097,434
                            ------------  ------------  ------------  ------------  ------------
    Total Costs and
      Expenses                 6,978,566     2,177,143    10,994,683     3,283,399    44,685,324
                            ------------  ------------  ------------  ------------  ------------

LOSS FROM OPERATIONS         ( 6,911,304)  ( 2,177,143)  (10,890,775)  ( 3,283,399)  (44,429,069)

OTHER INCOME AND EXPENSES
  Interest income                547,366         7,975     1,164,208         9,468     2,027,897
  Interest expense           (    35,705)            -   (    35,705)            -   ( 2,209,517)
  Income from sale of
    prototypes                         -             -             -             -       180,815
  Miscellaneous income                 -             -         2,552             -         2,552
                            ------------  ------------  ------------  ------------  ------------
    Total Other Income
      and Expenses               511,661         7,975     1,131,055         9,468         1,747
                            ------------  ------------  ------------  ------------  ------------

NET LOSS BEFORE
  EXTRAORDINARY ITEM         ( 6,399,643)  ( 2,169,168)  ( 9,759,720)  ( 3,273,931)  (44,427,322)

EXTRAORDINARY GAIN ON
  EXTINGUISHMENT OF DEBT               -             -             -             -        65,637
                            ------------  ------------  ------------  ------------  ------------
NET LOSS                    $( 6,399,643) $( 2,169,168) $( 9,759,720) $( 3,273,931) $(44,361,685)

OTHER COMPREHENSIVE
  INCOME
  Unrealized gain on
    available-for-sale
    securities                    81,338             -       141,339             -       173,831
                            ------------  ------------  ------------  ------------  ------------
TOTAL COMPREHENSIVE LOSS    $( 6,318,305) $( 2,169,168) $( 9,618,381) $( 3,273,931) $(44,187,854)
                            ============  ============  ============  ============  ============

WEIGHTED AVERAGE SHARES
  OUTSTANDING                 80,475,868    66,795,058    80,438,548    65,634,370
                            ============  ============  ============  ============

BASIC AND DILUTED LOSS
  PER SHARE                 $(      0.14) $(      0.03) $(      0.18) $(      0.05)
                            ============  ============  ============  ============


         See notes to condensed consolidated financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                    COMPUTERIZED THERMAL IMAGING, INC.
                       (A Development Stage Company)
              Condensed Consolidated Statements of Cash Flows
                                (UNAUDITED)
                                                                                        From
                                                                                     Inception
                               Three months ended           Six months ended          through
                                  December 31,                 December 31,         December 31,
                            --------------------------  --------------------------  ------------
                                2000          1999           2000         1999          2000
                            ------------  ------------  ------------  ------------  ------------
<S>                         <C>           <C>           <C>           <C>           <C>
CASH FLOWS FROM OPERATING
  ACTIVITIES:
Net loss                    $( 6,399,643) $( 2,169,168) $( 9,759,720) $( 3,273,931) $(44,361,685)
Adjustments to reconcile
  net loss to net cash
  used in operating
  activities:
  Depreciation and
    amortization                 709,237        22,750     1,147,024        39,055     1,904,199
  Loss (gain) on
    disposition of assets         24,589             -        77,532             -        68,876
  Amortization of bond
    (premium) discount, net   (   37,207)            -   (    60,543)            -     (  60,543)
  Amortization of debt
    issuance costs and
    discounts on notes                 -             -             -             -       937,969
 Common stock, warrants,
    and options issued as
    compensation                       -       342,235             -       374,108     9,196,801
  Warrants/options extended
    beyond expiration as
    compensation               1,687,250             -     1,687,250             -     1,687,250
  Common stock issued for
    interest expense                   -             -             -             -       423,596
  Common stock/warrants issued
    to settle litigation               -             -             -             -     1,136,380
  Options issued at
    discount to market as
    compensation expense         231,250             -       231,250             -       323,000
  Common stock issued for
    failure to complete
    timely registration                -             -             -             -        82,216
  Common stock issued to
    401(k) plan                        -             -             -             -        43,236
  Extraordinary gain on
    extinguishment of debt             -             -             -             -   (    65,637)
  Write-off of advances
    to affiliate                       -             -       130,537             -       130,537
  Changes in operating
    assets and
    liabilities (net of
    effects of acquisition):
      Accounts receivable
        trade               (     41,072)  (     3,600)       81,561   (     3,600)       25,673
      Inventory             (    129,132)            -   (   379,233)            -   (   312,681)
      Interest receivable         41,855             -        42,485             -   (   396,788)
      Prepaid expenses            56,468             -        49,120             -   (   155,421)
      Miscellaneous
        Receivables         (     21,617)            -   (    44,000)            -   (    44,000)
      Maintenance contract       146,027   (   650,000)      309,863   (   650,000)            -
      Accounts payable           260,492       829,374   (   115,943)      587,137       504,442
      Sales taxes payable          2,624             -           702             -        15,511
      Deferred revenues      ( 1,750,000)            -   ( 1,750,000)            -             -
      Accrued liabilities    (   237,461)            -   (   206,742)            -       518,210
                            ------------  ------------  ------------  ------------  ------------
Net Cash Used in Operating
  Activities                $( 5,456,340) $( 1,628,409) $( 8,558,857) $( 2,927,231) $(28,398,859)
                            ------------  ------------  ------------  ------------  ------------

