---

# SECURITIES AND EXCHANGE COMMISSION

# Washington, DC 20549

---

# Form 10-Q

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

For the quarterly period ended September 30, 2001

OR

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

For the transition period from ___ to ___

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Commission File Number 0-26138

# DENDRITE INTERNATIONAL, INC.

(Exact name of registrant as specified in its Charter)

# New Jersey       
                   
          
               22-2786386

---

(State or other jurisdiction of incorporation or organization)   
    (I.R.S. Employer Identification No.)

1200 Mount Kemble Avenue
Morristown, NJ 07960
973-425-1200

---

(Address, including zip code, and telephone
number (including area code) of registrant's
principal executive office)

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

Indicate the number of
shares outstanding of each of the issuers classes of common stock, as of
the last practicable date: at November 6, 2001 there were 39,482,150 shares of
common stock outstanding.

---

# DENDRITE
INTERNATIONAL, INC.

# INDEX

`PAGE NO.
                                                                                           --------

PART I.       FINANCIAL INFORMATION                                                            3

ITEM 1.       Consolidated Financial Statements

                 Consolidated Statements of Operations
                     Three months and nine months ended September 30, 2001                      3
                     and September 30, 2000

                 Consolidated Balance Sheets
                     September 30, 2001 and December 31, 2000                                   4

                 Consolidated Statements of Cash Flows
                     Nine months ended September 30, 2001 and  September 30, 2000               5

                 Notes to Unaudited Consolidated Financial Statements                           6

ITEM 2.       Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                                         9

PART II.      OTHER INFORMATION

ITEM 6.       Exhibits and Reports on Form 8-K                                                 18

Signatures                                                                                     19`

PART I. FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements

`DENDRITE INTERNATIONAL, INC.
                                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                                 (IN THOUSANDS EXCEPT PER SHARE DATA)
                                                              (UNAUDITED)


                                                 THREE MONTHS ENDED SEPTEMBER 30,        NINE MONTHS ENDED SEPTEMBER 30,
                                              -------------------------------------   ---------------------------------------
                                                   2001                2000                2001                      2000
                                              ------------------  -----------------   ------------------        -------------
Revenues:
   License fees...........................       $  8,635            $  8,599            $  15,911              $  20,258
   Services...............................         48,478              47,434              145,044                134,569
                                                 --------            --------            ---------              ---------
                                                   57,113              56,033              160,955                154,827
                                                 --------            --------            ---------              ---------

Cost of revenues:
   Cost of license fees...................          1,531                 835                3,692                  2,710
   Purchased software impairment..........             --                  --                2,614                     --
   Cost of services.......................         26,665              21,701               83,873                 62,236
                                                 --------            --------            ---------              ---------
                                                   28,196              22,536               90,179                 64,946
                                                 --------            --------            ---------              ---------

Gross margin..............................         28,917              33,497               70,776                 89,881
                                                 --------            --------            ---------              ---------

Operating expenses:
   Selling, general and administrative....         22,875              18,752               71,970                 50,336
   Research and development...............          2,689               2,703                8,524                  8,043
   Restructuring charge...................             --                  --                6,134                     --
   Asset impairment.......................             --                  --                9,623                     --
                                                 --------            --------            ---------              ---------
                                                   25,564              21,455               96,251                 58,379
                                                 --------            --------            ---------              ---------

Operating income (loss)...................          3,353              12,042              (25,475)                31,502
   Interest income........................            496                 917                2,083                  2,437
   Other expense..........................             (9)                (17)                 (82)                   (45)
                                                 --------            --------            ---------              ---------

Income (loss) before income tax expense             3,840              12,942              (23,474)                33,894
(benefit).................................
   Income tax expense (benefit)...........          1,383               4,660               (7,841)                12,202
                                                 --------            --------            ----------             ---------

Net income (loss).........................       $  2,457            $  8,282            $ (15,633)             $  21,692
                                                 ========            ========            ==========             =========

Net income (loss) per share:
   Basic..................................       $    0.06           $    0.21           $   (0.39)             $    0.55
                                                 =========           =========           ==========             =========
   Diluted................................       $    0.06           $    0.20           $   (0.39)             $    0.52
                                                 =========           =========           ==========             =========

Shares used in computing net income (loss)
per share:

   Basic..................................         39,568              39,509               39,783                 39,155
                                                 ========            ========            =========              =========
   Diluted................................         39,985              41,638               39,783                 41,333
                                                 ========            ========            =========              =========`

The accompanying notes are an integral part of these statements.

`DENDRITE INTERNATIONAL, INC.
                                   CONSOLIDATED BALANCE SHEETS
                                (IN THOUSANDS EXCEPT SHARE DATA)


                                                             SEPTEMBER 30,     DECEMBER 31,
                                                                 2001              2000
                                                           ----------------  ---------------
                                                             (Unaudited)
Assets
Current Assets:
   Cash and cash equivalents............................      $   58,308        $  73,230
   Short-term investments...............................           6,383            4,143
   Accounts receivable, net.............................          33,262           48,182
   Prepaid expenses and other...........................           5,949            6,987
   Prepaid taxes........................................           8,456            1,564
   Deferred taxes.......................................           4,675            1,160
                                                               ---------         --------
     Total current assets...............................         117,033          135,266
                                                               ---------         --------

Property and equipment, net.............................          23,148           15,924
Facility held for sale..................................          10,832               --
Other assets............................................             100            3,872
Goodwill, net...........................................           5,098           12,305
Purchased capitalized software, net.....................             526            4,144
Capitalized software development costs, net.............           5,280            4,392
Deferred taxes..........................................           2,090               --
                                                               ---------         --------
                                                              $  164,107        $ 175,903
                                                              ==========        =========
Liabilities and Stockholders' Equity
Current Liabilities:
   Accounts payable.....................................      $    3,451        $   5,120
   Accrued compensation and benefits....................           7,584            4,271
   Other accrued expenses...............................          17,726            8,085
   Accrued restructuring charge.........................           4,414               --
   Deferred revenues....................................           5,869            4,052
                                                               ---------         --------
     Total current liabilities..........................          39,044           21,528
                                                               ---------         --------

Deferred rent...........................................              --               25
Deferred taxes..........................................              --            1,052

Stockholders' Equity:
   Preferred Stock, no par value, 10,000,000 shares
    authorized, none issued.............................              --               --
   Common Stock, no par value, 150,000,000 shares
    authorized; 41,323,855 and 40,729,212 shares issued as
    of September 30, 2001 and December 31, 2000,
    respectively; and 39,378,655 and 40,127,712 shares
    outstanding as of September 30, 2001 and
    December 31, 2000, respectively.....................          88,408           83,370
Retained earnings.......................................          58,314           73,949
Deferred compensation...................................            (176)            (405)
Accumulated other comprehensive loss....................          (2,076)          (1,689)
Less treasury stock, at cost............................         (19,407)          (1,927)
                                                               ---------         --------
     Total stockholders' equity.........................         125,063          153,298
                                                               ---------         --------
                                                              $  164,107        $ 175,903
                                                              ==========        =========`

The accompanying notes are an integral part of these statements.

