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                                    FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                         Commission File Number 0-22510


                            CLINTRIALS RESEARCH INC.
             (Exact name of registrant as specified in its charter)

         DELAWARE                                   62-1406017
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(State of incorporation)               (I.R.S. Employee Identification Number)

          11000 Weston Parkway
          Cary, North Carolina                                       27513
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(Address of principal executive offices)                           (Zip Code)

         Company's telephone number, including area code: (919) 460-9005

               Securities registered pursuant to Section 12(g) of
                                    the Act:

                                                          NAME OF EACH EXCHANGE
     TITLE OF EACH CLASS                                   ON WHICH REGISTERED
     -------------------                                   -------------------
Common Stock, $.01 par value                               NASDAQ Stock Market

         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 requirement for the past 90 days. Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

         The aggregate market value of voting stock held by nonaffiliates of the
registrant was $87,893,149 as of February 16, 2001. The number of Shares of
Common Stock outstanding as of February 16, 2001 was 18,402,922.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Items 10, 11 and 12 in Part III of this Form 10-K are incorporated by
reference to the registrant's definitive proxy materials for its 2001 annual
meeting of stockholders.


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                                     PART I

ITEM 1. BUSINESS

         ClinTrials Research Inc. (the Company or ClinTrials) is a full service
global contract research organization (CRO) serving the pharmaceutical,
biotechnology and medical device industries. The Company designs, monitors and
manages preclinical and clinical trials, provides clinical data management and
biostatistical services, and offers product registration services throughout the
United States, Canada and Europe. The Company's headquarters and U.S. clinical
operations are located near Research Triangle Park, North Carolina; additional
clinical facilities and offices are located in Maidenhead, U.K.; Glasgow,
Scotland; Brussels, Belgium; Paris, France; Melbourne, Australia; Tel Aviv,
Israel; Milan, Italy; Warsaw, Poland; Madrid, Spain and Munich, Germany. The
Company's preclinical operations are located in Montreal, Canada. The Company's
revenue is generated from preclinical testing (53% of total net revenue during
2000) and clinical testing (47% of total net revenue during 2000) of new
pharmaceutical and biotechnology products.

RECENT DEVELOPMENTS

         On August 16, 2000, the Company announced the resignation of Jerry R.
Mitchell, M.D., Ph.D. from his position as Chairman and Director, President and
Chief Executive Officer, of the Company. Pursuant to such resignation, the
Company and Dr. Mitchell entered into a separation agreement. Paul J. Ottaviano,
replaced Dr. Mitchell as President and Chief Executive Officer. Director Ed
Nelson assumed the role of Chairman.

         The Company also announced on August 16, 2000 that it had retained ING
Barings LLC as its investment banking firm in connection with the review of
financial and strategic alternatives.

         On February 22, 2001, the Company, Inveresk Research Group Limited and
Indigo Acquisition Corp. ("Indigo") entered into a definitive merger agreement
for Indigo to acquire all of the outstanding shares of the Company for $6.00 per
share in cash. Under the terms of the agreement, Indigo will commence a tender
offer for all of the outstanding shares of the Company at $6.00 per share within
seven business days. The tender offer will be subject to at least a majority of
the outstanding Company shares, on a fully diluted basis, being validly tendered
and not withdrawn. The tender offer will also be subject to regulatory approvals
and other customary conditions. Any of the Company's shares not acquired
pursuant to a successful tender offer will be acquired in a subsequent merger at
the same $6.00 per share cash price. In connection with the execution of the
merger agreement, Indigo has entered into an agreement with the holders of
approximately 21% of the Company's outstanding shares under which such holders
have agreed to tender their shares in the tender offer.

BACKGROUND

         New pharmaceutical and biotechnology products must undergo extensive
testing and regulatory review to determine their relative safety and
effectiveness. Companies seeking approval for these products are responsible for
performing and analyzing the results of preclinical and multi-phase clinical
trials. Preclinical trials typically last for up to three years and involve
animal testing and laboratory analyses to determine the basic biological
activity and safety of the drug. Upon successful completion of the preclinical
phase, the drug undergoes a series of clinical tests in humans, including
healthy volunteers as well as patients with the targeted disease. Clinical
trials are conducted over a period typically lasting five to seven years and
involve hundreds or thousands of human subjects.

         Preclinical and clinical testing must comply with the requirements of
Good Laboratory Practice (GLP), Good Clinical Practice (GCP) and other standards



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promulgated by the Food and Drug Administration (FDA) and other federal and
state governmental authorities. GLP regulations mandate standardized procedures
for controlling studies, recording and reporting data and retaining appropriate
records for preclinical testing. The Company's preclinical laboratory also
adheres to accreditation procedures on the humane care and treatment of animals.
GCP stipulates procedures designed to ensure the quality and integrity of data
obtained from clinical testing and to protect the rights and safety of clinical
subjects. The FDA pioneered the use of clinical trials in the regulation of new
drug development, and the agency's approval process has shaped much drug
regulation worldwide. In recent years, the FDA and corresponding regulatory
agencies of the major industrial countries (Canada, Japan and the European
Community (EC)) commenced discussions for the purpose of developing common
standards for both the conduct of preclinical and clinical studies and the
format and content of applications for new drug approvals. Data from
multi-national studies adhering to GCP are now generally acceptable to the FDA
and the governments within the EC.

         In the United States, a drug sponsor must file an Investigational New
Drug (IND) application with the FDA before the commencement of human testing of
a drug. The IND includes preclinical testing results and sets forth the
sponsor's plans for conducting human clinical trials. The design of these plans,
also referred to as the study protocol, is critical to the success of the drug
development effort because the protocol must correctly anticipate the data and
results that the FDA will require before approving the drug. In the absence of
any comments from the FDA, human clinical trials may begin 30 days after the IND
is filed.

         Clinical trials usually start on a small scale to assess safety and
then expand to larger trials to test efficacy. Trials are usually grouped into
four phases, with multiple trials generally conducted within each phase.

                  PHASE I. Phase I trials are conducted on healthy volunteers,
         typically 20 to 80 persons, to develop basic safety data relating to
         toxicity, metabolism, absorption and other pharmacological actions.
         These trials last an average of six months to one year.

                  PHASE II. Phase II trials are conducted on a small number of
         subjects, typically 100 to 400 patients, who suffer from the drug's
         targeted disease or condition. Phase II trials offer the first evidence
         of clinical efficacy, as well as additional safety data. These trials
         last an average of two years.

                  PHASE III. Phase III trials are conducted on a significantly
         larger population of several hundred to several thousand patients, some
         of whom suffer from the targeted disease or condition and some of whom
         are healthy. Phase III trials are designed to measure efficacy on a
         large scale as well as long-term side effects. These trials involve
         numerous sites and generally last two to three years.

                  PHASE IV. As a condition of granting marketing approval, the
         FDA may require that a sponsor continue to conduct additional clinical
         trials, known as Phase IV trials, to monitor long-term risks and
         benefits, study different dosage levels, or evaluate different safety
         and efficacy parameters in target patient populations. With the
         increasing importance of Phase IV trials has also come increased
         complexity in the scope of the trials (i.e., the number of patients
         tested) and the manner in which they are conducted (i.e., the number of
         sites at which testing is performed). Phase IV trials generally last
         one to four years.

         Clinical trials often represent the most expensive and time-consuming
part of the overall drug development process. The information generated during
these trials is critical for gaining marketing approval from the FDA or other
regulatory agencies. After the successful completion of Phase III trials, the
sponsor of a new drug must submit a New Drug Application (NDA) to the FDA. The
NDA is a comprehensive filing that includes, among other things, the results of
all preclinical and clinical studies, information about the drug's composition
and the sponsor's plans for producing, packaging and labeling the drug. Most of
the clinical data contained in an NDA is generated during the Phase II and III
trials. The FDA's review of an NDA can last from several months to several



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years, with the average review lasting two years. Drugs that successfully
complete this review may be marketed in the United States, subject to the
conditions imposed by the FDA in its approval. The FDA has been subject to
increasing pressure to allow drugs to reach the public more quickly. As a
result, in some instances the FDA has expedited the review process by granting
conditional approval of lifesaving drugs or those for conditions for which there
is no current treatment so that they can be marketed while Phase IV trials are
being conducted. In recent years, the FDA has encouraged the use of computer
assisted NDAs (CANDAs) in an effort to expedite the approval process.

INDUSTRY TRENDS

         Preclinical and clinical trials were historically performed almost
exclusively by in-house personnel at the major pharmaceutical companies. In
recent years, pharmaceutical companies have begun to outsource clinical trials
management to CROs, which has resulted in significant growth in the CRO
industry. The Company believes worldwide research and development expenditures
by the pharmaceutical and biotechnology industries reached an estimated $54.5
billion in 2000, approximately $24 billion of which was spent on preclinical and
clinical trials, with approximately $5 billion being outsourced to CROs. Global
research and development expenditures for the major pharmaceutical companies
have grown at an estimated annual rate of 8.3% during the past five years.