         See notes to condensed consolidated financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                    COMPUTERIZED THERMAL IMAGING, INC.
                       (A Development Stage Company)
        Condensed Consolidated Statements of Cash Flows (Continued)
                                (UNAUDITED)

                                                                                        From
                                                                                     Inception
                               Three months ended           Six months ended          through
                                  December 31,                 December 31,         December 31,
                            --------------------------  --------------------------  ------------
                                2000          1999           2000         1999          2000
                            ------------  ------------  ------------  ------------  ------------
<S>                         <C>           <C>           <C>           <C>           <C>
CASH FLOWS FROM INVESTING
  ACTIVITIES:

  Proceeds from sale of
    assets                             -             -             -             -         4,790
  Purchase of property
    and equipment            (   219,109)  (    13,706)   (  744,049)  (    85,207)  ( 1,603,255)
  Purchase of software
    license                  (       775)            -    (    2,410)            -   ( 3,852,410)
  Proceeds on sale of
    securities available
    for sale                   3,512,940             -     3,575,322             -     3,575,322
  Purchase of securities
    available for sale       (   299,876)            -   ( 1,301,966)            -   (27,330,366)
  Acquisition of Bales
    Scientific common
    stock                              -             -                           -   ( 5,642,880)
  Acquisition of minority
    interest of subsidiary             -   (    30,000)  (    40,000)  (    30,000)  (   100,000)
                            ------------  ------------  ------------  ------------  ------------
Net Cash (Used in)/Provided
  by Investing Activities      2,993,180   (    43,706)    1,486,897   (   115,207)  (34,948,799)
                            ------------  ------------  ------------  ------------  ------------
CASH FLOWS FROM FINANCING
  ACTIVITIES:

  Common stock, warrants
    and options issued for
    cash                               -     2,566,626       310,850     4,045,084    63,867,471
  Stock offering costs                 -             -             -             -   ( 2,933,793)
  Cash paid in Bales
    acquisition                        -             -             -             -        38,822
  Advances to affiliates               -             -   (    22,673)            -   (   130,537)
  Advances (to)/from
    stockholders                       -    (   18,599)            -         7,042     2,320,738
  Proceeds from borrowings,
    net of issuance costs
    and accrued interest               -             -             -             -     3,576,131
  Retirement of notes and
    debentures                         -             -             -             -   ( 1,177,190)
                            ------------  ------------  ------------  ------------  ------------
Net Cash Provided by
  Financing Activities                 -     2,548,027       288,177     4,052,126    65,561,642
                            ------------  ------------  ------------  ------------  ------------
NET INCREASE (DECREASE)
  IN CASH AND CASH
  EQUIVALENTS                ( 2,463,160)      875,912   ( 6,783,783)    1,009,688     2,213,984

CASH AND CASH EQUIVALENTS
  AT BEGINNING OF PERIOD       4,677,144       270,938     8,997,767       137,162             -
                            ------------  ------------  ------------  ------------  ------------
CASH AND CASH EQUIVALENTS
  AT END OF PERIOD          $  2,213,984  $  1,146,850  $  2,213,984  $  1,146,850  $  2,213,984
                            ============  ============  ============  ============  ============



         See notes to condensed consolidated financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                    COMPUTERIZED THERMAL IMAGING, INC.
                       (A Development Stage Company)
        Condensed Consolidated Statements of Cash Flows (Continued)
                                (UNAUDITED)


                                                                                        From
                                                                                     Inception
                               Three months ended           Six months ended          through
                                  December 31,                 December 31,         December 31,
                            --------------------------  --------------------------  ------------
                                2000          1999           2000         1999          2000
                                           (Restated)                  (Restated)    (Restated)
                            ------------  ------------  ------------  ------------  ------------
<S>                         <C>           <C>           <C>           <C>           <C>
SUPPLEMENTAL CASH FLOW
  INFORMATION

Cash paid for:
  Interest expense          $     35,705  $          -  $     35,705  $          -  $     35,705
  Income taxes                         -             -             -             -             -

SUPPLEMENTAL SCHEDULE OF
  NON-CASH FINANCING AND
  INVESTING ACTIVITIES

Common stock issued to
  individuals to acquire
  minority interest of
  subsidiary                           -             -             -       165,000       165,500

Common stock issued as
  consideration for
  Bales Scientific, Inc.               -             -             -             -     5,500,000

Options issued for
  offering costs                       -             -             -             -       744,282

Common stock issued for
  advances from
  shareholders                         -             -             -             -     2,320,738

Common stock issued for
  notes payable, accrued
  discount and interest                -             -             -             -     2,224,953

Common stock issued for
  liabilities                          -             -             -             -        50,000

Deemed dividend on
  extension of warrants        5,035,966             -     5,035,966             -     5,035,966






         See notes to condensed consolidated financial statements.

</TABLE>
<PAGE>

                COMPUTERIZED THERMAL IMAGING, INC.
                  (A Development Stage Company)
       Notes to Condensed Consolidated Financial Statements



NOTE A.  UNAUDITED FINANCIAL STATEMENTS AND BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC"). Certain information and footnote disclosures
normally included in annual financial statements prepared in accordance with
accounting principles generally accepted in the United States of America have
been condensed or omitted as permitted by such rules and regulations.  In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of results of
operations have been included in the financial statements.  Results for
interim periods are not necessarily indicative of the results that may be
expected for the full year.  These financial statements should be read in
connection with the audited consolidated financial statements and notes
thereto included in the Company's latest annual report on Form 10-KSB.