`DENDRITE INTERNATIONAL, INC.
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (IN THOUSANDS)
                                                    (UNAUDITED)


                                                                          NINE MONTHS ENDED SEPTEMBER 30,
                                                                            2001                   2000
                                                                        -------------          ----------
Operating activities:
   Net (loss) income...........................................           $(15,633)              $ 21,692
   Adjustments to reconcile net (loss) income to net cash
     provided by operating activities:
   Depreciation and amortization...............................             11,332                  8,076
   Asset impairment............................................             12,237                     --
   Restructuring charge........................................              6,134                     --
   Amortization of deferred compensation ......................                114                    282
   Deferred income tax benefit.................................             (6,657)                    --
   Tax benefit from exercise of employee stock options.........              1,823                  3,868
     Changes in assets and liabilities, net of effect from
      acquisition:
     Decrease/(increase) in accounts receivable................             14,825                (12,919)
     Decrease/(increase) in prepaid expenses and other.........              1,178                    (25)
     Increase in prepaid income taxes..........................             (6,970)                  (780)
     Increase in other assets..................................                 --                    (90)
     Increase/(decrease) in accounts payable and other
      accrued expenses.........................................             11,285                   (528)
     Payments relating to restructuring charge.................             (1,720)                    --
     (Decrease)/increase in deferred rent......................                (25)                    26
     Increase/(decrease) in deferred revenues..................              1,808                 (1,107)
                                                                          --------               --------
       Net cash provided by operating activities...............             29,731                 18,495
                                                                          --------               --------
Investing activities:
   Purchases of short-term investments.........................            (20,230)                (7,880)
   Sales of short-term investments.............................             17,990                 19,058
   Acquisition, net of cash acquired...........................                 --                 (2,318)
   Increase in other non-current assets........................                 --                 (3,450)
   Purchases of property and equipment.........................            (14,757)                (6,812)
   Investment in facility held for sale........................            (10,832)                    --
   Additions to capitalized software development costs.........             (2,443)                (1,578)
                                                                          --------               --------
       Net cash used in investing activities...................            (30,272)                (2,980)
                                                                          --------               --------
Financing activities:
   Payments on capital lease obligations.......................                 --                   (285)
   Purchases of treasury stock.................................            (17,480)                    --
   Issuance of common stock....................................              3,329                  7,973
                                                                          --------               --------
       Net cash (used in)/provided by financing activities.....            (14,151)                 7,688
                                                                          ---------              --------
Effect of foreign exchange rate changes on cash................               (230)                  (253)
Net (decrease)/increase in cash and cash equivalents...........            (14,922)                22,950
Cash and cash equivalents, beginning of period.................             73,230                 50,024
                                                                          --------               --------
Cash and cash equivalents, end of period.......................           $ 58,308               $ 72,974
                                                                          ========               ========`

The accompanying
 notes are an integral part of these statements.

# DENDRITE INTERNATIONAL,
INC.

# NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

## 1.  Basis of
Presentation

The consolidated financial statements of Dendrite International, Inc. and its subsidiaries (the "Company") included in this Form
10-Q are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and operating results for the three and nine month periods
ended September 30, 2001 and September 30, 2000.  For further information, refer to the consolidated financial statements and notes
thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000.

Our interim operating results may not be indicative of operating results for the full year.

## 2.  Net Income
(Loss) Per Share

Basic net income (loss) per share was computed by dividing the net income (loss) for each period by the weighted average number
of shares of common stock outstanding for each period.  Diluted net income per share was computed by dividing net income for each
period by the weighted average number of shares of common stock and common stock equivalents outstanding during each period.  For the
three months ended September 30, 2001, common stock equivalents used in computing diluted net income per share was 417,000 shares.
For the nine months ended September 30, 2001, 609,000 common stock equivalents were anti-dilutive and were therefore excluded from
the computation of net loss per share.   For the three and nine months ended September 30, 2000, common stock equivalents used in
computing diluted net income per share were 2,129,000 and 2,178,000 shares, respectively.

## 3.  
Comprehensive Income

Assets and liabilities of the Company's wholly-owned international subsidiaries are translated at their respective period-end
exchange rates and revenues and expenses are translated at the average currency exchange rates for the period.  The resulting
translation adjustments are included as "Accumulated other comprehensive loss" and are reflected as a separate component of
stockholders' equity.  Total after-tax comprehensive income for the three months ended September 30, 2001 was $2,802,000 compared to
after-tax comprehensive income of $8,003,000 for the three months ended September 30, 2000.   Total after-tax comprehensive loss for
the nine months ended September 30, 2001 was $16,020,000 compared to after-tax comprehensive income of $21,196,000 for the nine
months ended September 30, 2000.

## 4.  Restructuring
Charge

On June 14, 2001, the Company announced a restructuring of its business operations to reflect a lower expected revenue growth
model in the near term.  The restructuring plan consists of the resizing of the Company's personnel by a reduction of 155 employees
and 35 contractors across various departments in the United States and Europe as well as 192 additional personnel associated with the
closing of the Company's facility located in Stroudsburg, PA.  The Stroudsburg, PA operations are being relocated to the Company's
facilities in New Jersey, Virginia and a new facility to be leased in Bethlehem, PA.  The exit costs have been included in the
restructuring charge while the moving and other start-up costs are not included in this restructuring charge and will continue to be
expensed as incurred.

During the second quarter of 2001, the Company recorded a charge of $6,134,000 associated with its restructuring.  Of this charge,
$4,414,000 has not been paid as of September 30, 2001 and is, accordingly, classified as accrued restructuring in the accompanying
consolidated balance sheets.  The restructuring charges were determined based upon formal plans approved by the Company's management
using the information available at the time.  Management of the Company believes this provision will be adequate to cover any costs
incurred relating to the restructuring.  The Company anticipates that the majority of the accrued restructuring balance of $4,414,000
as of September 30, 2001 will be paid by December 31, 2001.  The activity on the accrued restructuring charge balance as of September
30, 2001 is summarized in the table below:

`Accrued Restructuring
                                                          Restructuring Charge  Cash Payment in 2001  as of September 30, 2001
                                                          ------------------    -------------------    -------------------
Termination payments to employees                                $4,213,000             $1,388,000             $2,825,000
Facility exit costs                                                 909,000                319,000                590,000
Contract termination and other restructuring costs                1,012,000                 13,000                999,000
                                                          ------------------    -------------------    -------------------
                                                                 $6,134,000             $1,720,000             $4,414,000
                                                          ==================    ===================    ===================`

## 5.  Asset Impairment

During the second quarter of 2001, the Company reviewed the carrying values of its long-lived assets, including its minority
investments in start-up ventures, identifiable intangibles and goodwill.  During the second quarter of 2001, the Company wrote off
$3,450,000 of cost method investments it had in two start-up ventures due to a permanent impairment in the fair value of these
investments.  These entities have experienced difficulty in raising the additional capital necessary to fund their start-up
activities and the situation at both became particularly severe in the second quarter of 2001.

In connection with the Company's announcement on June 14, 2001, relative to its partnership with Oracle Corporation to market an
integrated customer relationship management ("CRM") solution to meet the specialized needs of the worldwide pharmaceutical industry,
the Company's vision and product platform has changed.  The operations acquired through the Company's acquisitions of Associated
Business Computing, N.V. ("ABC") and Analytika, Inc. ("Analytika") have been modified to keep pace with the developing needs of the
ethical pharmaceutical market.  The projected undiscounted future cash flows of these operations are substantially less than the
carrying value of the related long-lived assets, including identifiable intangibles and goodwill.  The fair value of the long-lived
assets was determined based upon the discounted cash flows expected to be derived from these operations.  Management of the Company
believes that these operations will generate negative cash flows over the next several years due to the administrative costs required
to support the projected revenue stream.  Accordingly, the Company recorded an impairment charge of $8,787,000, consisting of
$2,614,000 of purchased capitalized software and $6,173,000 of goodwill.  Relative to the operations acquired as a result of the
Marketing Management International, Inc. ("MMI") acquisition, it is planned that after December 31, 2001, the Company will offer the
mid-tier pharmaceutical industry a product which is more compatible with the Company's vision of integrated CRM solutions.
Accordingly, the Company has reduced the remaining useful life of the purchased capitalized software related to the MMI acquisition
and expects the balance to be fully amortized by December 31, 2001.  As the operations of the business acquired in the MMI
acquisition continue to be successful, no impairment charge or reduction in life was necessary for the goodwill associated with MMI.