         The contract research industry derives substantially all of its revenue
from the research and development (R&D) expenditures of pharmaceutical,
biotechnology and medical device companies. The Company believes that certain
industry trends have led pharmaceutical and biotechnology companies to increase
the use of CROs for preclinical and clinical trials. These trends include the
following:

         INCREASING COST CONTAINMENT PRESSURES. The increasing pressure to
control rising health care costs, and the penetration of managed health care and
health care reform have caused the following changes in the pharmaceutical
industry:

         -        MANAGED CARE ORGANIZATIONS. Managed care organizations have
                  become major participants in the delivery of pharmaceuticals.
                  These organizations limit the selection of drugs from which
                  affiliated physicians may prescribe, thus increasing the
                  competition among pharmaceutical companies to develop more
                  effective products in a shorter time frame.

         -        CONSOLIDATION. As pharmaceutical companies seek to create
                  economies of scale, there have been several large mergers
                  within the pharmaceutical industry, and as a result of these
                  mergers, the pharmaceutical industry has experienced
                  large-scale employee lay-offs and other cutbacks.

         -        OTHER FACTORS. Factors such as competition from generic drugs
                  following patent expiration, more stringent regulatory
                  requirements and the increasing complexity of clinical trials
                  have resulted in increasing market pressure on profit margins.

         In response to these cost containment pressures, a number of United
States pharmaceutical companies have publicly committed to hold net effective
price increases generally in line with inflation. In the area of clinical
development, many pharmaceutical and biotechnology companies are seeking to
reduce the high fixed costs associated with peak-load staffing by reducing
internal clinical staff and relying on a combination of internal resources and
external resources such as CROs, thereby shifting fixed costs to variable costs.

         GLOBALIZATION OF CLINICAL RESEARCH AND DEVELOPMENT. Due to the
increasing cost of new drug development, many projects that are not expected to
achieve sufficient annual worldwide revenue are abandoned. Pharmaceutical
companies are increasingly attempting to maximize returns from a given drug by
pursuing regulatory approvals in multiple countries simultaneously rather than
sequentially. A pharmaceutical company seeking approval in a country in which it




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lacks experience or internal resources will frequently turn to a CRO for
assistance in interacting with regulators or in organizing and conducting
clinical trials. The Company believes that the globalization of clinical
research and development activities has increased the demand for CRO services.

         INCREASINGLY COMPLEX AND STRINGENT REGULATION; NEED FOR TECHNOLOGICAL
CAPABILITIES. Increasingly complex and stringent regulatory requirements
throughout the world have increased the volume of data required for regulatory
filings and escalated the demand for data collection and analysis during the
drug development process. In recent years, the FDA and corresponding regulatory
agencies of Canada, Japan and the EC have commenced discussions to develop
common standards for preclinical and clinical studies and the format and content
of applications for new drug approvals. Further, the FDA encourages the use of
computer-assisted filings in an effort to expedite the approval process. As
regulatory requirements have become more complex, the pharmaceutical and
biotechnology industries are increasingly outsourcing to CROs to take advantage
of their data management expertise, technological capabilities and global
presence.

         ESCALATING RESEARCH AND DEVELOPMENT EXPENDITURES. Global research and
development expenditures for the major pharmaceutical companies have grown at an
estimated annual rate of 8.3% during the past five years. Such expenditures have
resulted from an increased emphasis on developing effective products for the
treatment of chronic disorders and life threatening acute conditions such as
infectious diseases. The cost of developing therapies for chronic disorders,
such as arthritis, Alzheimer's disease and osteoporosis is higher because the
treatments must be studied for a longer period to demonstrate their
effectiveness in curbing the chronic disorder and to determine any possible
long-term side effects.

         REDUCING DRUG DEVELOPMENT TIME REQUIREMENTS. Pharmaceutical and
biotechnology companies face increased pressure to bring new drugs to market in
the shortest possible time, thereby reducing costs, maintaining market share and
accelerating realization of revenue. Currently, total development of a new drug
takes approximately eight to twelve years, a significant portion of a drug's
twenty year period for protection under United States patent laws. Certain
clients of the Company have initiated plans to reduce this time to approximately
five to seven years. Pharmaceutical and biotechnology companies are attempting
to increase the speed of new product development, and thereby maximize the
period of marketing exclusivity and economic returns for their products, by
outsourcing development activities to CROs. The Company believes that CROs are
often able to perform the needed services with a higher level of expertise or
specialization, and more quickly, than a pharmaceutical or biotechnology company
could perform such services internally. In addition, some pharmaceutical and
biotechnology companies are beginning to contract with large full-service CROs
to conduct preclinical and all phases of clinical trials for new product
programs lasting several years, rather than separately contracting specific
phases of drug development to several different CROs. The Company believes this
approach may result in shorter overall development times. In anticipation of
this trend, the Company has established itself as a firm capable of taking a
pharmaceutical from its initial testing through its licensing for
commercialization.

         NEW DRUG DEVELOPMENT PRESSURES. The Company believes that R&D
expenditures have increased as a result of the constant pressure to develop and
patent products, and to respond to the demand for products for an aging
population and for the treatment of chronic disorders and life-threatening
conditions. In response to this pressure, pharmaceutical and biotechnology
companies are outsourcing preclinical and clinical trials in order to use their
own resources to develop additional drugs.

         GROWTH OF BIOTECHNOLOGY INDUSTRY. The biotechnology industry and the
number of drugs produced by it, which require FDA approval, have grown
substantially over the past decade. Many biotechnology companies have chosen not
to expend resources to develop sufficient staff or expertise to conduct clinical
trials in-house, but rather have utilized providers such as CROs to perform
these services.




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         As the use of CROs increases, so do the demands placed upon CROs that
provide a broad range of services in multiple countries for larger clients. For
example, larger CROs generally remain competitive by sustaining internal growth
and by opening offices in additional countries in order to have a presence near
either a client or a large test site. Increasingly, large clients require CROs
to meet certain credit-worthiness standards. As a result of these factors, CROs
have experienced an increasing demand for working capital and strong balance
sheets in order to maintain their competitive standing within the industry.

BUSINESS STRATEGY

         The outsourcing of preclinical and clinical trials for pharmaceutical,
biotechnology and medical device products is estimated to be growing at least as
much as the rate of growth in global research and development expenditures by
major pharmaceutical companies (estimated to be at an annual rate of 8.3% during
the past five years). The CRO industry is highly fragmented with many small,
limited-service providers as well as in-house research departments, universities
and teaching hospitals, and other CROs, many of which have substantially greater
resources than the Company. However, the Company believes it is well positioned
to take advantage of the trend toward outsourcing as a result of its
demonstrated ability to provide a broad range of professional, cost-effective
preclinical and clinical research and development services worldwide. The
Company's strategy is comprised of the following elements:

         PROVIDE COMPREHENSIVE PRECLINICAL AND CLINICAL RESEARCH SERVICES. The
Company offers a broad range of clinical research services and believes that its
knowledge and experience in all stages of clinical research enhance its
credibility with prospective clients. The Company has the capability to provide
a full range of preclinical and clinical services on a turnkey basis, which the
Company believes can be especially important to clients without significant
relevant regulatory expertise, such as biotechnology companies and international
pharmaceutical companies seeking to enter new geographic markets. To meet the
needs of specific clients, the Company offers its services separately or as an
integrated package. This allows a client to use the Company to design a
protocol, conduct a trial, analyze the results of one or more trials, prepare
and submit a new drug application or computer-assisted filing to the FDA, or for
any combination of these services. This approach enables the Company to respond
to clients' requirements with flexibility and also allows it to establish a
relationship with a new client with a particular service that may in turn lead
to larger, more comprehensive projects. In addition, the Company believes its
preclinical capabilities increase the prospect of being awarded contracts for
later stage testing after satisfactory completion of the preclinical tests.

         PROVIDE DRUG DEVELOPMENT SERVICES. The Company attempts to establish
study protocols and expertise in a therapeutic area prior to the formal
announcement of a new product by a pharmaceutical or biotechnology company.
Manufacturers prefer to outsource to CROs that already have knowledge and have
developed testing models in the relevant area and that can therefore more
quickly begin the new drug application process. The Company has several senior
managers with therapeutic expertise and IND application experience to provide
the necessary drug development expertise to biotechnology and pharmaceutical
customers. ClinTrials has demonstrated depth and high quality performance in the
following areas: anti-viral and other infectious diseases, cardiology, central
nervous system, gastroenterology, endocrinology, respiratory and urology,
osteoporosis evaluation, cardiovascular pharmacology, biomaterials testing,
bio-marker assays and infusion delivery. The Company is a leader in the
investigation of blood substitutes and protease inhibitors and in the conducting
of megatrials (trials involving more than 1,000 participants).

         PROVIDE INTERNATIONAL PRESENCE. The Company provides clinical research
and development services to major United States and European pharmaceutical and
biotechnology companies. The Company conducts multi-national clinical trials
designed to pursue concurrent regulatory approvals in multiple countries. The
Company believes that this experience is a competitive advantage, as
pharmaceutical and biotechnology companies increasingly are pursuing regulatory




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approvals simultaneously in multiple countries. The Company has a data
management facility in Glasgow, Scotland to provide more comprehensive services
to its United States clients doing business abroad and to better market its
services to existing and potential European clients. Since 1996, the Company
expanded its geographic reach by opening trials management offices in Australia,
France, Israel and Poland and has delivered services in over 30 countries with
the most recent offices opened in Madrid, Spain and Munich, Germany in 2000.