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and related disclosures.  Actual
results may differ from these estimates.

     Prior Period Adjustments
     ------------------------

     Subsequent to the issuance of the Company's financial statements for the
period ended December 31, 2000, management reconsidered the accounting
treatment of transactions involving (i) the extension to December 31, 2000 of
warrants originally scheduled to expire on December 31, 1999 and (ii) warrants
issued for advertising services and litigation settlement.  The Company had
revised its original accounting of these transactions and reflected the
revised accounting in its financial statements included in its quarterly
report for the period ended December 31, 2000 on Form 10-Q.  The Company's
management has determined that the original accounting of these transactions
was in fact appropriate. As a result, the financial statements for the periods
ended December 30, 2000, the previously revised financial statements for the
periods ended December 30, 1999 and stockholders' equity as of June 30, 2000
have been restated from the amounts previously reported to reflect these
adjustments.

     A summary of the significant effects of the restatement is as follows:


                                         As Previously
                                            Reported            As Restated
                                         -------------         -------------
For the three months ended
 December 31, 1999
---------------------------------------
   General and administrative costs      $   1,823,483          $    902,776
   Net loss                                 (3,089,875)           (2,169,168)
   Basic and diluted loss per share              (0.08)                (0.03)


For the six months ended
 December 31, 2000
---------------------------------------
   Basic and diluted loss per share              (0.19)                (0.18)


For the six months ended
 December 31, 1999
---------------------------------------
   General and administrative costs          2,163,640             1,238,836
   Net loss                                 (4,198,735)           (3,273,931)
   Basic and diluted loss per share              (0.10)                (0.05)


From Inception on June 10, 1987 through
 December 31, 2000
---------------------------------------
   General and administrative costs         26,375,100            25,534,279
   Net loss                                (45,349,506)          (44,361,685)


As of June 30, 2000
---------------------------------------
   Additional paid-in-capital               86,247,518            82,774,168
   Accumulated deficit                     (38,075,337)          (34,601,965)


As of December 31, 2000
---------------------------------------
   Additional paid-in-capital               93,684,786            90,039,159
   Accumulated deficit                     (53,043,278)          (49,397,651)


The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and related disclosures.  Actual results may
differ from these estimates.

NOTE B. NEW ACCOUNTING STANDARD AND GUIDANCE

     Accounting for Derivative Instruments and Hedging Activities
     ------------------------------------------------------------

     In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities", subsequently amended by SFAS No. 138
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities", which establishes accounting and reporting standards for
derivative instruments and hedging activities.  SFAS 133 requires an entity to
recognize all derivative instruments as either assets or liabilities in the
statement of financial position and measure those instruments at their fair
value.  The Company adopted the statement on July 1, 2000 and has determined
that the adoption of SFAS 133 did not have a material effect on the financial
condition of the Company.

     Revenue Recognition
     -------------------

     In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements."  The SAB summarizes the SEC staff's views on applying generally
accepted accounting principles to revenue recognition in financial statements.
The Company has reviewed its revenue recognition policies and has determined
that they comply with the principles set forth in SAB No. 101.  Accordingly,
the issuance of SAB No. 101 did not have any effect on the Company's financial
position or results of operation.

NOTE C. INVENTORIES

     Inventories are stated at the lower-of-cost or market with cost
determined using first-in first-out. Inventories consist of the following:

                                          December 31, 2000     June 30, 2000
                                             ----------           ----------
Raw materials and work-in-process            $  447,798           $  110,206
Finished goods                                   23,269                    -
Supplies                                         18,372                    -
                                             ----------           ----------
                                             $  489,439           $  110,206
                                             ==========           ==========

NOTE D. INCOME TAXES

     The Company uses the liability method of accounting for income taxes.
Under this method, deferred income taxes are recorded to reflect the tax
consequences on future years of temporary differences between the tax basis of
assets and liabilities and their financial statement amounts at the end of
each reporting period. The Company has reviewed its net deferred tax assets,
together with net operating loss carryforwards, and has provided a valuation
allowance to reduce its potential deferred tax assets to their net realizable
value. In making this determination, the Company has considered the Company's
history of tax losses incurred since inception and the fact that the Company
is still within the development stage.

NOTE E.  GOODWILL

     Costs in excess of the fair value of identifiable net assets of acquired
entities are being amortized over their useful life.  During the second
quarter of fiscal year 2001, the Company reduced the amortization period of
goodwill from 15 years to 10 years resulting in $262,000 of additional
amortization expense recorded in the current quarter.

NOTE F.  STOCK WARRANTS AND OPTIONS

     During the second quarter of fiscal year 2001, 500,000 stock options were
issued at an 11.38 percent discount to market to an employee of the Company
and 1,000,000 employee stock options, originally scheduled to expire on
December 20, 2000, were extended to September 18, 2001.  As a result of the
issuance and extension of the stock options, the Company recorded additional
compensation expense of $1,918,500. The additional expense has no net effect
to the cash flows or total stockholders' equity of the Company.

NOTE G.  CONTINGENCIES

     At December 31, 2000, the Company was not involved in any pending or
threatened legal disputes that the Company believes would have a material
adverse impact on the Company's financial statements.