## 6.  Customer
and Geographic Segment Data

In the three months ended September 30, 2001, the Company derived approximately 57% of its revenues from its two largest
customers.  In the three months ended September 30, 2000, the Company derived approximately 51% of its revenues from its two largest
customers.  In the nine months ended September 30, 2001, the Company derived approximately 52% of its revenues from its two largest
customers.  In the nine months ended September 30, 2000, the Company derived approximately 41% of its revenues from its two largest
customers.

The Company is organized by geographic locations and has one reportable segment. All transfers between geographic areas have been
eliminated from consolidated revenues. Operating income consists of total revenues recorded in the location less operating expenses
and does not include interest income, other expense or income taxes. This data is presented in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 131, "Disclosure About Segments of an Enterprise and Related Information".

`For the Three Months Ended September 30, For the Six Months Ended September 30,
                                            ---------------------------------------- --------------------------------------
                                                 2001                2000                 2001              2000
                                            ---------------   ---------------------- ---------------    --------------
Revenues:
United States...........                       $48,060,000           $40,380,000       $129,690,000      $116,362,000
All Other...............                         9,053,000            15,653,000         31,265,000        38,465,000
                                            ---------------   -------------------    ---------------    --------------
                                               $57,113,000           $56,033,000       $160,955,000      $154,827,000
                                            ===============   ===================    ===============    ==============
Operating (loss) income:
United States...........                       $ 5,948,000           $ 7,851,000       $(20,384,000)      $25,579,000
All Other...............                        (2,595,000)            4,191,000         (5,091,000)        5,923,000
                                            ---------------   -------------------    ---------------    --------------
                                               $ 3,353,000           $12,042,000       $(25,475,000)      $31,502,000
                                            ===============   ===================    ===============    ==============

                                            September 30, 2001     December 31, 2000
                                            ------------------     -----------------
Identifiable Assets:
United States...........                      $142,997,000          $155,843,000
All Other...............                        21,110,000            20,060,000
                                            ---------------   -------------------
                                              $164,107,000          $175,903,000
                                            ===============   ===================`

For segment reporting purposes, license revenues have been allocated to the sales office of the respective country in which the
sale is made, although the actual contract is with the U.S. entity for legal and tax purposes.

## 7.  Recently Issued
Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board approved Statement of Financial Accounting Standard No. 141, "Business
Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 prospectively prohibits the pooling of
interests method of accounting for business combinations initiated after June 30, 2001. SFAS No. 142 requires companies to cease
amortizing goodwill that existed at June 30, 2001. The amortization of existing goodwill will cease on December 31, 2001. Any
goodwill resulting from acquisitions completed after June 30, 2001 will not be amortized. SFAS No. 142 also establishes a new method
of testing goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would
reduce the fair value of a reporting unit below its carrying value. The adoption of SFAS No. 142 will result in the Company's
discontinuation of amortization of its goodwill which is expected to be approximately $5,000,000 as of January 1, 2002; however, the
Company will be required to test its goodwill for impairment under the new standard beginning in the first half of 2002.  The Company
is currently evaluating the impact of the adoptions of these statements.

## 8.  Common
Stock Repurchase Program

On January 31, 2001, the Company announced that its Board of Directors had authorized the Company to repurchase up to
$20,000,000 of its outstanding common stock over a two-year period (the "2001 Stock Repurchase Plan").  Under the 2001 Stock
Repurchase Plan, the Company repurchases shares on the open market or in privately negotiated transactions from time to time.
Repurchases of stock under the 2001 Stock Repurchase Plan are at management's discretion, depending upon price and availability.  The
repurchased shares are held as treasury stock, which may be used to satisfy the Company's current and near term requirements under
its equity incentive and other benefit plans and for other corporate purposes.  During the three months ended September 30, 2001,
after September 11th, the Company repurchased 263,000 shares of Company common stock at a purchase price of $2,985,000
under the 2001 Stock Repurchase Plan. Since the inception of the 2001 Stock Repurchase Plan, the Company has repurchased a total of
1,343,700 shares of Company common stock at a total purchase price of $17,480,000.

Under all stock repurchase plans, cumulatively,  the Company had repurchased a total of 1,945,200 shares of Company common stock
at a purchase price of $19,407,000.

## 9.  Analytika,
Inc. Acquisition

On January 6, 2000, the Company purchased all of the assets and assumed certain liabilities of Analytika, Inc. ("Analytika"), a
provider of advanced analytical products, consulting services and outsourced operations services to the pharmaceutical industry.
Under the terms of the acquisition agreement, the Company paid $2,318,000 in cash, which included transaction costs, and $6,506,000
in the Company's common stock.  The acquisition has been accounted for using the purchase method with the purchase price allocated to
the fair value of the assets acquired and liabilities assumed based on their respective fair market value at the acquisition date.
Of the purchase price, $2,890,000 was allocated to purchased capitalized software development costs.  The excess of the purchase
price over the fair value of the net assets acquired was allocated to goodwill ($5,979,000) based upon an independent appraisal.
During the second quarter of 2001, the remaining book value of the capitalized software development costs and the goodwill relating
to the Analytika acquisition was written down to zero due to impairment of the related assets. See Note 5. Analytika's results of
operations have been included in the Company's consolidated financial statements from the date of acquisition.

## 10.  Facility Held for Sale

In April 2001, the Company paid $10,832,000 to purchase a 145,000 square foot building in New Jersey for the purpose of
establishing a new U.S. operations facility to accommodate the Company's growth.  In connection with its restructuring plan, the
Company has since determined to shift its operations to other existing facilities and has therefore resolved to sell the new
facility. See Note 4.  This building is classified as facility held for sale within the accompanying consolidated balance sheet.

## 11.  Commitments and Contingencies

In the fourth quarter of 2000, the Company entered into a lease agreement for a new facility in Chesapeake, Virginia, with future
minimum rental payments of approximately $15,000,000 over the next 11 years.  The two building facility in Chesapeake is comprised of
approximately 100,000 total square feet.  We expect capital expenditures in connection with tenant improvements, furniture and
fixtures and other capital costs to be incurred through mid 2002. These expenditures are not expected to exceed $10,000,000 and the
related funding is expected to be from operating cash flows and existing cash balances.

During the first half of 2001, the Company entered into a lease for 33,000 square feet of office space in Bridgewater, New Jersey
to serve as the Company's corporate and sales headquarters.  Tenant improvements such as furniture, fixtures and other capital costs
are not expected to exceed $2,000,000.

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

## FORWARD-LOOKING
STATEMENTS

This Form 10-Q contains certain forward-looking statements that are within the meaning of Section 27A of the Securities Act of
1933 and Section 21-E of the Securities Exchange Act of 1934, and are intended to be covered by the safe harbors created by such
acts.  For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements,
including the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding our
strategy, future operations, future expectations or future estimates, financial position and objectives of management.  Those
statements in this Form 10-Q containing the words "believes", "anticipates", "plans", "expects" and similar expressions constitute
forward-looking statements, although not all forward-looking statements contain such identifying words.  These forward-looking
statements are based on our current expectations, assumptions, estimates and projections about our Company and the pharmaceutical and
consumer packaged goods industries.  All such forward-looking statements involve risks and uncertainties, including those risks
identified under "Factors That May Affect Future Operating Results", many of which are beyond our control.  Although we believe that
the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate and actual
results may differ from those indicated by the forward-looking statements included in this Form 10-Q, as more fully described under
"Factors That May Affect Future Operating Results".  In light of the significant uncertainties inherent in the forward-looking
statements included in this Form 10-Q, you should not consider the inclusion of such information as a representation by us or anyone
else that we will achieve such results.  Moreover, we assume no obligation to update these forward-looking statements to reflect
actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.