         PURSUE STRATEGIC ALLIANCES. In these arrangements, the client agrees to
provide the Company with a preferred vendor status and is guaranteed adequate
staffing and competitive pricing over a multi-year period. The Company believes
this type of arrangement results in more predictable pricing to the client and
more efficient management of the Company's resources, and potentially increases
the amount of work outsourced to the Company by the strategic partner. Over the
past five years, the Company has entered into strategic alliances with eleven
pharmaceutical companies. In addition, the Company's preclinical subsidiary has
preferred provider relationships, which, in contrast to strategic alliances, are
noncontractual, informal relationships in which the client makes the Company
among its first choices of testing service providers.

         INVEST IN INFORMATION SYSTEMS TECHNOLOGY. The Company maintains a
commitment to investments in technology supporting increased productivity and
client communications with a focus on clinical and management information
systems. The Company continues to invest heavily in the information technology
infrastructures required to support the creation, maintenance, and statistical
analysis of clinical databases. A sustained focus on reducing client delivery
timelines while maintaining compliance with the dynamic regulated environment is
a key strategy. Clinical systems in support of data management and clinical
monitoring have been aligned with the business strategy to allow data managers
to develop the majority of the edit checks for a study. The Company is also
focused on improving the efficiency of the query resolution/management process,
one of the most costly areas of clinical data processing. In addition, the
Company produces custom interactive voice response systems (CTRansmit Voice(TM))
which allows investigators to enroll patients into a trial, control drug
utilization and distribution, and have access to patient diary information
through use of a touch tone telephone. The Company has implemented a web-based
reporting tool (CTRansmit Web(TM)) to distribute, in a secure manner, clinical
trial information and status to authorized users (sponsors, investigative sites,
etc.). The web-based information delivery system allows authorized users ready
access to study information. The Company's information systems have transitioned
into the Year 2000 and 2001 without problems.

         INCREASE CLIENT BASE AND NUMBER OF CONTRACTS. ClinTrials' strategy is
to seek contracts with new clients and new contracts with existing clients in
different therapeutic areas and to cross-sell other services to existing
clients.

         PURSUE SELECTED ACQUISITIONS. The Company may pursue strategic
acquisitions of selected CROs or related businesses that provide one or more of
the following: complementary services, expanded geographic presence, new
therapeutic expertise or complementary client bases.

SERVICES

         The Company's services and related products include drug development
services, preclinical and clinical trials management services, clinical data
management and biostatistical services, and product registration services. The
Company's services can be provided separately or as an integrated package.
Services from each of these categories can be utilized for the development and
execution of a turnkey NDA.

         DRUG DEVELOPMENT SERVICES. The Company employs several key employees
with therapeutic expertise, IND and NDA application experience and
pharmaceutical company experience who assist customers in the development
process of new medicines.



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         PRECLINICAL TRIALS. The Company designs and conducts preclinical
research programs, based principally upon animal models, that generate the data
required to establish safe starting dosages and the potential efficacy of a
product in humans, and to determine organ toxicity and other potential risks of
human usage. Preclinical trial reports are submitted to regulatory authorities
in support of an application to initiate clinical testing in humans. The Company
also offers analytical laboratory services including assessment of product
concentration in suspensions, solutions, animal feed and plasma radiometric
determination in metabolite profiling of biological tissues, and radiopurity
assessment of dose solution.

         CLINICAL TRIALS MANAGEMENT SERVICES. The Company offers complete
services for the design, placement, performance and management of clinical trial
programs, a critical element in obtaining regulatory approval for drugs and
medical devices. The Company has performed services in connection with trials in
many therapeutic areas. The Company's multi-disciplinary clinical trials group
has the ability to examine a product's existing preclinical and clinical data
for the purposes of designing protocols for clinical trials in order to
ascertain evidence of the product's safety and efficacy.

         The Company manages every aspect of trials in Phases I through IV,
including design of protocols, operations manuals, identification and
recruitment of trial investigators, initiation of sites, monitoring for strict
adherence to GCP, site visits to ensure compliance with protocol procedures and
proper collection of data, interpretation of trial results and report
preparation. Substantially all of the Company's current clinical projects
involve Phase II, III or IV clinical trials, which, in most cases, are
significantly larger and more complex than Phase I trials.

         In the CRO industry, trials involving tests on over 1,000 patients over
a period of several years at multiple sites are becoming more routine. These
trials have resulted from the drug companies' emphasis on treating and curing
chronic disorders and the resulting need to thoroughly test large numbers of
patients for long-term side effects of new drugs. The Company is experienced in
managing such trials and actively markets its abilities in this area.

         Clinical trials are monitored for strict adherence to GCP. Efficient
data collection, form design, detailed operations manuals and site visits by the
Company's clinical research associates (CRA) are employed to determine whether
clinical investigators and their staffs follow established protocols and
accurately record the findings of the trials.

         The Company assists clients with one or more of the following steps of
clinical trials:

         -        STUDY PROTOCOL. The protocol defines the medical issues the
                  study seeks to examine and the statistical tests that will be
                  conducted. Accordingly, the protocol defines: (i) the
                  frequency and type of laboratory and clinical measures that
                  are to be tracked and analyzed; (ii) the number of patients
                  required to produce a statistically valid result; (iii) the
                  period of time over which they must be tracked; and (iv) the
                  frequency and dosage of drug administration.

         -        CASE REPORT FORMS. Once the study protocol has been finalized,
                  special forms for recording the desired information must be
                  developed. These forms are called Case Report Forms (CRFs).
                  The CRF may change at different stages of a trial. The CRF for
                  one patient in a given study may consist of as many as 100
                  pages or more.

         -        SITE AND INVESTIGATOR RECRUITMENT. The drug is administered to
                  patients by investigators, at hospitals, clinics or other
                  locations, referred to as sites. Potential investigators may
                  be identified by the drug sponsor or the CRO, which then
                  solicits the investigators' participation in the study.





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                  Generally, the investigators contract directly with the
                  Company. The trial's success depends on the successful
                  identification and recruitment of investigators with proper
                  expertise and an adequate base of patients who satisfy the
                  requirements of the study protocol.

         -        PATIENT ENROLLMENT. The investigators find and enroll patients
                  suitable for the study according to the study protocol.
                  Prospective patients are required to review information about
                  the drug and its possible side effects and sign an informed
                  consent to record their knowledge and acceptance of potential
                  side effects. Patients also undergo a medical examination to
                  determine whether they meet the requirements of the study
                  protocol. Patients then receive the drug and are examined by
                  the investigator as specified by the study protocol.

         -        STUDY MONITORING AND DATA COLLECTION. As patients are examined
                  and tests are conducted in accordance with the study protocol,
                  data are recorded on CRFs and laboratory reports. The data are
                  collected from study sites by specially trained CRAs. CRAs
                  visit sites regularly to ensure that the CRFs are completed
                  correctly and that all data specified in the protocol are
                  collected. CRFs are reviewed for consistency and accuracy
                  before their data are entered into an electronic database for
                  purposes of medical and statistical analysis.

         -        MEDICAL AFFAIRS. Throughout the course of a clinical trial,
                  the Company may provide various medical research and services
                  including medical monitoring of clinical trials,
                  interpretation of clinical trial results and preparation of
                  clinical study reports.

         -        REPORT WRITING. The results of statistical analysis of data
                  collected during the trial together with other clinical data
                  are included in a final report generated for inclusion in a
                  regulatory document.

         CLINICAL DATA MANAGEMENT AND BIOSTATISTICAL SERVICES. The Company's
data management professionals assist in the design of protocols and CRFs, as
well as training manuals and training sessions for investigational staff, to
ensure that data are collected in an organized and consistent format. Databases
are designed according to the analytical specifications of the project and the
particular needs of the client. Prior to data entry, the Company's personnel
screen the data to detect errors, omissions and other deficiencies in completed
CRFs. The Company provides clients with data abstraction, data review and
coding, data entry, database verification and editing and problem data
resolution.

         The Company's biostatistics professionals provide biostatistical
consulting, database design, data analysis and statistical reporting. The
Company's biostatisticians provide clients with assistance in all phases of drug
development. These professionals develop and review protocols, design
appropriate analysis plans and design report formats to address the objectives
of the study protocol as well as the client's individual objectives. Working
with the programming staff, biostatisticians perform appropriate analyses and
produce tables, graphs, listings and other applicable displays of results
according to the analysis plan. Additionally, biostatisticians assist clients
before panel hearings at the FDA.

         The Company believes that its data management and biostatistical
services capabilities can be utilized by a client more effectively when packaged
as part of its total clinical trials management services and used to monitor
Phases I through IV rather than just one phase. This packaging permits
technology transfer resulting in a faster and less costly clinical trial
process, as the data are collected and analyzed more rapidly and the decision to
move to the next phase can be made more quickly.




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         PRODUCT REGISTRATION SERVICES. The Company provides comprehensive
product registration services throughout Europe and the United States. The
Company provides regulatory strategy formulation, document preparation, Good
Manufacturing Practice consultation and acts as liaison with the FDA and other
regulatory agencies. Although these services have not generated material revenue
to date, the Company offers these services in order to provide the full range of
services necessary to remain competitive in the CRO industry.

         The Company works closely with clients to devise regulatory strategies
and comprehensive product development programs. The Company's regulatory affairs
experts review existing published literature, assess the scientific background
of a product, assess the competitive and regulatory environment, identify
deficiencies and define the steps necessary to obtain registration in the most
expeditious manner. Through this service, the Company helps its clients
determine the feasibility of developing a particular product or product line.