NOTE H.  CANCELLATION OF AGREEMENTS WITH CTII

      Pursuant to certain agreements entered into in fiscal 2000 to market and
deploy our Breast Cancer System 2100 throughout Central and South America, the
Company accepted a purchase order on June 6, 2000 for the sale of 10 Breast
Cancer Systems for $5 million to Computerized Thermal Imaging International,
Inc. ("CTII"), an entity in which the Company received a 15-percent interest
pursuant to the agreements.  The Company received a down payment of $1.75
million (which was recorded as deferred revenue as of June 30, 2000), with the
remaining $3.25 million to be received upon delivery of the systems.  The
invoice obligated the Company to deliver the 10 systems to CTII on, or about,
mid-October, 2000.  Additionally, the Company expected to issue 500,000
options upon the delivery and placement of such systems into commercial use.

      In late September 2000, the Company advised CTII of its desire to
renegotiate the foregoing agreements given the substantial change in market
conditions, the increased value of the Company's common stock and unresolved
issues concerning the deployment of the Company's systems in Mexico.  On
October 11, 2000, following attempts to reach more favorable terms, the
Company concluded it was in the best interests of the Company and its
shareholders to mutually terminate the agreements and the purchase order for
the 10 units.  Accordingly, the agreements and purchase order were terminated
and the Company refunded the $1.75 million down payment received from CTII on
the initial order of the 10 units.  In connection with the termination of the
agreements, the Company's obligation to issue options to CTII was eliminated,
the Company's 15% ownership in CTII reverted back to the remaining principals
of CTII, and each party to the agreements will bear the respective costs of
any performance under the agreements.

NOTE I. RECLASSIFICATIONS

     Certain 1999 amounts have been reclassified to conform to the 2000
presentations.


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

     This document contains forward-looking statements about our business and
future. The United States Private Securities Litigation Reform Act of 1995
provides a "safe harbor" for certain forward-looking statements.  Our
forward-looking statements are expressed in good faith and we believe that
there is a reasonable basis for us to make them.  However, readers are
cautioned not to place undue reliance on such statements. Forward-looking
statements include, but are not limited to, statements about our: 1) plans; 2)
objectives; 3) goals; 4) strategies; 5) expectations for the future; 6) future
performance and events; 7) underlying assumptions for all of the above; and 8)
other statements that are not statements of historical fact.

     We make these forward-looking statements based on our analysis of
internal and external historical trends and future expectations. However, such
statements involve risks and uncertainties that could cause our actual results
to materially differ from our forward-looking statements and there can be no
assurance that we will achieve the results set forth in these forward-looking
statements.  In addition to other factors, the following are important factors
that could cause our actual results to materially differ from our
forward-looking statements: 1) the results of our pre-clinical and clinical
testing; 2) the time and costs involved in obtaining regulatory approvals for
our systems and products; 3) our ability to respond to changes in the medical
technology marketplace including our ability to develop or acquire new
technologies; 4) competitive factors; 5) the availability of financing on
terms and conditions acceptable to us; 6) the availability of personnel with
requisite skills; and 7) the terms of any new collaborative, licensing and
other arrangements that we may establish.

     We have no obligation, or intent, to update or revise these
forward-looking statements to reflect future events, new information, or
otherwise.

     The following discussion and analysis of our consolidated financial
condition and results of operations should be read in conjunction with our
Audited Consolidated Financial Statements and Notes thereto contained in our
Form 10-KSB for the fiscal year ended June 30, 2000.

     Trends/Uncertainties Affecting Continuing Operations
     ----------------------------------------------------

     We are a development stage enterprise and have generated no significant
revenues since inception in 1987.  Our ability to achieve profitability will
depend, in large part, on our ability to successfully develop clinical
applications for our products, obtain regulatory approvals, and develop the
capacity to manufacture and extensively market our products.

     We are presently making the transition from a research and development
stage company to a commercial operating company.  This transition anticipates
final approval of our Breast Cancer System 2100 currently undergoing FDA
evaluation.  We can make no assurances that we will ultimately obtain FDA
approval of our Breast Cancer System 2100 or, that if approved, we will be
able to successfully make the transition to a commercial operating company and
sell our products on a broad basis.  While attempting to make this transition,
we will be subject to all risks inherent in a growing venture, including, but
not limited to, the need to develop and manufacture reliable and effective
products, develop marketing expertise and expand our sales force.  There can
be no assurance that we will achieve profitable operations.

     General
     -------

     Computerized Thermal Imaging, Inc. ("we", "us", "our", and "the Company")
is in business to enhance the quality of human life through cost-effective,
superior diagnostics.  Our research indicates that data generated by our
infrared imaging system can help physicians detect many diseases, disorders,
and injuries within the body's physiological, neurological, and vascular
systems that may go undetected using conventional imaging modalities.
Realizing that our non-invasive, painless imaging system can be applied to the
public good, we have placed our primary focus on an area of great need: breast
cancer detection. This decision resulted in the development of our Breast
Cancer System 2100 ("Breast Cancer System"). We are presently seeking FDA
premarket approval ("PMA") of this system as an adjunct to mammography.  The
purpose of our PMA Application and clinical trial is to establish the efficacy
of our Breast Cancer System to consistently distinguish between malignant and
benign tissue and, thereby, significantly reduce the number of unnecessary
breast biopsies performed each year.  We have submitted, and received
acceptance on, four of the five modules to be submitted to the FDA as part of
our PMA Application.  In late 2000, we completed the data collection phase of
our clinical trial and expect to submit the fifth, and final, module following
compilation and analysis of the clinical results prior to June 30, 2001.