## OVERVIEW

The Company provides a comprehensive range of CRM software products and support services to the pharmaceutical industry.  The
Company's solutions combine proprietary software products with extensive system support services, sales force support services,
analytical consulting services and clinical trial services.

The Company generates revenues from both services and licenses.  Service revenues, which account for a substantial portion of our
revenues, consist of fees from a wide variety of contracted services, generally under multi-year contracts. We generate
implementation fees from services provided to configure and implement our CRM software products for our customers. We receive
technical and hardware support fees for services related to, among other things, ongoing technical support, maintenance of our
customers' databases, operations of our customers' server computers, maintenance of our customers' remote hardware and asset
control.  Technical and hardware support fees also include fees for software maintenance services such as software defect resolution
and performance enhancements.  We generally charge fees for these maintenance services based on a percentage of total license fees
and initial customization of these licenses.  We receive sales force support fees for organizing and managing support of our
customers' sales forces, including training, telephone support and data analysis services. It is our experience that our larger
customers increase the amount of services they purchase from us over time. Fees for these additional services are typically based on
the labor and materials used to provide the applicable service.

We charge our customers license fees to use our proprietary computer software. Customers generally pay one-time perpetual license
fees based upon the number of users, the territory covered and the particular software licensed by the customer.

The Company generally recognizes license fees as revenue using the percentage-of-completion method over a period of time that
commences when we begin configuring the product and ends when the product configuration is complete and it is ready for use in the
field. This period of time usually includes initial customization or configuration and concludes with quality assurance and testing.
When there is no initial customization or configuration, the Company generally recognizes the license fees from those products upon
delivery so long as services to be provided are not essential to the functionality of the software.  Additionally, license revenues
are recognized immediately when the user count for previously delivered software increases.  Historically, the Company's software
licensing agreements provide for a warranty period (typically 180 days from the date of execution of the agreement). The Company's
software maintenance period usually begins immediately after the warranty period.  The portion of the license fee associated with the
warranty period is unbundled from the license fee and is recognized ratably over the warranty period. The Company does not recognize
any license fees unless persuasive evidence of an arrangement exists, delivery has occurred, the license amount is fixed or
determinable and collectability is probable.

The United States, the United Kingdom, France and Japan are currently our primary markets. We bill services provided by our
foreign branches and subsidiaries in local currencies. Operating results generated in local currencies are translated into U.S.
dollars at the average exchange rate in effect for the reporting period.  We generated approximately 16% and 28% of our total
revenues outside the United States during the three months ended September 30, 2001 and September 30, 2000, respectively.  We
generated approximately 19% and 25% of our total revenues outside the United States during the nine months ended September 30, 2001
and September 30, 2000, respectively.  Our operating profits and losses by geographic segment are shown in Note 6 of the "Notes to
Unaudited Consolidated Financial Statements."

## RECENT
DEVELOPMENTS

During the second quarter of 2001, the Company began recording a series of non-recurring costs, relating to three different major
categories: 1) Restructuring charges, or those costs and expenses associated with resizing our business to a new lower expected
revenue growth in the near term; 2) Asset impairments, which reflect either the write-off or shortened lives of intangible and other
non-current assets; and 3) Other non-recurring charges, which relate primarily to facility moves and other associated costs which are
not included within restructuring charges.  The total charges related to these three categories is expected to be approximately
$37,000,000, of which approximately $23,000,000 is expected to be from cash expenditures.

The restructuring plan consists of the resizing of the Company's personnel as well as the closing of its facility located in
Stroudsburg, PA.  This will result in a reduction of 155 employees and 35 contractors across various departments in the United States
and Europe as well as 192 additional personnel associated with the closing of the Company's facility in Stroudsburg, PA.  The
Stroudsburg, PA operations are being relocated to the Company's facilities in New Jersey, Virginia and a new facility which has been leased in
Bethlehem, PA.  The exit costs have been included in the restructuring charge while the moving and other start-up costs are not
included in this restructuring charge and will continue to be expensed as incurred.  These exit costs are included with non-recurring
charges as discussed herein.  During the second quarter of 2001, the Company recorded a charge of $6,134,000 associated with this
restructuring.  Of this charge, $4,414,000 has not been paid as of September 30, 2001 and is, accordingly, classified as accrued
restructuring in the accompanying consolidated balance sheets.  The restructuring charges were determined based upon formal plans
approved by the Company's management using the information available at the time.  Management of the Company believes this provision
will be adequate to cover any costs incurred relating to the restructuring.  The Company anticipates that the majority of the accrued
restructuring balance of $4,414,000 as of September 30, 2001 will be paid by December 31, 2001.  See Note 4 to "Notes to Unaudited
Consolidated Financial Statements."

During the nine months ended September 30, 2001, the Company reviewed the carrying values of its long-lived assets, including its
minority investments in start-up ventures, identifiable intangibles and goodwill.  During the nine months ended September 30, 2001,
the Company wrote off $3,450,000 of cost method investments it had in two start-up ventures due to a permanent impairment in the fair
value of these investments.  These entities have experienced difficulty in raising the additional capital necessary to fund their
start-up activities and the situation at both became particularly severe in the second quarter of 2001.

In connection with the Company's announcement on June 14, 2001, relative to its partnership with Oracle Corporation to market an
integrated customer relationship management ("CRM") solution to meet the specialized needs of the worldwide pharmaceutical industry,
the Company's vision and product platform has changed.  The operations acquired through the Company's acquisitions of Associated
Business Computing, N.V. ("ABC") and Analytika, Inc. ("Analytika") have been modified to keep pace with the developing needs of the
ethical pharmaceutical market.  The projected undiscounted future cash flows of these operations are substantially less than the
carrying value of the related long-lived assets, including identifiable intangibles and goodwill.  The fair value of the long-lived
assets was determined based upon the discounted cash flows expected to be derived from these operations.  Management of the Company
believes that these operations will generate negative cash flows over the next several years due to the administrative costs required
to support the projected revenue stream.  Accordingly, the Company recorded an impairment charge of $8,787,000, consisting of
$2,614,000 of purchased capitalized software and $6,173,000 of goodwill.  Relative to the operations acquired as a result of the
Marketing Management International, Inc. ("MMI") acquisition, it is planned that after December 31, 2001, the Company will offer the
mid-tier pharmaceutical industry a product which is more compatible with the Company's vision of integrated CRM solutions.
Accordingly, the Company has reduced the remaining useful life of the purchased capitalized software related to the MMI acquisition
and expects the balance to be fully amortized by December 31, 2001.  As the operations of the business acquired in the MMI
acquisition continue to be successful, no impairment charge or reduction in life was necessary for the goodwill associated with MMI.

As a result of our decision to relocate our operations to multiple new facilities, we have and will continue to incur significant
costs.  These costs primarily relate to start-up costs relating to our new Chesapeake, VA and Bethlehem, PA facilities, and the
transfer of our operations from Stroudsburg, PA to these and other locations.  These costs include, among other things, duplicate
lease costs, relocation, retention and moving costs.  Also included within these costs is the recognition of future losses on
selected contracts that were identified as we examined the relocation of help desk services to Chesapeake, VA.  The Company incurred
other non-recurring costs of approximately $2,802,000 and $8,707,000 during the three and nine months ended September 30, 2001,
respectively.  We expect to incur approximately $9,600,000 of additional non-recurring costs during the fourth quarter of 2001.