         The Company's regulatory affairs professionals have experience in the
analysis, preparation and submission of FDA regulatory documents covering a wide
range of products, including drugs and over-the-counter products. The Company
also has experience with preparing regulatory documentation for submission to
European regulatory authorities.

CLIENTS AND MARKETING

         The Company has served many of the leading pharmaceutical companies in
the United States and the European Community. The Company's clients also include
companies in the biotechnology and medical device industries. For the year ended
December 31, 2000, the Company recognized revenue on contracts with 200 clients.
During 2000, 68% of the Company's net service revenue was derived from
pharmaceutical companies, 31% from biotechnology companies and 1% from medical
device companies. In 1999, such companies contributed 84%, 13% and 3% of net
service revenue, respectively.

         The Company has had, and will continue to have, certain clients from
which at least 5% of the Company's overall revenue are generated over multiple
contracts. Such concentrations of business are not uncommon within the CRO
industry. During 2000, the Company generated approximately 9% of its net service
revenue from multiple unrelated contracts with a major pharmaceutical company.
No other client represented 5% or more of the Company's net revenue in 2000. The
Company's contracts are entered into with numerous therapeutic areas or
divisions within each client and frequently involve different decision-makers.
Thus, there is a reduced likelihood that the Company would simultaneously lose
all contracts with any single client.

         Marketing activities are conducted by the Company's business
development personnel based in each of the Company's locations. In response to
the highly technical nature of the Company's business, most business development
personnel have scientific backgrounds. Additionally, the Company conducts
selective advertising programs in trade journals and publications and, from time
to time, employs direct mailings of information to existing and potential
clients. The Company also attends and exhibits at selected trade shows in the
United States and Europe.

CONTRACTUAL ARRANGEMENTS

         The Company generally is awarded contracts based, among other things,
upon its response to requests for proposal (RFP) received from pharmaceutical,
biotechnology and medical device companies. The contract may require the Company
to design a protocol, conduct the trial, analyze the results of one or more of
the trials, prepare and submit an IND, NDA or CANDA to the FDA, or perform any
combination of these services. After negotiating a letter of intent or
definitive contract for clinical studies, the Company, and in many cases the
client, will coordinate the selection of clinical investigators and conduct
pre-study site visits. The clinical investigators, in conjunction with the



                                       9
<PAGE>   11


Company, are then responsible for enrolling participants in the trial, which may
include persons with a given disorder or disease, healthy persons and persons
within defined populations. Informed consents, in accordance with FDA and
institutional regulations, are obtained from all participants. Change orders to
existing contracts are typically generated at the request of the client based on
the results of the trial to date and include changes in the scope of the trial
and in the services to be provided by the Company. The Company may record
additional revenue or reduce backlog as a result of change orders.

         Most contracts are fixed priced multi-year contracts that require a
portion of the contract amount to be paid at or near the time the trial is
initiated. These contracts may also include milestone payments that are
contingent upon the achievement of specific requirements. The Company generally
bills its clients upon the completion of negotiated performance requirements
and, to a lesser extent, on a date certain basis. The Company's contracts
generally may be terminated with or without cause. In the event of termination,
the Company is typically entitled to all sums owed for work performed though the
notice of termination and all costs associated with termination of the study. In
addition, some of the Company's contracts provide for an early termination fee,
the amount of which usually declines as the trial progresses. Termination or
delay in the performance of a contract occurs for various reasons, including,
but not limited to, unexpected or undesired results, inadequate patient
enrollment or investigator recruitment, production problems resulting in
shortages of the drug, adverse patient reactions to the drug, or the client's
decision to de-emphasize a particular trial.

         The Company's strategic alliance agreements, although larger in size
and covering several projects over multiple years, are generally the same as the
contracts described above.

BACKLOG

         Backlog consists of anticipated net service revenue from signed
contracts, letters of intent, and verbal commitments where work has not yet been
completed. Once work under a contract, letter of intent or verbal commitment
commences, net service revenue is recognized over the life of the contract using
the percentage-of-completion method of accounting or in accordance with contract
terms as services are provided. Since it is common for clients to authorize
projects and the Company to commence providing services before a contract is
signed, the Company believes reported backlog should consist of anticipated net
revenue from uncompleted projects which have been authorized by a client,
through a written contract or otherwise. At December 31, 2000, 1999 and 1998,
the Company's backlog was $140.2 million, $98.9 million and $105.1 million,
respectively. The Company believes that backlog is not a consistent indicator of
future results because backlog can be affected by a number of factors, including
the variable size and duration of projects, many of which are performed over
several years. Additionally, projects may be terminated by the client or delayed
by regulatory authorities for many reasons, including unexpected test results.
Moreover, the scope of a project can change during the course of a study.

COMPETITION

         The Company primarily competes with pharmaceutical companies' own
in-house research departments, other CROs, universities and teaching hospitals.
The CRO industry is still fragmented, with full-service CROs with global
capacities, several mid-size CROs and many small, limited-service providers. In
recent years, several large, full-service competitors have emerged, some of
which have substantially greater capital and other resources, are better known
and have more experienced personnel than the Company. The Company's largest
competitors include Quintiles Transnational Corp., Covance Inc., Parexel
International Corporation, Pharmaceutical Product Development, Inc. ICON Plc,
and Kendle International, Inc. The recent trend toward industry consolidation is
likely to result in heightened competition among the larger CROs. The larger
CROs are increasingly required to have substantial amounts of working capital in
order to sustain internal growth and international expansion, and to meet the
credit-worthiness standards of their larger clients. The Company believes that


                                       10
<PAGE>   12



clients choose a CRO based on several factors, the most important of which is
the quality of the work performed for existing clients. Other important factors
include references from existing clients, trials management experience and
scientific knowledge related to specific therapeutic areas, the price for the
services performed, the ability to organize and manage large-scale trials on a
global basis, the ability to manage large and complex medical databases, and the
ability to hire and retain qualified investigators. The Company believes that it
competes favorably in these areas.

GOVERNMENT REGULATION

         The clinical investigation of new pharmaceutical, biotechnology and
medical device products is highly regulated by governmental agencies. The
purpose of United States federal regulations is to ensure that only those
products that have been proven to be safe and effective are made available to
the public. The FDA has set forth regulations and guidelines that pertain to
applications to initiate trials of products, approval and conduct of studies,
report and record retention, informed consent, applications for the approval of
new products, and post-marketing requirements. Pursuant to FDA regulations, CROs
that assume obligations of a drug sponsor are required to comply with applicable
FDA regulations and are subject to regulatory action for failure to comply with
such regulations. In the United States, the historical trend has been in the
direction of increased regulation by the FDA. The Company believes that many
pharmaceutical, biotechnology and medical device companies do not have the staff
and/or the available expertise to comply with all of the regulations and
standards, and this has contributed and will continue to contribute to the
growth of the CRO industry.

         The services provided by the Company are ultimately subject to FDA
regulation in the United States and comparable agencies in other countries,
although the level of applicable regulation in other countries is generally less
comprehensive than regulation present in the United States. The Company is
obligated to comply with FDA regulations governing such activities as selecting
qualified investigators, obtaining required forms from investigators, verifying
that patient informed consent is obtained, monitoring the validity and accuracy
of data, verifying drug/device accountability, and instructing investigators to
maintain records and reports. The Company must also maintain records for each
study for specified periods for inspection by the study sponsor and the FDA
during audits. If such audits document that the Company has failed to adequately
comply with Federal regulations and guidelines, it could have a material adverse
effect on the Company. In addition, the Company's failure to comply with
applicable regulations could possibly result in termination of ongoing research
or the disqualification of data, either of which could also have a material
adverse effect on the Company, including, without limitation, damage to the
Company's reputation.

POTENTIAL LIABILITY AND INSURANCE

         The Company monitors the testing of new drugs on human volunteers
pursuant to study protocols in clinical trials. Clinical research involves a
risk of liability for personal injury or death to patients from adverse
reactions to the study drug, many of whom are seriously ill and are at great
risk of further illness or death as a result of factors other than their
participation in a trial. Additionally, although the Company's employees do not
have direct contact with the participants in a clinical trial, the Company, on
behalf of its clients, contracts with physicians who render professional
services, including the administration of the substance being tested, to such
persons. As a result, the Company could be held liable for bodily injury, death,
pain and suffering, loss of consortium, other personal injury claims and medical
expenses arising from a clinical trial.

         The Company believes that the risk of liability to patients in clinical
trials is mitigated by various regulatory requirements, including the role of
institutional review boards (IRBs) and the need to obtain each patient's
informed consent. The FDA requires each human clinical trial to be reviewed and
approved by the IRB at each study site. An IRB is an independent committee that
includes both medical and non-medical personnel and is obligated to protect the
interests of patients enrolled in the trial. After the trial begins, the IRB
monitors the protocol and the measures designed to protect patients, such as the
requirement to obtain informed consent.