     In addition to screening for breast cancer, we believe our thermal
imaging technology also shows promise in the treatment of pain, the
identification of musclo-skeletal abnormalities, and the non-destructive
testing of structural components.  In connection therewith, we design,
manufacture and sell our Photonic Stimulator designed to improve vascularity
and increase blood flow circulation in the treatment of pain.  Specifically,
we have recently initiated practical studies to demonstrate the Photonic
Stimulator's usefulness in the treatment of diabetic neuropathy.  We also
develop, manufacture, and sell unique industrial applications of our
technology to address the non-destructive inspection of aging aircraft,
electronics, composites, metals and other advanced materials, as well as
breakthroughs in the inspection of turbine blades of large power-generation
equipment.  To date, our line of products consists of our Breast Cancer System
(currently undergoing FDA review), our Photonic Stimulator, our Thermal Image
Processor, and our Turbine Blade Inspection System.

     We are presently transitioning from development stage to
commercialization.  In March 2000, we raised over $44 million to support this
transition and complete our PMA Application.  We have had limited revenues
from operations and essentially no sales of any magnitude related to our
Breast Cancer System.  To date, revenues have been generated primarily from
sales of our Photonic Stimulator and Thermal Image Processor and services
provided in connection with our Turbine Blade Inspection System.  In January
of our fiscal year 2001, we initiated a marketing campaign designed to
establish the distribution channels for our products.  In connection
therewith, we recently executed agreements with distribution agents to market
our products.  Orders resulting from our marketing campaign exceeded $850,000
during the quarter ended March 31, 2001.  These orders will be recognized as
revenues in future periods in accordance with, and to the extent permitted by,
generally accepted accounting principles and regulations promulgated by the
Securities and Exchange Commission.

     We are publicly traded on the American Stock Exchange under the "CIO"
ticker symbol.  As of May 11, 2001, we have 80,548,763 shares of common stock
outstanding held by approximately 29,000 known shareholders. Known
shareholders are comprised primarily of individual investors.  In addition to
the issued and outstanding common stock, we have approximately 18.7 million
shares underlying warrants and options that remain unexercised, including
warrants and options not fully vested as of the date hereof.  Accordingly, on
a fully diluted basis, we have approximately 99 million common shares
outstanding, 24.1% of which is beneficially owned by insiders and affiliates.
In addition to the foregoing, we own 98.1 percent of Computerized Thermal
Imaging Company (previously known as Thermal Medical Imaging, Inc.) and 100
percent of Bales Scientific, Inc.  We have no other interest in any other
entity.

     Capital is required, in part, to satisfy general corporate expenses,
salaries, software license and maintenance contract payments, manufacturing
costs, professional fees to comply with securities reporting requirements,
costs of clinical trials and technical support, FDA consulting expenses,
acquisition of technology, costs of litigation, and expenses associated with
the private placement and registration of our securities.  Our capital
resources are principally derived from the sale and private placement of our
common stock and warrants and the exercise of our common stock warrants and
options.

RESULTS OF OPERATIONS
---------------------

THREE MONTHS ENDED DECEMBER 31, 2000 COMPARED TO THREE MONTHS ENDED DECEMBER
31, 1999.
-----------------------------------------------------------------------------

     Revenues
     --------

     Revenues for the quarter ended December 31, 2000 totaled $116,042. These
revenues resulted entirely from product sales by Bales Scientific, our
subsidiary, which we acquired in April 2000.  Accordingly, we had no revenues
for the comparative period ended December 31, 1999.

     Interest income in the quarter ended December 31, 2000 increased $539,391
compared with the same quarter of 1999, to $547,366.  This increase is
primarily the result of investing the proceeds from the private placement of
our common stock during the quarter ended March 31, 2000.

     Costs and Expenses
     ------------------

     General and Administrative Expenses.  General and administrative expenses
for the quarter ended December 31, 2000 increased $2,987,698 or 331% over the
same quarter in 1999, to $3,890,474.  This increase is primarily a result of
1) additional compensation expense of $2,339,922 ($1,687,250 resulting from
the extension of stock options beyond their scheduled date of expiration,
$231,250 arising from the issuance of employee stock options at a discount to
market, and $421,422 resulting from a material increase in the number of
employees); 2) additional legal expenses of $236,526 incurred in connection
with our Nasdaq listing application, regulatory filings, and various legal
matters; and 3) a $141,350 increase in travel costs.

     Research and Development Expenses.  Research and development expenses for
the quarter ended December 31, 2000 increased $1,127,238, or 90%, over the
same quarter in 1999, to $2,378,855.  The increase is primarily a result of 1)
a $166,255 increase in clinic trial expenses; 2) a $515,072 increase in
salaries as a result of a material increase in the number of employees; 3) a
$149,477 increase in software license fees, and 4) a $183,398 increase in
equipment and supplies.

     Depreciation and Amortization.  Depreciation and amortization expenses
for the quarter ended December 31, 2000 increased $686,487, or 3,018% over the
results of the same quarter in 1999, to $709,237.  The increase in
depreciation and amortization expense primarily resulted from amortization of
goodwill associated with our acquisition of Bales Scientific and amortization
of our software licenses.