## RESULTS OF
OPERATIONS

## THREE MONTHS
ENDED SEPTEMBER 30, 2001 AND 2000

REVENUES.  Total revenues increased $1,080,000 to $57,113,000
in the three months ended September 30, 2001, an increase of 2% from revenues of
$56,033,000 in the three months ended September 30, 2000.

License
fee revenues increased $36,000 to $8,635,000 in the three months ended September
30, 2001, from our previous quarterly high of $8,599,000 in the three months
ended September 30, 2000. License fee revenues as a percentage of total revenues
were 15% in the three months ended September 30, 2001 and September 30, 2000.
License fees are, by nature, non-recurring items. License fee revenues during
the three months ended September 30, 2001 related primarily to a major systems
upgrade by an existing customer.

Service
revenues increased $1,044,000 to $48,478,000 in the three months ended September
30, 2001, an increase of 2% from $47,434,000 in the three months ended September
30, 2000. Service revenues as a percentage of total revenues were 85% in the
three months ended September 30, 2001 and September 30, 2000. The increase in
service revenues was impacted by major client rollouts, additional ongoing
services and new service offerings.

COST OF REVENUES.  Total cost of revenues increased $5,660,000 to
$28,196,000 in the three months ended September 30, 2001, up 25% from
$22,536,000 in the three months ended September 30, 2000.

Cost
of license fees increased $696,000 to $1,531,000 in the three months ended
September 30, 2001, up 83% from $835,000 in the three months ended September 30,
2000. Cost of license fees for the three months ended September 30, 2001 is
comprised of the amortization of purchased software and capitalized software
development costs of $1,044,000 and third party vendor license fees of $487,000.
Cost of license fees for the same period in 2000 is comprised of the
amortization of purchased software and capitalized software development costs of
$672,000 and third party vendor license fees of $163,000. The increase in the
amortization of purchased software and capitalized development costs related
primarily to the acceleration of amortization of the purchased capitalized
software related to the MMI acquisition as discussed within Recent
Developments and Note 5 of Notes to Unaudited Financial
Statements. This acceleration resulted in nearly $400,000 of additional
costs during the three months ended September 30, 2001. Third party vendor
license fees increased due to an increase in the number of third party software
products embedded in our WebForceTM product suite. A significant
portion of our license fees during the three months ended September 30, 2000
related to sales of our Japanese market product, j-forceWEB, which contains less
third party software than our WebForce product suite.

Cost of services increased $4,964,000 to $26,665,000
 in the three months ended September 30, 2001, up 23% from $21,701,000 in
the three months ended September 30, 2000.  Total gross margin for the three months ended September 30, 2001 was 51%, down from 60%
for the three months ended September 30, 2000.  The increase in cost of services and decrease in gross margin was primarily due to
the Company's evolving business mix and continued budgetary pressures on our customers, which restricted our margins.  Additionally,
the Company had approximately $500,000 of non-recurring costs which were classified within cost of services during the three months
ended September 30, 2001.  However, gross margin has improved sequentially from the second quarter 2001 as a result of our
restructuring and cost improvement measures as discussed in "Recent Developments" above.

SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES.  
SG&A expenses increased $4,123,000 to $22,875,000 in the three months ended
September 30, 2001, up 22% from $18,752,000 in the three months ended September
30, 2000. As a percentage of revenues, SG&A expenses increased to 40% in the
three months ended September 30, 2001, up from 33% in the three months ended
September 30, 2000. The increase in SG&A expenses for the three months ended
September 30, 2001 was primarily attributable to $1,200,000 of costs associated
with the Companys CRM launch in partnership with Oracle Corporation,
$1,100,000 of costs relating to the transition of services from its New Jersey
facility to its new facility in Chesapeake, Virginia, and approximately
$1,800,000 of costs related to the strengthening of our corporate infrastructure
which includes, among other things, investment in senior management and our
global sales organization, and increased facility costs compared to the same
period last year.

RESEARCH
AND DEVELOPMENT (R&D) EXPENSES.  R&D expenses decreased
$14,000 to $2,689,000 in the three months ended September 30, 2001, down 1% from
$2,703,000 in the three months ended September 30, 2000. As a percentage of
revenues, R&D expenses remained constant at 5% in the three months ended
September 30, 2001 and September 30, 2000. With respect to future research and
development expenses, subject to market conditions, we currently anticipate that
such expenses will be approximately 4% to 6% of revenues for the remainder of
2001.

PROVISION FOR INCOME TAXES.  
  The effective tax rate used to recognize income tax expense in the three months ended September 30,
2001 and September 30, 2000 was 36%.

## NINE MONTHS
ENDED SEPTEMBER 30, 2001 AND 2000

REVENUES.  Total revenues increased $6,128,000 to $160,955,000
in the nine months ended September 30, 2001, an increase of 4% from $154,827,000
in the nine months ended September 30, 2000.

License
fee revenues decreased $4,347,000 to $15,911,000 in the nine months ended
September 30, 2001, a decrease of 21% from $20,258,000 in the nine months ended
September 30, 2000. License fee revenues as a percentage of total revenues were
10% in the nine months ended September 30, 2001, as compared to 13% in the nine
months ended September 30, 2000. License fees are, by nature, non-recurring
items. The overall decrease related to fewer licenses signed with customers.

Service
revenues increased $10,475,000 to $145,044,000 in the nine months ended
September 30, 2001, an increase of 8% from $134,569,000 in the nine months ended
September 30, 2000. Service revenues as a percentage of total revenues were 90%
in the nine months ended September 30, 2001, as compared to 87% in the nine
months ended September 30, 2000. The increase in service revenues was impacted
by major client rollouts, additional ongoing services and new service offerings.

COST OF REVENUES. Total cost of revenues increased $25,233,000 to
$90,179,000 in the nine months ended September 30, 2001, an increase of 39% from
$64,946,000 in the nine months ended September 30, 2000.

Cost
of license fees increased $982,000 to $3,692,000 in the nine months ended
September 30, 2001, an increase of 36% from $2,710,000 in the nine months ended
September 30, 2000. Cost of license fees for the nine months ended September 30,
2001 is comprised of the amortization of purchased software and capitalized
software development costs of $2,732,000 and third party vendor license fees of
$960,000. Cost of license fees for the same period in 2000 is comprised of the
amortization of purchased software and capitalized software development costs of
$2,101,000 and third party vendor license fees of $609,000. The costs associated
with third party vendor licenses increased due to an increase in the number of
third party software products embedded in our WebForceTMproduct
suite. As of June 2001, the Company reduced the remaining useful life of the
purchased capitalized software related to the MMI acquisition to seven months
which resulted in an additional expense of approximately $570,000 during the
nine months ended September 30, 2001.

During the nine months ended September 30, 2001, the Company recorded an impairment charge of $2,614,000 related to its purchased
capitalized software costs from its acquisitions of Analytika and ABC.  These operations have been modified to keep pace with the
developing needs of the ethical pharmaceutical market.  The projected undiscounted future cash flows of these operations are
substantially less than the carrying value of the related long-lived assets, including identifiable intangibles and goodwill.  The
fair value of the long-lived assets was determined based upon the discounted cash flows expected to be derived from these
operations.  Management of the Company believes that these operations will generate negative cash flows over the next several years
due to the administrative costs required to support the projected revenue stream.  See Notes 4 and 5 of "Notes to Unaudited
Consolidated Financial Statements" and "Recent Developments" above and "Restructuring Charge" and "Asset Impairment" below for a
discussion of the restructuring charges and asset impairments recorded in the nine months ended September 30, 2001.