                                       11
<PAGE>   13


         To reduce its potential liability, the Company seeks to obtain
indemnity provisions in its contracts with clients and, in some cases, with
investigators contracted by the Company on behalf of its clients. These
indemnities generally do not, however, protect the Company against certain of
its own actions such as those involving negligence or misconduct. Moreover,
these indemnities are contractual arrangements that are subject to negotiation
with individual clients, and the terms and scope of such indemnities vary from
client to client and from trial to trial. The Company also, in some
circumstances, indemnifies and holds harmless its clients and investigators
against liabilities incurred by such parties due to the actions or inactions of
the Company. Finally, since the financial performance of these indemnities is
not secured, the Company bears the risk that an indemnifying party may not have
the financial ability to fulfill its indemnification obligations. The Company
could be materially and adversely affected if it were required to pay damages or
incur defense costs in connection with a claim that is outside the scope of an
indemnity or where the indemnity, although applicable, is not performed in
accordance with its terms.

         The Company, as a professional contract research organization, is held
to a high standard of work product and failure to adhere to such professional
standards could result in allegations by the client of an error or omission by
the Company. The Company maintains errors and omissions professional liability
insurance in amounts it believes to be sufficient. This insurance provides
coverage for the vicarious liability of the Company due to negligence of the
physicians who contract with the Company, as well as suits by clients of the
Company that allege a clinical trial was compromised due to an error or omission
by the Company. The Company also carries contingent products liability if for
any reason the manufacturer of a study drug allegedly causes bodily injury and
can not or will not indemnify the Company. There can be no assurance that the
Company's insurance coverage will be adequate, or that insurance coverage will
continue to be available on terms acceptable to the Company. Other than the
litigation described in Item 3. Legal Proceedings, the Company has not received
any claims resulting from vicarious professional liability or errors or
omissions in performing clinical trials.

INTELLECTUAL PROPERTY

         The Company believes that factors such as its ability to attract and
retain highly-skilled professional and technical employees and its project
management skills and experience are significantly more important to its
performance than are any intellectual property rights developed by it. The
Company has developed, and continually develops and updates, certain computer
software related methodologies. The Company seeks to maintain its rights in the
software it develops through a combination of contract, copyright and trade
secret protection. While the Company does not consider any of this software or
methodology to be material to the Company's business, the Company believes its
software capabilities provide important benefits to its clients.

EMPLOYEES

         At December 31, 2000, the Company had 1,571 employees, of which 69 held
a Ph.D. or M.D. degree, 11 held D.V.M. degrees and 134 others held masters
degrees. 17% of the Company's employees are located in the United States, 59%
are located in Canada and the remaining 24% are located in Europe and other
international locations. The Company believes that its relations with its
employees are good.

         The Company's performance depends on its ability to attract and retain
a qualified management, professional, scientific and technical staff.
Competition from both the Company's clients and competitors for skilled
personnel is high. While the Company has not experienced any significant
problems in attracting or retaining qualified staff to date, there can be no
assurance the Company will be able to avoid these problems in the future.




                                       12
<PAGE>   14


RISK FACTORS

         Statements in this Annual Report on Form 10-K that are not descriptions
of historical facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that are subject to risks and
uncertainties. The following matters constitute cautionary statements
identifying important factors with respect to any such forward-looking
statements, including certain risks and uncertainties that could cause actual
results to differ materially from those reflected in any such forward-looking
statements.

         DEPENDENCE ON GROWTH OF RESEARCH AND DEVELOPMENT ACTIVITIES. The
Company is a global provider of preclinical and clinical research services to
pharmaceutical, biotechnology and medical device clients. As such, the Company's
ability to win new outsourced contracts from the pharmaceutical industry is
dependent upon the rate of research and development expenditure by that
industry. This in turn can be influenced by a variety of factors, including
mergers within the pharmaceutical industry, the availability of capital to the
biotechnology industry, and by the impact of government reimbursement rates for
medicare and medicaid programs. Consequently, the success of the company to grow
and win new outsourced contracts is highly dependent upon the ability of the
pharmaceutical and biotechnology industries to continue to spend on R&D at rates
close to or at historical levels.

         FLUCTUATION IN QUARTERLY OPERATING RESULTS. The Company's quarterly
operating results have fluctuated as a result of factors such as delays
experienced in implementing or completing particular clinical trials,
termination of clinical trials and the costs associated with integrating
acquired operations. Since a high percentage of the Company's operating costs
are relatively fixed while revenue recognition is subject to fluctuation, minor
variations in the timing of contracts or the progress of trials may cause
significant variations in quarterly operating results. Results of one quarter
are not necessarily indicative of results for the next quarter.

         DEPENDENCE ON CERTAIN INDUSTRIES AND CLIENTS. The Company provides
services primarily to the pharmaceutical and biotechnology industries.
Accordingly, the Company's net service revenue is substantially dependent on
these industries' expenditures on research and development. Although these
expenditures are large, the number of potential CRO clients is relatively
limited and it is not uncommon for a CRO to derive over 5% of its revenue from
multiple contracts with a single client. The Company has in the past derived and
may in the future derive a significant portion of its net service revenue from a
relatively limited number of clients. The loss of any such client could
materially adversely affect the Company's results of operations. In 2000, one
client accounted for approximately 9% of the Company's net service revenue. No
other client accounted for more than 5% of the Company's net service revenue
during 2000. The Company's operations could be materially and adversely affected
by, among other factors, any economic downturn in the pharmaceutical or
biotechnology industries, any decrease in their research and development
expenditures, or a change in the governmental regulations pursuant to which
these industries operate. Furthermore, management believes that the Company has
benefited to date from the increasing tendency of pharmaceutical and
biotechnology companies to outsource the performance and analysis of large
clinical research projects to independent parties. Should this tendency be
reduced or halted entirely, the Company's operations would be materially and
adversely affected.

         LOSS OF CLINICAL RESEARCH CONTRACTS. Clients of the Company generally
have the right to terminate a contract at any time during a clinical trial,
potentially causing periods of excess capacity and reductions in net service
revenue and net income. Trials may be terminated for various reasons, including
unexpected or undesired results, inadequate patient enrollment or investigator
recruitment, production problems resulting in shortages of the drug, adverse
patient reactions to the drug or the client's decision to de-emphasize a
particular trial. The termination of any one trial would typically not have a
material adverse impact on the Company. The loss of a large trial or the
simultaneous loss of multiple trials, however, could result in unplanned periods
of excess capacity and adversely affect the Company's backlog, future revenue



                                       13
<PAGE>   15


and profitability. In most instances, if a contract is terminated, the Company
is entitled to receive revenue earned to date as well as, at times, a
termination fee. However, because the Company's contracts are predominately
fixed price contracts, the Company bears the risk of cost overruns.

         HEALTH CARE INDUSTRY REFORM. The health care industry is subject to
changing political, economic and regulatory influences that may affect the
pharmaceutical and biotechnology industries. In recent years, several
comprehensive health care reform proposals were introduced in the United States
Congress. The intent of the proposals was, generally, to expand health care
coverage for the uninsured and reduce the growth of total health care
expenditures. While none of the proposals were adopted, the United States
Congress may again address health care reform. In addition, foreign governments
may also undertake health care reforms in their respective countries.
Implementation of government health care reform may adversely affect research
and development expenditures by pharmaceutical and biotechnology companies,
which could decrease the business opportunities available to the Company. The
Company is unable to predict the likelihood of such or similar legislation being
enacted into law or the effect such legislation would have on the Company.

         EXCHANGE RATE FLUCTUATIONS. The Company is exposed to foreign currency
risk by virtue of its international operations. The Company conducts business in
several foreign countries. Approximately 75%, 69%, and 55% of the Company's net
revenue for the years ended December 31, 2000, 1999, and 1998, respectively,
were derived from the Company's operations outside the United States. During
2000, the Company's preclinical operations in Canada generated 70% of the
Company's non-U.S. revenue. Accordingly, exposure exists to potentially adverse
movement in foreign currency rates, especially the Canadian dollar and British
pound sterling. Canada and the United Kingdom have traditionally had relatively
stable currencies in recent years and it is expected these conditions will
persist over the next twelve months. However, the Company continually monitors
international events which could affect currency values. Accordingly, from time
to time, the Company uses foreign exchange forward contracts to hedge the risk
of changes in foreign currency exchange rates associated with contracts in which
the expenses for providing services are incurred in the functional currency of
the Company's foreign subsidiary, but payments on contracts are made by the
client in another currency. The objective of these contracts is to reduce the
effect of foreign currency exchange rate fluctuations on the Company's foreign
subsidiary's operating results. During the year ended December 31, 2000, the
Company did not have any derivative instruments and did not engage in any
hedging activities.

         NO ASSURANCE OF SUCCESSFUL INTEGRATION OF ACQUISITIONS. A significant
component of the Company's historical growth has come through acquisitions of
other CROs, and the Company's growth strategy includes possible additional
acquisitions. Any acquisitions which the Company may pursue will involve risks,
including the possible inability to integrate the operations and services of the
acquired business, the expenses incurred in connection with the acquisition, the
diversion of management's attention from other business concerns and the
potential loss of key employees of the acquired business. Acquisitions of
foreign companies also may involve the additional risks of, among others,
integration of foreign business practices and overcoming language barriers.
There can be no assurance that any such acquisitions will not have a material
adverse effect upon the Company's results of operations, financial condition or
business prospects.