     During the quarter ended December 31, 2000 and all prior periods, we
expensed all costs associated with processes and systems development,
including software code writings, computer systems hardware and software
purchases, material expenses in the development of our examination table and
all payroll expenses throughout the periods presented.

     Net Loss
     --------

     As a result of the foregoing, we incurred a loss of $6,399,643 for the
quarter ended December 31, 2000 compared to a loss of $2,169,168 for the
quarter ended December 31, 1999.  After accounting for dividends deemed paid
to specified warrant holders on the extension of their warrants, we incurred a
loss of $11,435,609 for the quarter ended December 31, 2000 compared to a loss
of $2,169,168 for the quarter ended December 31, 1999.

     For the quarter ended December 31, 2000, the loss attributable to common
shareholders was $11,435,609, or $(0.14) per share, compared to a loss
attributable to common shareholders of $2,169,168, or $(0.03) per share, for
the quarter ended December 31, 1999.

SIX MONTHS ENDED DECEMBER 31, 2000 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1999.
-----------------------------------------------------------------------------

     Revenues
     --------

     Revenues for the six months ended December 31, 2000 totaled $195,707.
These revenues resulted entirely from product sales by Bales Scientific, our
subsidiary, which we acquired in April 2000.  Accordingly, we had no revenues
for the comparative period ended December 31, 1999.

     Interest income in the six months ended December 31, 2000 increased
$1,154,740 compared with the same period of 1999, to $1,164,208.  This
increase is primarily the result of investing the proceeds from the private
placement of our common stock during the quarter ended March 31, 2000.

     Costs and Expenses
     ------------------

     General and Administrative Expenses.  General and administrative expenses
for the six months ended December 31, 2000 increased $4,606,175, or 372% over
the same period in 1999 to $5,845,011. This increase is primarily a result of
1) additional compensation expense of $2,563,189 ($1,687,250 resulting from
the extension of stock options beyond their scheduled date of expiration,
$231,250 arising from the issuance of employee stock options at a discount to
market, and $644,689 resulting from a material increase in the number of
employees); 2) additional legal expenses of $670,208 incurred in connection
with our Nasdaq listing application, regulatory filings, and various legal
matters; 3) a $176,231 increase in professional services; 4) a $512,239
increase in stockholder service/public relations costs as a result of our
involvement with the RSNA Conference in Chicago and USA Track & Field Team
during the Sydney 2000 Olympics; and 5) a $222,783 increase in travel costs.

     Research and Development Expenses.  Research and development expenses for
the six months ended December 31, 2000 increased $1,997,140, or 100% over the
same period in 1999, to $4,002,648.  The increase is primarily a result of 1)
a $53,058 increase in clinic trial expenses; 2) a $787,954 increase in
salaries as a result of a material increase in the number of employees; 3) a
$133,923 increase in payments to Battelle, TRW and Therma Corp in connection
with our clinical trials, software development and FDA Pre-Market Approval
application; 4) a $313,313 increase in software license fees, and 5) a
$253,576 increase in equipment and supplies.

     Depreciation and Amortization.  Depreciation and amortization expenses
for the six months ended December 31, 2000 increased $1,107,969, or 2,837%
over the results of the same period in 1999, to $1,147,024.  The increase in
depreciation and amortization expense primarily resulted from amortization of
goodwill associated with our acquisition of Bales Scientific and amortization
of our software licenses.

     During the six months ended December 31, 2000 and all prior periods, we
expensed all costs associated with processes and systems development,
including software code writings, computer systems hardware and software
purchases, material expenses in the development of our examination table and
all payroll expenses throughout the periods presented.

     Net Loss
     --------

     As a result of the foregoing, we incurred a loss of $9,759,720 for the
six months ended December 31, 2000 compared to a loss of $3,273,931 for the
six months ended December 31, 1999.  After accounting for dividends deemed
paid to specified warrant holders on the extension of their warrants, we
incurred a loss of $14,795,686 for the quarter ended December 31, 2000
compared to a loss of $3,273,931 for the quarter ended December 31, 1999.

     For the six months ended December 31, 2000, the loss attributable to
common shareholders was $14,795,686, or $(0.18) per share, compared to a loss
attributable to common shareholders of $3,273,931, or $(0.05) per share, for
the six months ended December 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     Sources of Liquidity
     --------------------

     Our net working capital at December 31, 2000 was $26,316,112 compared to
$670,757 at December 31, 1999.  The ratio of current assets to current
liabilities was 24.8 to 1.0 at December 31, 2000 compared to 2.4 to 1.0 at
December 31, 1999.

     Our cash requirements consist of, but are not limited to, general
corporate expenses including office salaries and expenses, lease payments on
our office space, acquisition of technology, software license and maintenance
contracts payments, legal and accounting fees to comply with securities
registration and reporting requirements, costs of clinical trials and
technical support, FDA consulting expenses, and expenses associated with the
private placement of our equity securities.

     Net cash used in operating activities in the six months ended December
31, 2000 was $8,558,857 compared to $2,927,231 in the six months ended
December 31, 1999.  Net cash provided by investing activities in the 2000
period was $1,486,897 compared to net cash used in investing activities of
$115,207 in the prior year's comparable period.  Net cash provided by
financing activities was $288,177 in the six months ended December 31, 2000
compared to $4,052,126 generated in the prior year's comparable period.  As a
result of the foregoing, cash and cash equivalents decreased by $6,783,783 in
the six months ended December 31, 2000 compared to a $1,009,688 increase in
the six months ended December 31, 1999.