Cost of services increased
$21,637,000 to $83,873,000 in the nine months ended September 30, 2001, up 35% from $62,236,000 in the
nine months ended September 30, 2000.  This increase was due to a combination of factors, including non-recurring costs of
$3,053,000,  which related to the recognition of future losses on selected contracts where we expect the costs of providing the
future services will exceed the revenue to be received from the performance of the services, which was identified while examining the
restructuring of our Stroudsburg, PA facility and approximately $500,000 which related to other non-recurring exit costs.  The
remaining increase in cost of services was primarily due to overstaffing within our service areas in anticipation of higher levels of
growth than were realized during the first six months of 2001.

Total
gross margin for the nine months ended September 30, 2001 was 44%, down from 58%
for the nine months ended September 30, 2000. Gross Margin was impacted
significantly by the $2,614,000 asset impairment and $3,929,000 of non-recurring
costs within costs of services that was recorded in the first nine months of
2001. If not for the effects of these items, the gross margin would have been
48% for the nine months ended September 30, 2001. This was significantly lower
than the gross margin during the nine months ended September 30, 2000, primarily
due to overstaffing within our service areas in anticipation of higher levels of
growth than were realized during the first six months of 2001.

SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES.
SG&A expenses increased $21,634,000 to $71,970,000 in the nine months ended
September 30, 2001, up 43% from $50,336,000 in the nine months ended September
30, 2000. As a percentage of revenues, SG&A expenses increased to 45% in the
nine months ended September 30, 2001, as compared with 33% in the nine months
ended September 30, 2000. The increase in SG&A expenses for the period ended
September 30, 2001 was caused by several factors, most notably $3,200,000 of
costs associated with the Companys CRM launch in partnership with Oracle
Corporation, $3,900,000 of costs relating to the transition of services to its
new facility in Chesapeake, Virginia, and approximately $14,500,000 of costs
related to the strengthening of our corporate infrastructure which includes,
among other things, investment in senior management and our global sales
organization.

RESEARCH
AND DEVELOPMENT (R&D) EXPENSES. R&D expenses increased
$481,000 to $8,524,000 in the nine months ended September 30, 2001, an increase
of 6% from $8,043,000 in the nine months ended September 30, 2000. As a
percentage of revenues, R&D expenses remained constant at 5% in the nine
months ended September 30, 2001 and September 30, 2000.

RESTRUCTURING
CHARGE. On June 14, 2001, the Company announced a restructuring
of its business operations to reflect a lower expected revenue growth model in
the near term. The restructuring plan consists of the resizing of the
Companys personnel as well as the closing of its facility located in
Stroudsburg, PA. The Stroudsburg, PA operations are being relocated to the
Companys facilities in New Jersey, Virginia and a new facility to be
leased in Bethlehem, PA. The exit costs have been included in the restructuring
charge while the moving and other start-up costs are not included in this
restructuring charge and will continue to be expensed as incurred.

During the nine months ended September 30, 2001, the Company recorded a charge of $6,134,000 associated with its
restructuring.    The restructuring charges were determined based upon formal plans approved by the Company's management using the
information available at the time.  Management of the Company believes this provision will be adequate to cover any costs incurred
relating to the restructuring.  See Note 4 of "Notes to Unaudited Consolidated Financial Statements."

ASSET IMPAIRMENT. During the second quarter of 2001, the Company
reviewed the carrying values of its long-lived assets, including its minority
investments in start-up ventures, identifiable intangibles and goodwill. After
the review, the Company wrote off $3,450,000 of cost method investments it had
in two start-up ventures due to a permanent impairment in the fair value of
these investments. These entities have experienced difficulty in raising the
additional capital necessary to fund their start-up activities and the situation
at both became particularly severe during the nine months ended September 30,
2001.

In
connection with the Companys announcement on June 14, 2001, relative to
its partnership with Oracle Corporation to market an integrated CRM solution to
meet the specialized needs of the worldwide pharmaceutical industry, the
Companys vision and product platform has changed. The operations acquired
through the Companys acquisitions of ABC and Analytika have been modified
to keep pace with the developing needs of the ethical pharmaceutical market. The
projected undiscounted future cash flows of these operations are substantially
less than the carrying value of the related long-lived assets, including
identifiable intangibles and goodwill. The fair value of the long-lived assets
was determined based upon the discounted cash flows expected to be derived from
these operations. Management of the Company believes that these operations will
generate negative cash flows over the next several years due to the
administrative costs required to support the projected revenue stream.
Accordingly, the Company recorded an impairment charge of $8,787,000, consisting
of $2,614,000 of purchased capitalized software and $6,173,000 of goodwill.
Relative to the operations acquired as a result of the MMI acquisition, it is
planned that after December 31, 2001, the Company will offer the mid-tier
pharmaceutical market a product which is more compatible with the Companys
vision of integrated CRM solutions. Accordingly, the Company has reduced the
remaining useful life of the purchased capitalized software related to the MMI
acquisition to seven months as of June 2001, which resulted in an additional
expense of approximately $570,000 during the nine months ended September 30,
2001. As the operations of the business acquired in the MMI acquisition continue
to be successful, no impairment charge or reduction in life was necessary for
the goodwill associated with MMI. See Note 5 of Notes to Unaudited
Consolidated Financial Statements.

PROVISION
FOR INCOME TAXES. The effective tax benefit recorded in nine
months ended September 30, 2001 was 33%, as compared with an effective tax
expense of 36% in the nine months ended September 30, 2000. This decrease
resulted from the write-off of certain goodwill amounts which are not deductible
for tax purposes.

## LIQUIDITY AND
CAPITAL RESOURCES

We finance our operations primarily through cash generated by operations.  Net cash provided by operating activities was
$29,731,000 for the nine months ended September 30, 2001, compared to $18,495,000 for the nine months ended September 30, 2000.  This
increase in cash provided by operating activities was due primarily to a decrease in accounts receivable, an increase in accounts
payable and accrued expenses and an increase in deferred revenues.  In addition, asset impairment charges, an increase in
depreciation and amortization and the net non-cash restructuring charge of $4,414,000 generated a net loss of $15,633,000 for the
nine months ended September 30, 2001.

Cash used in investing activities was $30,272,000 in the nine months ended September 30, 2001, compared to $2,980,000 in the nine
months ended September 30, 2000.  The significant increase was due primarily to our purchase of a new building which is currently
held for sale, and tenant improvements made to our new data center facility during the nine months ended September 30, 2001, as well
as our net sales of short-term investments in 2000, partially offset by cash used for acquisitions in 2000.

Cash used in financing  activities  was  $14,151,000  in the nine months ended  September  30,  2001,  compared to cash  provided by
financing  activities  of $7,688,000  in the nine months ended  September  30, 2000.  The decrease was due to purchases of common stock
under the stock  repurchase  program  announced on January 31,  2001,  and an overall  decrease in the level of stock option  exercises
during the nine months ended September 30, 2001.  During the nine months ended September 30, 2001, the Company purchased 1,343,700 shares
of its common stock at a cost of $17,480,000 under the existing stock repurchase program.