         VOLATILITY OF STOCK MARKET PRICE. From time to time, there may be
significant volatility in the market price for the Company's Common Stock. If
revenues, earnings or new contract orders fail to meet expectations of the
investment community, then there could be an immediate and significant impact on
the trading price for the Company's Common Stock. Additionally, changes in
earnings estimated by analysts, general conditions in the economy, the financial
markets or the health care, pharmaceutical, biotechnology or CRO industries,
implementation of proposed healthcare reforms or other developments affecting
the Company could cause the market price of the Company's Common Stock to
fluctuate substantially. In recent years the stock market has experienced
extreme price and volume fluctuations. This volatility has had a significant
effect on the market prices of securities issued by many companies for reasons
unrelated to their operating performance.



                                       14
<PAGE>   16


ITEM 2. PROPERTIES

         The Company both owns and leases its facilities. The Company's
corporate headquarters and U. S. operations are located near Research Triangle
Park, North Carolina; the preclinical operations are conducted near Montreal,
Quebec in Canada; international operations are located in Maidenhead, U.K.;
Glasgow, Scotland; Brussels, Belgium; Melbourne, Australia; Milan, Italy; Paris,
France; Tel Aviv, Israel, Warsaw, Poland, Madrid, Spain, and Munich, Germany.
The Company believes that the space owned and leased is adequate for the
Company's operations and that the leases generally reflect market rates in their
respective geographic areas. The expiration dates of the leases range from 2001
to 2013. All of the Company's clinical operations facilities in Europe and other
international locations are leased.

         The Company utilizes both owned and leased laboratory and office space
in Montreal, Quebec to perform its preclinical services. The majority of the
Company's preclinical services are performed at a 200,000 square foot building
that is owned by the Company's Canadian subsidiary, BioResearch.

         In 1998, the Company moved its Research Triangle Park clinical
operations into a newly constructed building in Cary, North Carolina. The
corporate headquarters relocated from Nashville, Tennessee to this location in
May 1999. The Company leases approximately 178,000 square feet in this building
under a lease that expires in 2013. Due to over capacity, the Company has
sub-leased 36,624 square feet to two different parties under three year
agreements expiring in years 2003 and 2004. During 2001, the Company plans to
sub-lease an additional 46,289 square feet in this building.

ITEM 3. LEGAL PROCEEDINGS

         The Company is from time to time subject to claims and suits arising in
the ordinary course of business. In the opinion of management, there are
currently no proceedings to which the Company is a party that will have a
material adverse effect upon its operations or financial condition.

         In 1991, a customer commenced legal action against the predecessor of
the Company's preclinical subsidiary claiming damages resulting from statistical
errors in carrying out two clinical research studies. Judgment was rendered in
February 1997 by the Superior Court of Montreal against the Company's subsidiary
in the amount of approximately $536,000 plus interest to accrue from September
1991. The Company's preclinical subsidiary, now responsible for this action, has
reserves adequate to cover the current judgment amount. The Company's
preclinical subsidiary has appealed the amount of the judgment and the
subsidiary's insurance company has appealed the portion of the judgment, which
obligates the insurance company to pay the insurance claim related to this
litigation. The Company believes it is entitled, subject to certain limitations,
to indemnification from a former owner of the predecessor for a portion of this
claim. In the opinion of management, the ultimate resolution of such pending
legal proceedings will not have a material effect on the Company's financial
position or results of operations. The appeal was heard in April 2000 by the
Quebec court of appeals but no judgement has yet been rendered.

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

         None.



                                       15
<PAGE>   17




                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's Common Stock trades on The Nasdaq Stock Market (Nasdaq)
under the symbol CCRO. On February 16, 2001, the last reported sale price for
the Common Stock on Nasdaq was $5.75. As of December 31, 2000, the Company had
approximately 192 holders of record of the Common Stock and the Company
estimates an additional 3,293 beneficial owners. The following table shows the
high and low sales prices for the Common Stock as reported by Nasdaq for the
periods indicated:

                                                     HIGH             LOW
                                                     ----             ---

2001

  First Quarter (through February 16, 2001)          $ 6.50          $ 5.00


2000

  First Quarter                                      $ 5.00          $ 3.00
  Second Quarter                                       3.88            2.28
  Third Quarter                                        5.38            2.63
  Fourth Quarter                                       5.75            4.03


1999

  First Quarter                                      $ 6.63          $ 3.41
  Second Quarter                                       6.31            3.75
  Third Quarter                                        6.88            4.75
  Fourth Quarter                                       5.38            3.00


         The Company has paid no dividends since inception and does not intend
to pay dividends in the foreseeable future.



                                       16
<PAGE>   18


ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

                            CLINTRIALS RESEARCH INC.
                      SELECTED CONSOLIDATED FINANCIAL DATA
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>

                                                2000            1999            1998            1997            1996
                                             ---------       ---------       ---------       ---------       ---------
<S>                                          <C>             <C>             <C>             <C>             <C>
STATEMENT OF OPERATIONS
Net service revenue                          $ 105,325       $  96,931       $  89,691       $ 102,990       $  94,719
Operating costs and expenses:
    Direct costs                                66,164          58,317          62,936          69,279          56,510
    Selling, general and administrative
       expenses                                 35,749          36,034          38,823          37,982          25,852
    Depreciation and amortization                5,888           6,155           5,738           5,485           3,916
    Restructuring charge                            --              --           6,364           1,650              --
    Gain on Sale of Ovation                         --            (484)             --              --              --
    Nashville lease termination                     --             845              --              --              --
    Write-off of purchase option costs              --           2,178              --              --              --
                                             ---------       ---------       ---------       ---------       ---------
Income (loss) from operations                   (2,476)         (6,114)        (24,170)        (11,406)          8,441
Other income                                       303             417             812           1,204             972
                                             ---------       ---------       ---------       ---------       ---------
Income (loss) before income taxes               (2,173)         (5,697)        (23,358)        (10,202)          9,413
Provision (benefit) for income Taxes             2,054           1,348          (1,226)         (3,806)          2,988
                                             ---------       ---------       ---------       ---------       ---------
Net income (loss)                            $  (4,227)      $  (7,045)      $ (22,132)      $  (6,396)      $   6,425
                                             =========       =========       =========       =========       =========

Earnings (loss) per Share:
    Basic                                    $   (0.23)      $   (0.39)      $   (1.22)      $   (0.35)      $    0.42

    Diluted                                  $   (0.23)      $   (0.39)      $   (1.22)      $   (0.35)      $    0.40
Weighted average common shares
    outstanding for computation of
    earnings (loss) per Share:
       Basic                                    18,402          18,116          18,207          18,156          15,447
       Diluted                                  18,402          18,116          18,207          18,156          15,927

BALANCE SHEET DATA (END OF PERIOD)
Cash, cash equivalents, and held-to-
  maturity securities                        $   9,178       $   7,889       $  10,867       $  28,275       $  38,134
Working capital                                 14,825          16,311          17,226          44,641          51,925
Total assets                                   120,776         116,404         123,096         144,979         157,223
Long-term debt obligations                         238             381             265              --              --
Stockholders' equity                            77,983          85,168          89,556         115,778         125,020
</TABLE>


Note:    The financial data presented above for the periods presented are not
         strictly comparable due to the significant effect of the acquisition of
         BioResearch on July 31, 1996.




                                       17
<PAGE>   19


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

The Company's Annual Report on Form 10-K includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
including, without limitation, statements containing the words believes,
anticipates, intends, expects and words of similar import. Such statements
include statements concerning the Company's ability to obtain new business and
to accurately estimate the timing of recognition of revenue in the backlog due
to variability in size, scope and duration of projects, regulatory delays, study
results which lead to reductions or cancellations of projects, other decisions
totally within the control of its clients and its ability to immediately affect
the level of operating expenses, as well as statements concerning the Company's
business strategy, acquisition strategy, operations, cost savings initiatives,
industry, economic performance, financial condition, liquidity and capital
resources, existing government regulations and changes in, or the failure to
comply with, governmental regulations. Such statements are subject to various
risks and uncertainties. The Company's actual results may differ materially from
the results discussed in such forward-looking statements because of a number of
factors, including those identified in this Management's Discussion and Analysis
of Financial Condition and Results of Operations, in the Risk Factors section
included in Part I, Item 1, and elsewhere in this report. Although the Company
believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that such statements included in this
document will prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the Company or
any other person that the objectives and plans of the Company will be achieved.
The forward-looking statements are made as of the date of this Annual Report and
the Company assumes no obligation to update such statements or to update the
reasons that actual results could differ from those projected in the
forward-looking statements.

OVERVIEW

The Company is a full-service contract research organization (CRO) serving the
pharmaceutical, biotechnology and medical device industries. The Company
designs, monitors and manages preclinical and clinical trials, provides clinical
data management and biostatistical services and offers product registration and
pharmacoeconomic services throughout the United States, Canada and Europe. The
Company generates substantially all of its revenue from the preclinical and
clinical testing of new pharmaceutical and biotechnology products.

The Company's contracts are typically fixed-price contracts that range in
duration from a few months to a few years. The contracts usually require a
portion of the contract amount to be paid at or near the time the trial is
initiated with the remaining contract amount paid in intervals based upon the
completion of certain negotiated performance requirements or milestones and, to
a lesser extent, on a date certain basis. The Company's contracts generally may
be terminated with or without cause. In the event of termination, the Company is
typically entitled to all sums owed for work performed through the notice of
termination and all costs associated with termination of the study. In addition,
at times some of the Company's contracts provide for an early termination fee,
the amount of which usually declines as the trial progresses. Termination or
delay in the performance of a contract may occur for various reasons, including,
but not limited to, unexpected or undesired results, inadequate patient
enrollment or investigator recruitment, production problems resulting in
shortages of the drug, adverse patient reactions to the drug, or the client's
decision to de-emphasize a particular trial.