     Capital resources needed to meet our planned expenditures are derived
primarily from equity funding on the private placement of our common stock and
warrants and the exercise of our outstanding warrants and options.

     Agreement with Beach Boulevard, LLC.  On March 4, 1999, we entered into a
Securities Purchase Agreement (as amended in May 1999, the "Investment
Agreement") with Beach Boulevard L.L.C. ("Beach"). Subject to certain
conditions set forth in the Investment Agreement, we have the right to require
Beach to purchase up to $7 million of our common stock in a series of $500,000
tranches.  As of the date hereof, we have required Beach to purchase
approximately $3 million of our common stock in a series of six tranches
during our fiscal years ended June 30, 2000 and 1999.  Since Beach's
participation in the sixth tranche, we have made no requirements of funding by
Beach, although Beach's obligation to provide funding, subject to the terms
and conditions set forth in the Investment Agreement, continues.

     Because Beach is not required to purchase additional shares unless
certain conditions are satisfied as set forth in the Investment Agreement,
there is no assurance that Beach will ultimately provide us with the remaining
$4 million commitment.  Furthermore, there is no assurance that we will
require Beach to purchase additional shares even if the conditions set forth
in the Investment Agreement are satisfied.

     Sources of Potential Long-term Liquidity. We expect that both use
agreements and equipment financing will be sources of long-term liquidity for
us, although it is premature to anticipate the results of either.  Although we
have investigated both options and have entered into preliminary discussions
with equipment financing companies, we are awaiting Pre-Market Approval of our
Breast Cancer System 2100 before entering into any additional planning or
definitive agreements regarding either.  Much of what we anticipate as being
sources of long-term liquidity is contingent upon (1) whether or not we
achieve Pre-Market Approval of our Breast Cancer System 2100, (2) the
development and execution of a definitive and successful marketing strategy,
(3) whether we are able to develop our Medical Systems for other applications
in the United States, and (4) the results of our marketing efforts in domestic
and foreign markets.

     Capital Requirements/Plan of Operation
     --------------------------------------

     We are a development stage enterprise and, as such, are largely dependent
on the sale of our common stock and warrants, and the exercise of our warrants
and options, to provide liquidity.  Since inception, we have continually
sought funding to meet our day-to-day operations and business plan and have
often sought substantial loans from affiliates and shareholders to meet our
financial obligations.  Such loans were often repaid in stock. Although we
believe that we have sufficient resources to meet our current plan of
operations for the next 12 months, it is possible that, due to unforeseen
events, we will have insufficient resources and funding required to execute
our plan of operations.  Until such time as we begin generating significant
revenues from operations, which is not likely until and unless Pre-Market
Approval of our Breast Cancer System 2100 is obtained from the FDA and our
products are marketed and sold on a large-scale basis, we will be faced with
the difficulties and expenses associated with our financing needs and
obligations.

     Our capital requirements may vary from our estimates and depend on
numerous factors including, but not limited to: 1) progress in our research
and development programs; 2) results of pre-clinical and clinical testing; 3)
costs of technology; 4) time and costs involved in obtaining regulatory
approvals; 5) hiring of additional personnel to carry out our plan of
operations; 6) costs of filing, defending and enforcing any patent claims and
other intellectual property rights; 7) economic impact of competing
technological and market developments; 8) the costs of transitioning to a
commercial enterprise; 8) the costs to manufacture our products; and 9) the
terms of any new collaborative, licensing and other arrangements that we may
establish.

     We estimate that we will require approximately $17 million in cash to
meet our business plan and obligations for the 12-month period ending December
31, 2001 including approximately $6.8 million in engineering and manufacturing
design costs and research and development to continue and/or initiate clinical
trials, test our systems in connection with industrial and other medical
applications and complete our FDA Pre-Market Approval application with the
FDA, $2.0 million for day-to-day operating expenses including lease payments
on our facilities, $4.6 million to cover salaries, $1.1 million in capital
equipment, $1.8 million for public relations, advertising, and
commercialization of our products, and $.7 million for legal and accounting
for SEC compliance with reporting obligations, on-going litigation, and
general legal representation.  As of March 31, 2001, we have 53 employees and
plan to hire additional employees as we move towards completion of the FDA
approval process and develop our marketing and distribution plan.

     Certain aspects of our Plan of Operation for the next twelve months
include: 1) completion of FDA Pre-Market Approval application on our Breast
Cancer System 2100; 2) development and initiation of our plan for
commercialization of our products including development of relationships with
distributors; and 3) development and commercialization of our technologies
into industrial application.

     We have a financing arrangement (discussed in "Sources of Liquidity"
above) whereby Beach is currently required to provide us with up to $4,000,000
in financing from time to time under certain conditions and then only if we
desire to obtain financing from Beach. This financing arrangement is in the
form of a Securities Purchase Agreement whereby Beach purchases shares of our
common stock at a 15% discount to the market price of our common stock at the
time of the funding.  We can provide no assurances that we will require
additional funding under the Securities Purchase Agreement or, if we desire
additional funding, we will meet the terms of the Securities Purchase
Agreement necessary to require additional funding.  Furthermore, any issuance
of shares to Beach could have a severe dilutive effect on the existing holders
of our common stock.