We maintain a $15,000,000 revolving credit facility agreement with The Chase Manhattan Bank, N.A.  The agreement is available to
finance working capital needs and possible future acquisitions.  The terms of this agreement require us to maintain a minimum
consolidated net worth, among other covenants, measured quarterly, which is equal to our net worth as of December 31, 1997 plus 50%
of net income earned after January 1, 1998 plus 75% of the net proceeds of any stock offerings (as defined in the agreement).  This
covenant effectively limits the amount of cash dividends we may pay.  The credit facility was scheduled to expire on November 30, 2001.  On October
17, 2001, the Company signed a commitment letter with The Chase Manhattan Bank, N.A. to extend this facility through November 30,
2002 under substantially the same terms.  At September 30, 2001, there were no borrowings outstanding under the agreement and we were
in compliance with all of our covenant obligations.

At September 30, 2001, our working capital was approximately $77,989,000, compared with $113,738,000 at December 31, 2000, a
decrease of $35,749,000.   This decrease relates primarily to our purchase of a building for $10,832,000, our purchases of treasury
stock for $17,480,000, and $5,433,000 of capital improvements to our new facilities.
We believe that available funds, anticipated cash flows from operations and our line of credit will satisfy
our currently projected working capital and capital expenditure requirements, exclusive of cash required for possible acquisitions of
businesses, products and technologies, for the foreseeable future.

In the second quarter of 2001, the Company spent $10,832,000 to purchase a 145,000 square foot building in New Jersey for the
purpose of establishing a new U.S. operations facility to accommodate the Company's growth.  The Company has determined to shift its
operations to other existing facilities and to a lower cost facility in Chesapeake, Virginia in connection with its restructuring plan, and therefore has resolved to hold the new
facility for sale. See Note 4 and 10 to "Notes to Unaudited Consolidated Financial Statements."

During
the fourth quarter of 2000, the Company entered into a lease agreement for a new
facility in Chesapeake, Virginia, with future minimum rental payments of
approximately $15,000,000 over the next 11 years. The two building facility is
comprised of approximately 100,000 total square feet. We expect capital
expenditures in connection with tenant improvements, furniture and fixtures and
other capital costs to be incurred through mid 2002. Funding for these
expenditures is expected to be from operating cash flows and existing cash
balances.

During the first half of 2001, the Company entered into a lease for 33,000 square feet of office space in Bridgewater, New Jersey
to serve as the Company's corporate and sales headquarters.  Tenant improvements such as furniture, fixtures and other capital costs
are not expected to exceed $2,000,000.

We
regularly evaluate opportunities to acquire products or businesses complementary
to our operations. Such acquisition opportunities, if they arise, and are
successfully completed, may involve the use of cash or equity instruments.

## FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

## OUR BUSINESS
IS HEAVILY DEPENDENT ON THE PHARMACEUTICAL INDUSTRY

Most of our CRM products and services are currently used in connection with the marketing and sale of prescription-only drugs.
This market is undergoing a number of significant changes. These include:

- the significant consolidation of the pharmaceutical industry as well as the timing and
 sequencing of sales to our customers may reduce the number of our existing and potential customers;
- regulatory changes that permit the over-the-counter sale of formerly prescription-only drugs; and
- competitive pressure on the pharmaceutical industry resulting from the
continuing shift to delivery of healthcare through managed care organizations.

We cannot assure you that we can respond effectively to any or all of these and other changes in the marketplace. Our failure to
do so could have a material adverse effect on our business, operating results or financial condition.

## OUR QUARTERLY RESULTS OF OPERATIONS
MAY FLUCTUATE SIGNIFICANTLY AND MAY NOT MEET MARKET EXPECTATIONS

Our results of operations may vary from quarter to quarter due to lengthy sales and implementation cycles for our products, our
fixed expenses in relation to our fluctuating revenues and variations in our customers' budget cycles, each of which is discussed
below. As a result, you should not rely on quarter-to-quarter comparisons of our results of operations as an indication of future
performance. It is also possible that in some future period our results of operations may be below our targeted goals and the
expectations of the public market analysts and investors. If this happens, the price of our common stock may decline.

## OUR LENGTHY SALES AND IMPLEMENTATION CYCLES
MAKE IT DIFFICULT TO PREDICT OUR QUARTERLY REVENUES

The selection of a CRM solution generally entails an extended decision-making process because of the strategic implications and
substantial costs associated with a customer's license of the solution. Given the importance of the decision, senior levels of
management often are involved and, in some instances, its board of directors may be involved in this process. As a result, the
decision-making process typically takes nine to eighteen months, and in certain cases even longer. Accordingly, we cannot control or
predict the timing of our execution of contracts with customers.

In addition, an implementation process of three to six or more months before the software is rolled out to a customer's sales
force is customary. However, if a customer were to delay or extend its implementation process, our quarterly revenues may decline
below expected levels and could adversely affect our results of operations.

## OUR FIXED COSTS MAY LEAD
TO FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS IF REVENUES FALL BELOW EXPECTATIONS

We establish our expenditure levels for product development, sales and marketing and some of our other operating expenses based in
large part on our expected future revenues and anticipated competitive conditions. In particular, we frequently add staff in advance
of new business to permit adequate time for training. If the new business is subsequently delayed, canceled or not awarded, we will
have incurred expenses without the associated revenues. In addition, we may increase sales and marketing expenses if competitive
pressures become greater than originally anticipated.  Since only a small portion of our expenses varies directly with our actual
revenues, our operating results and profitability are likely to be adversely and disproportionately affected if our revenues fall
below our targeted goals or expectations.

## OUR BUSINESS
IS AFFECTED BY VARIATIONS IN OUR CUSTOMERS BUDGET CYCLES

We have historically realized a greater percentage of our license fees and service revenues in the second half of the year than in
the first half because, among other things, our customers typically spend more of their annual budget authorization for CRM solutions
in the second half of the year. However, the relationship between the amounts spent in the first and second halves of a year may vary
from year to year and from customer to customer. In addition, changes in our customers' budget authorizations may reduce the amount
of revenues we receive from the license of additional software or the provision of additional services. As a result, our operating
results could be adversely affected.

## WE DEPEND ON A FEW MAJOR
CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR REVENUES

We derive a significant portion of our revenues from a limited number of customers for which there is substantial competition.
Some of our customers have switched, and in the future other customers may switch, to software products and/or services offered by
our competitors or by in-house staff.  In addition, any consolidation between or among our customer base could adversely affect our
business base.

## WE MAY BE
UNABLE TO SUCCESSFULLY INTRODUCE NEW PRODUCTS OR RESPOND TO TECHNOLOGICAL CHANGE

The market for CRM products changes rapidly because of frequent improvements in computer hardware and software technology. Our
future success will depend, in part, on our ability to:

- use  available  technologies  and data sources to develop new  products  and services and to enhance our current  products and
              services;
- introduce new solutions that keep pace with developments in our target markets; and
- address the changing and increasingly sophisticated needs of our customers.

We cannot assure you that we will successfully develop and market new products or product enhancements that respond to
technological advances in the marketplace, or that we will do so in a timely fashion. We also cannot assure you that our products
will adequately and competitively address the needs of the changing marketplace.

Competition for software products has been characterized by shortening product cycles. We may be materially and adversely affected
by this trend if the product cycles for our products prove to be shorter than we anticipate. If that happens, our business, operating
results or financial condition could be adversely affected.

To remain competitive, we also may have to spend more of our revenues on product research and development than we have in the
past. As a result, our results of operations could be materially and adversely affected.

Further, our software products are technologically complex and may contain previously undetected errors or failures. Such errors
have occurred in the past and we cannot assure you that, despite our testing, our new products will be free from errors. Errors that
result in losses or delays could have a material adverse effect on our business, operating results or financial condition.