Revenue for contracts is recorded in accordance with the American Institute of
Certified Public Accountants (AICPA) Statement of Position (SOP) 81-1 Accounting
for Performance of Construction-Type and Certain Product-Type Contracts as costs
are incurred and includes estimated earned fees or profits calculated on the
basis of the relationship between costs incurred and total estimated costs
(cost-to-cost type of percentage-of-completion method of accounting).
Additionally, the Company may begin work on a project before a contract is
signed for customers with whom the Company has formed a strategic alliance or
has a long-term relationship. Revenue is recognized in the same manner as signed
contracts based upon terms verbally agreed with the customer. Revenue is
affected by the mix of trials conducted and the degree to which labor and
facilities are utilized. The Company recognizes revenue related to contract
modifications when realization is assured and the amounts can be reasonably



                                       18
<PAGE>   20


determined. The Company also follows the views of the Staff of the Securities
and Exchange Commission's Staff Accounting Bulletin No. 101 (SAB 101) on revenue
recognition. SAB 101 states that revenue should be recognized when all four of
these conditions exist: persuasive evidence of an arrangement exists; services
have been rendered or delivery has occurred; the price is fixed or determinable;
and collectibility is reasonably assured. When estimated contract costs indicate
that a loss will be incurred on a contract, the entire loss is provided for in
such period. The Company routinely subcontracts with third party investigators
in connection with multi-site clinical trials and with other third party service
providers for laboratory analysis and other specialized services. Subcontractor
costs are passed through to clients and, in accordance with industry practice,
are included in gross service revenue. Subcontractor costs are accrued on a
straight-line basis over the investigator phase of the contract. Subcontractor
services may vary significantly from contract to contract; therefore, changes in
gross service revenue may not be indicative of trends in revenue growth.
Accordingly, the Company views net service revenue, which consists of gross
service revenue less subcontractor costs, as its primary measure of revenue
growth. The Company has had, and is expected to continue to have, certain
clients from which at least 5% of the Company's overall revenue is generated
over multiple contracts. Such concentrations of business are not uncommon within
the CRO industry.

Backlog consists of anticipated net service revenue from signed contracts,
letters of intent, and verbal commitments where work has not yet been completed.
Once work under a contract, letter of intent or verbal commitment commences, net
service revenue is recognized over the life of the contract using the
percentage-of-completion method of accounting or in accordance with contract
terms as services are provided. Since it is common for clients to authorize
projects and the Company to commence providing services before a contract is
signed, the Company believes reported backlog should consist of anticipated net
revenue from uncompleted projects which have been authorized by a client,
through a written contract or otherwise. At December 31, 2000, backlog was
approximately $140.2 million, as compared to approximately $98.9 million at
December 31, 1999. The Company believes that backlog is not a consistent
indicator of future results because backlog can be affected by a number of
factors, including the variable size and duration of projects, many of which are
performed over several years. Additionally, projects may be terminated by the
client or delayed by regulatory authorities for many reasons, including
unexpected test results. Moreover, the scope of a project can change during the
course of a study.

The Company's core European operation consists of offices in Maidenhead, United
Kingdom and Brussels, Belgium. The Company expanded its ability to perform
global clinical trials by opening offices in Australia, France, and Israel in
1996, Italy and Scotland in 1997, Poland in 1999 and Spain and Germany in 2000.
The Company is focused on generating new business while controlling its cost
structure.



                                       19
<PAGE>   21


RESTRUCTURING CHARGE

On April 24, 1998, the Company announced that its data management operations in
Lexington, Kentucky would be closed and consolidated into its new clinical
research center in Research Triangle Park, North Carolina. The Company recorded
a restructuring charge of $6.4 million in the second quarter of 1998 in
connection with the closing of the Company's Lexington facility, severance costs
for the termination of 90 employees and costs associated with lease commitments
following the Company's restructuring decision to consolidate facilities. The
1998 restructuring charge consisted of the following (in thousands):

<TABLE>
<CAPTION>

                                                                                 AMOUNT OF
                                                                              RESTRUCTURING
                                                                                  CHARGE
                                                                              -------------

<S>                                                                              <C>
      Write down of assets in connection with closure of Lexington facility     $1,983
      Lease costs associated with consolidation of facilities                    1,976
      Severance costs                                                            2,132
      Other                                                                        273
                                                                                ------
                                                                                $6,364
                                                                                ======

</TABLE>


The above lease, severance and other restructuring costs have been fully paid
and the related accrued expenses were zero at December 31, 2000 and 1999.

RESULTS OF OPERATIONS

The Company's operating segments consist of preclinical trials which are
performed by the Company's Canadian subsidiary and clinical trials which are
performed primarily in the United States and Europe. Summarized below (in
thousands) is the Company's net revenue and income (loss) from operations for
each reportable segment as defined by Financial Accounting Standards Board
Statement of Financial Accounting Standard No. 131, "Disclosures about Segments
of an Enterprise and Related Information." Other includes corporate expenses and
operations not directly related to the segments. See Segment Reporting note to
consolidated financial statements of the Company.

                                        2000            1999            1998
                                     ---------       ---------       ---------
      Net Revenue:
             U.S. Clinical           $  26,262       $  30,108       $  40,366
             Europe Clinical            23,364          19,914          11,128
                                     ---------       ---------       ---------
             Total Clinical             49,626          50,022          51,494
             Canada Preclinical         55,699          46,909          38,197
                                     ---------       ---------       ---------
             Total Company           $ 105,325       $  96,931       $  89,691
                                     =========       =========       =========

      Segment profit (loss):
             U.S. Clinical           $  (7,419)      $  (8,859)      $  (8,990)
             Europe Clinical            (3,058)             12          (9,520)
                                     ---------       ---------       ---------
             Total Clinical            (10,477)         (8,847)        (18,510)
             Canada Preclinical         12,136           8,231           5,851
             Other                      (4,135)         (5,498)        (11,511)
                                     ---------       ---------       ---------
             Total Company           $  (2,476)      $  (6,114)      $ (24,170)
                                     =========       =========       =========


                                       20
<PAGE>   22


YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

Net loss for the year ended December 31, 2000 was $4.2 million, or $0.23 diluted
loss per share, compared to net loss in the same period of 1999 of $7.0 million
or $0.39 diluted loss per share. The decrease in the net loss was primarily
attributable to significantly higher income from operations in the Company's
Canada Preclinical segment, slightly lower losses in the U.S. Clinical segment,
as well as lower corporate costs in 2000 compared to 1999. These improvements
were partially offset by higher losses in the Europe Clinical segment.
Additionally, in 1999 the Company recorded a $2.2 million write-off of purchase
option costs relating to MPI Research and Nashville lease termination costs of
$0.8 million to relocate the Company's headquarters to North Carolina.

The U.S. Clinical segment reported a 12.8% decline in net revenues for the year
ended December 31, 2000 compared to 1999. Lower levels of work performed from
backlog and new orders were experienced during the year 2000. The segment loss
for the year ended December 31, 2000 was $1.4 million lower than in 1999 due to
a lower cost structure and more appropriate levels of staffing of the direct
workforce in year 2000 compared to 1999.

The Europe Clinical segment reported 17.3% higher net revenues and a $3.1
million segment loss for the year ended December 31, 2000 compared to a
break-even level of segment income in 1999. The decline in the British pound and
other European currencies reduced this segment's net revenues by approximately
$1.5 million and the segment loss was reduced by approximately $300,000. Net
revenues increased in 2000 due to the Company's activities with ongoing
contracts and successful completion of a $3.7 million contract that had its only
revenue milestone in December 2000. Higher costs were experienced during the
year 2000 in anticipation of performing work on several other large contracts
that were delayed or slow to start during the summer of 2000. The delays and
slow contract starts-ups in Europe were caused by drug supply issues, regulatory
agencies putting trials on clinical hold for safety reasons, and institutional
review boards delaying trial starts for ethical considerations. Accordingly,
revenues were not recognized in proportion to the level of costs incurred during
the year.

Canada Preclinical reported 18.7% higher net revenues and 47.4% greater segment
profit for the year ended December 31, 2000 compared to 1999. These increases
were primarily due to continuing high demand for specialty studies in the
reproduction/infusion areas. These are generally shorter-term studies with
shorter startup times, and thus yield higher margins because of the higher level
of special technology requirements.

Based on average exchange rates computed daily, the Canadian dollar was
substantially the same but the British pound was 6.2% weaker in 2000 than in
1999 in relation to the U.S. dollar. Other European currencies were also lower
compared to the U.S. dollar. The decline in the British pound and other European
currencies reduced the Company's net revenues by approximately $1.5 million. The
Company's net loss was reduced by approximately $300,000 or $0.02 per common
share.

Net service revenue increased $8.4 million or 8.7% to $105.3 million in 2000
from $96.9 million in 1999. As discussed above, increases in the Europe Clinical
and Canada Preclinical segment revenues were partially offset by the decrease in
revenues in the U.S. Clinical segment.