     There are currently outstanding options and warrants covering
approximately 16.6 million shares that can be exercised or converted with
exercise prices ranging from $.60 to $9.0625 (representing gross proceeds to
us, upon conversion, of approximately $45.8 million).  Of the estimated $45.8
million in gross proceeds available to us upon conversion of vested options
and warrants, approximately $6.4 million is attributable to options and
warrants expiring in 2001, approximately $5.3 million is attributable to
options and warrants expiring in 2002, approximately $3.0 million is
attributable to options and warrants expiring in 2003, approximately $30.5
million is attributable to options and warrants expiring in 2005, and
approximately $0.6 million is attributable to warrants and options which
expire after 2005.  Additional proceeds of approximately $9 million may become
available to us at a future date upon the vesting and exercise of yet unvested
options.  As of March 31, 2001, we had outstanding: a) 7,933,751 immediately
exercisable options to purchase our common stock at exercise prices ranging
from $.60 to $9.0625 per share; b) 2,074,285 options to purchase our common
stock at exercise prices ranging from $.76 to $7.71875 that vest at future
dates pursuant to various agreements; and c) immediately exercisable warrants
to purchase 8,715,431 shares of our common stock at prices ranging from $.72
to $7.25 per share.

     The likelihood of warrants and options being exercised will be high if
our common stock trades at a price above the respective strike prices of these
securities.  However, we can provide no assurances that our outstanding
options and warrants will be exercised even if the price of our common stock
trades above the respective strike prices of these securities.

     Based on the foregoing, we believe we will have sufficient capital to
fund our business plan over the next year from our existing cash and cash
equivalents and from the proceeds from the redemption of our marketable
securities.  If, due to unforeseen events, funding falls short and we need to
obtain additional funds, we would seek them from private investors through
loans or on the sale of our restricted common stock.  However, we can provide
no assurances that either of these avenues of financial support would be
available to us or, if available, on terms acceptable to us.

     Cancellation of Agreements with CTII.
     -------------------------------------

     In connection with Latin America markets, in September 1999, we engaged
William L. Mazilly and Amirali A. Rajwany, independent consultants, to
establish a consortium in Latin America to market and deploy our Breast Cancer
System 2100 throughout Central and South America.  For services rendered in
connection therewith, each was paid 100,000 shares of our restricted common
stock valued at $1.20 per share.  As a result of their efforts, we entered
into two Letter Agreements (collectively, the "Agreements") on October 28,
1999 with Computerized Thermal Imaging International, Inc. ("CTII"), an entity
in which we received a 15-percent interest, whereby CTII received, among other
things, 1) the exclusive right to represent the expansion of our business into
Central and South America, 2) the obligation to prepare and implement a
marketing strategy for deployment of our Breast Cancer System 2100 in those
areas of the world, 3) the right of first refusal on our Health Card
manufacturing worldwide, and 4) the obligation to sell a minimum of 100 of our
Breast Cancer System over a two-year period in the target territories.  The
Agreements further provided that we would grant to CTII, as compensation,
options to purchase up to 5 million shares of our common stock in 50,000 share
increments contingent on their placement of each Breast Cancer System 2100
into commercial use in the specified territories.  Each 50,000 block of
options granted the holder thereof the right to purchase, for a period of two
years, 50,000 shares of our common stock at a strike price equal to $1.6745; a
15 percent discount to the bid price of our common stock on October 28,1999.

     Pursuant to the Agreements, on June 6, 2000, we accepted a purchase order
for the sale of 10 Breast Cancer Systems to CTII for $5 million.  In
connection therewith, we received a down payment of $1.75 million with the
remaining $3.25 million to be received upon delivery of the systems.  The
invoice obligated us to deliver the 10 systems to CTII on, or about,
mid-October, 2000.  In connection therewith, we expected to issue 500,000
options upon the delivery and placement of such systems into commercial use.

     In late September 2000, we advised CTII of our desire to renegotiate the
foregoing Agreements given the substantial change in market conditions, the
increased value of our common stock and unresolved issues concerning their
deployment of our systems in Mexico.  On October 11, 2000, following attempts
to reach more favorable terms, we concluded it was in the best interests of
the Company and our shareholders to mutually terminate the Agreements and the
purchase order for the 10 units.  We accordingly did so and have refunded the
$1.75 million down payment received from CTII on the initial order of the 10
units.  In connection with the termination of the Agreements, our obligation
to issue options to CTII was eliminated, our 15% ownership in CTII reverted
back to the remaining principals of CTII and each party to the Agreements will
bear the respective costs of any performance under the Agreements.  In
consideration of their efforts to expand our business into Latin America, Mr.
Mazilly and Mr. Rajwany will retain the common stock previously granted to
them.

                           SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                         COMPUTERIZED THERMAL IMAGING, INC.
                                         (Registrant)

                                         /s/Richard V. Secord
Dated May 17, 2001                       -----------------------------------
                                         Richard V. Secord
                                         Chairman & Chief Executive Officer

                                         /s/Kevin L. Packard
Dated May 17, 2001                       -----------------------------------
                                         Kevin L. Packard
                                         Chief Financial Officer, Secretary &
                                         Treasurer