## INCREASED COMPETITION MAY RESULT
IN PRICE REDUCTIONS AND DECREASED DEMAND FOR OUR PRODUCTS AND SERVICES

We believe there are a number of other companies that sell CRM products and related services that specifically target the
pharmaceutical industry, including:

- certain competitors that are actively selling CRM software products in more than one country; and
- certain competitors that also offer CRM support services.

We believe that sales force automation or SFA and CRM software products and/or services offered by most of our competitors do not
address the variety of pharmaceutical customer needs that our solutions address.  We also face competition from many vendors that
market and sell SFA and CRM solutions in the Consumer Product Group (CPG) market. In addition, we also compete with various companies
that provide support services similar to our services. We believe our ability to compete depends on many factors, some of which are
beyond our control, including:

- the number and success of new market entrants supplying competing CRM products or support services;
- expansion of product lines by, or consolidation among, our existing competitors; and
- development and/or operation of in-house CRM software products or services by our customers and potential customers.

Some of our competitors and potential competitors are part of large corporate groups and have significantly greater financial,
sales, marketing, technology and other resources than we have. We cannot assure you that we will be able to compete successfully with
these companies or that competition will not have a material adverse effect on our business, operating results or financial
condition.

## OUR
INTERNATIONAL OPERATIONS HAVE RISKS THAT OUR DOMESTIC OPERATIONS DO NOT

The sale of our products and services in foreign countries accounts for, and is expected in the future to account for, a material
part of our revenues. These sales are subject to risks inherent in international business activities, including:

- any adverse change in the political or economic environments in these countries;
- any adverse change in tax, tariff and trade or other regulations;
- the absence or significant lack of legal protection for intellectual property rights;
- exposure to exchange rate risk for service revenues which are denominated in currencies other than U.S. dollars; and
- difficulties in managing an organization spread over various jurisdictions.

## WE MAY FACE
RISKS ASSOCIATED WITH ACQUISITIONS

Our business could be materially and adversely affected as a result of the risks associated with acquisitions.  As part of our
business strategy, we have acquired businesses that offer complementary products, services or technologies.   These acquisitions are
accompanied by the risks commonly encountered in an acquisition of a business, including:

- the effect of the acquisition on our financial and strategic position;
- the failure of an acquired business to further our strategies;
- the difficulty of integrating the acquired business;
- the diversion of our management's attention from other business concerns;
- the impairment of relationships with customers of the acquired business;
- the potential loss of key employees of the acquired company; and
- the maintenance of uniform, company-wide standards, procedures and policies.

These factors could have a material adverse effect on our revenues and earnings.  We expect that the consideration paid for
future acquisitions, if any, could be in the form of cash, stock, rights to purchase stock, or a combination of these.  To the extent
that we issue shares of stock or other rights to purchase stock in connection with any future acquisition, existing shareholders will
experience dilution and potentially decreased earnings per share.

## WE MAY FACE RISKS ASSOCIATED WITH
EVENTS WHICH MAY AFFECT THE U.S. AND WORLD ECONOMIES

The terrorist attacks of September 11, 2001 and subsequent world events have created a significant uncertainty about the future
prospects of the U.S. and world economies.  While we did not experience any material impact to our business during the time period
immediately following the events of September 11, 2001, we cannot assure you that these events and any uncertainties regarding the
affect on the U.S. and world economies will not adversely affect our business or the businesses of our customers.

## OUR SUCCESS DEPENDS
ON RETAINING OUR KEY SENIOR MANAGEMENT TEAM AND ON ATTRACTING AND RETAINING
QUALIFIED PERSONNEL

Our future success depends, to a significant extent, upon the contributions of our executive officers and key sales, technical and
customer service personnel.  Our future success also depends on our continuing ability to attract and retain highly qualified
technical and managerial personnel. Competition for such personnel is intense. We have at times experienced difficulties in
recruiting qualified personnel and we may experience such difficulties in the future. Any such difficulties could adversely affect
our business, operating results or financial condition.

## OUR INABILITY
TO MANAGE OUR GROWTH COULD ADVERSELY AFFECT OUR BUSINESS

To manage our growth effectively we must continue to strengthen our operational, financial and management information systems and
expand, train and manage our work force. However, we may not be able to do so effectively or on a timely basis. Failure to do so
could have a material adverse effect upon our business, operating results or financial condition.

## OUR BUSINESS
DEPENDS ON PROPRIETARY TECHNOLOGY THAT WE MAY NOT BE ABLE TO PROTECT COMPLETELY

We rely on a combination of trade secret, copyright and trademark laws, non-disclosure and other contractual agreements and
technical measures to protect our proprietary technology. We cannot assure you that the steps we take will prevent misappropriation
of this technology. Further, protective actions we have taken or will take in the future may not prevent competitors from developing
products with features similar to our products. In addition, effective copyright and trade secret protection may be unavailable or
limited in certain foreign countries. We have, on occasion, in response to a request by our customer, entered into agreements which
require us to place our source code in escrow to secure our service and maintenance obligations.

Further, we believe that our products and trademarks do not infringe upon the proprietary rights of third parties. However, third
parties may assert infringement claims against us in the future that may result in the imposition of damages or injunctive relief
against us. In addition, any such claims may require us to enter into royalty arrangements. Any of these results could materially and
adversely affect our business, operating results or financial condition.

## THERE ARE CHARACTERISTICS IN THE CONSUMER PACKAGED GOODS MARKET THAT DIFFER FROM THE PHARMACEUTICAL MARKET

We market and sell CRM solutions to companies in the CPG market. The selling environment in this market has unique characteristics
that differentiate it from the pharmaceutical market. In addition, we believe that the CPG market is composed of sub-markets, each of
which may have unique characteristics. Accordingly, we cannot assure you that we will be able to replicate in this market the success
we have achieved in the ethical pharmaceutical market.

## PROVISIONS OF OUR CHARTER
DOCUMENTS AND NEW JERSEY LAW MAY DISCOURAGE AN ACQUISITION OF DENDRITE

Provisions of our Restated Certificate of Incorporation, as amended, our By-laws, as amended, and New Jersey law may make it more
difficult for a third party to acquire us.  For example, the Board of Directors may, without the consent of the stockholders, issue
preferred stock with rights senior to those of the common stock.  In addition, the Company has a shareholder rights plan which may
limit the ability of a third party to attempt a hostile acquisition of the Company.

## OUR COMMON
STOCK MAY BE SUBJECT TO PRICE FLUCTUATIONS

The market
price of our common stock may be significantly affected by the following factors:

- the announcement or the introduction of new products by us or our competitors;
- quarter-to-quarter  variations  in our  operating  results  or  changes  in  earnings  estimates  or failure to meet or exceed
              earnings estimates;
- market conditions in the technology, healthcare and other growth sectors; and
- general consolidation in the healthcare information industry which may result in
the market perceiving us or other comparable companies as potential acquisition
targets.

Further, the stock market has experienced on occasion extreme price and volume fluctuations. The market prices of the equity
securities of many technology companies have been especially volatile and often have been unrelated to the operating performance of
such companies. These broad market fluctuations may have a material adverse effect on the market price of our common stock.

## PART II.  OTHER INFORMATION

## ITEM 6.  Exhibits and Reports on Form 8-K

(i)  Exhibits
                None

(ii)  Reports on Form 8-K

                None

## 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.

Date:  November 13, 2001

`By: /s/ John E. Bailye
                                   ------------------------------------------
                                   John E. Bailye, Chairman and
                                   Chief Executive Officer
                                   (Principal Executive Officer)


                                   By: /s/ George T. Robson
                                   ------------------------------------------
                                   George T. Robson, Executive Vice President
                                   and Acting Chief Financial Officer
                                   (Principal Financial Officer)`