Direct costs include compensation and benefits for billable employees as well as
other costs directly related to contracts. Direct costs increased 13.5% to $66.2
million in 2000 from $58.3 million in 1999 on a 8.7% increase in net revenue.
Direct costs increased as a percentage of net service revenue to 62.8% from
60.2% due to lower revenue in the U.S. Clinical segment, higher costs in the
Europe Clinical segment, partially offset by higher margins in Canada
Preclinical. Direct costs are based on the mix of contracts in progress and as a
percentage of net revenue may fluctuate from period to period dependent upon the
mix of contracts in the backlog. In addition, direct costs will fluctuate due to
changes in labor and facility utilization.



                                       21
<PAGE>   23


Selling, general and administrative costs decreased 0.8% to $35.7 million in
2000 from $36.0 million in 1999. Selling, general and administrative costs
decreased as a percentage of net service revenue to 33.9% from 37.2%. The
decrease as a percentage of net revenue is primarily attributable to higher
levels of net revenue while costs were slightly reduced as a result of cost
control measures. Selling, general and administrative costs, which primarily
includes compensation for administrative employees and costs related to
facilities, information technology and marketing, are relatively fixed in the
near term, while revenue is subject to fluctuation due primarily to variations
in the timing of contracts or the progress of clinical trials (both delays and
accelerations).

Depreciation and amortization expense decreased 4.3% to $5.9 million in 2000
compared to $6.2 million in 1999 as depreciation resulting from 2000 and 1999
capital expenditures were more than offset by a decrease in depreciation and
amortization for the closing of the Company's Nashville office in May 2000 and
the Lexington facility in April 1998. Additionally, capital expenditures during
2000 and 1999 have been lower than in prior years and, accordingly, certain
capital assets acquired prior to 1998 have become fully depreciated.

On January 4, 1999, the Company sold its pharmacoeconomic subsidiary, Ovation,
back to the principals from whom the shares were originally purchased, as part
of the Company's ongoing consolidation of U.S. operations into its Research
Triangle Park, North Carolina (RTP) facility. Pharmacoeconomic services are now
performed out of the Company's RTP facility as the Company retains the right to
use the ClinTrials Ovation name. The Company received 213,000 shares of its own
common stock in the sales transaction and recorded a gain on the sale of
$484,000.

The Company entered into an agreement to terminate the lease of its Nashville
office and accrued $845,000 in the first quarter of 1999 for costs related to
the termination of this lease. The termination of this lease relieved the
Company of approximately $11.0 million of future minimum lease payments. The
Company relocated its Corporate office to Research Triangle Park, North Carolina
in the second quarter of 1999.

The Company recorded a charge of $2,178,000 in the fourth quarter of 1999 to
write-off the purchase option costs included in other assets on the balance
sheet relating to MPI Research, a preclinical facility. The option expired March
31, 2000 and it was determined that as of December 31, 1999, it was unlikely to
be exercised. Accordingly, an asset impairment write-down was recognized in
1999.

Interest income, net of interest expense, was $0.3 million in 2000 compared to
$0.4 million in 1999 primarily due to lower cash balances available for
short-term investments and interest expense from borrowings under the Company's
domestic credit agreement.

The Company's provision for income taxes was $2.1 million and $1.3 million for
the years ended December 31, 2000 and 1999, respectively. This provision was
primarily due to the Company's Canadian operations. Future income taxes
associated with the Company's U.S. operations will be offset by available net
operating loss carryforwards. Accounting standards place certain limitations on
the recognition of net operating loss carryforwards. Accordingly, the Company
has recorded valuation allowances for the deferred tax assets related to the
Company's potential tax benefit of such loss carryforwards.



                                       22
<PAGE>   24


YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

Net loss for the year ended December 31, 1999 was $7.0 million, or $0.39 diluted
loss per share, compared to net loss in the same period of 1998 of $22.1 million
or $1.22 diluted loss per share. The decrease in the net loss was primarily
attributable to significantly improved results from operations in the Company's
Europe Clinical and Canada Preclinical segments, as well as lower corporate
costs in 1999 compared to 1998. Additionally, in 1998 the Company recorded a
$6.4 million restructuring charge (none in 1999). These improvements were
partially offset by the 1999 write-off of purchase option costs relating to MPI
Research of $2.2 million and Nashville lease termination costs of $0.8 million
to relocate the Company's headquarters to North Carolina in May 1999.

The U.S. Clinical segment reported a $10.3 million or 25.4% decline in net
revenues in 1999 compared to 1998 due to lower levels of backlog recognized in
the revenue stream in 1999. However, segment loss was slightly less in 1999
compared to 1998. Staffing levels of the direct labor workforce were lower
during 1999 than in 1998.

The Europe Clinical segment reported an $8.8 million or 79.0% increase in net
revenues during 1999 compared to 1998. New business orders were strong and
several significant contracts were completed in 1999. Segment profit totaled
$12,000 during 1999 compared to segment loss of $9.5 million in 1998. Improved
staffing levels and utilization of the direct labor workforce contributed to the
turnaround in 1999's results compared to 1998. Additionally, the new management
structure and related marketing and sales focus implemented during 1998 in
Europe contributed to the 1999 results.

The Canada Preclinical segment reported an $8.7 million or 23% increase in net
revenues in 1999 compared to 1998. Segment profit increased $2.4 million or 41%
in 1999 when compared to 1998. These increases were primarily due to continuing
high demand for specialty studies in the reproduction/infusion areas and an
increase in capacity to handle additional work. These are generally shorter-term
studies with shorter startup times, and thus yield higher margins because of the
higher level of special technology requirements.

Based on average exchange rates computed daily, the Canadian dollar and British
pound were minimally weaker in 1999 than in 1998 in relation to the U.S. dollar.
These changes did not significantly affect the Company's net revenues and did
not affect the Company's reported diluted loss per common share of $0.39.

Net service revenue increased $7.2 million or 8.1% to $96.9 million in 1999 from
$89.7 million in 1998. As discussed above, increases in the Europe Clinical and
Canada Preclinical segment revenues were partially offset by the decrease in
revenues in the U.S. Clinical segment.

Direct costs include compensation and benefits for billable employees as well as
other costs directly related to contracts. Direct costs decreased 7.3% to $58.3
million in 1999 from $62.9 million in 1998. Direct costs decreased as a
percentage of net service revenue to 60.2% from 70.2% due to improved staffing
levels and utilization of the direct labor workforce, primarily in the Europe
Clinical and Canada Preclinical segments. Direct costs are based on the mix of
contracts in progress and as a percentage of net revenue may fluctuate from
period to period dependent upon the mix of contracts in the backlog. In
addition, direct costs will fluctuate due to changes in labor and facility
utilization.

Selling, general and administrative costs decreased 7.2% to $36.0 million in
1999 from $38.8 million in 1998 primarily due to the termination of the
Company's Nashville lease and relocation of its Corporate office to North
Carolina in the second quarter of 1999 and a reduction in bad debt expense.
Furthermore, cost control measures in 1999 had the effect of reducing several
categories of selling, general and administrative expenses during 1999 compared
to 1998. Selling, general and administrative costs decreased as a percentage of
net service revenue to 37.2% from 43.3%. The decrease as a percentage of net





                                       23
<PAGE>   25


revenue is primarily attributable to higher levels of net revenue while costs
were reduced. Selling, general and administrative costs, which primarily
includes compensation for administrative employees and costs related to
facilities, information technology and marketing, are relatively fixed in the
near term, while revenue is subject to fluctuation due primarily to variations
in the timing of contracts or the progress of clinical trials (both delays and
accelerations).

Depreciation and amortization expense increased 7.3% to $6.2 million in 1999
compared to $5.7 million in 1998 as increased depreciation resulting from 1999
and 1998 capital expenditures was partially offset by a decrease in depreciation
and amortization for the closing of the Company's Nashville office in May 1999
and the Lexington facility in April 1998.

On January 4, 1999, the Company sold its pharmacoeconomic subsidiary, Ovation,
back to the principals from whom the shares were originally purchased, as part
of the Company's ongoing consolidation of U.S. operations into its Research
Triangle Park, North Carolina (RTP) facility. Pharmacoeconomic services are now
performed out of the Company's RTP facility as the Company retains the right to
use the ClinTrials Ovation name. The Company received 213,000 shares of the
Company's stock in the sales transaction and recorded a gain on the sale of
$484,000.

The Company entered into an agreement to terminate the lease of its Nashville
office and accrued $845,000 in the first quarter of 1999 for costs related to
the termination of this lease. The termination of this lease relieves the
Company of approximately $11.0 million of future minimum lease payments. The
Company relocated its Corporate office to Research Triangle Park, North Carolina
in the second quarter of 1999.

The Company recorded a charge of $2,178,000 in the fourth quarter of 1999 to
write-off the purchase option costs included in other assets on the balance
sheet relating to MPI Research, a preclinical facility. The option expired March
31, 2000 and it was determined that as of December 31, 1999, it was unlikely to
be exercised. Accordingly, an asset impairment write-down was recognized in
1999. The option was not exercised.

Interest income, net of interest expense, was $0.4 million in 1999 compared to
$0.8 million in 1998 primarily due to lower cash balances available for
short-term investments.

The Company's provision for income taxes was $1.3 million for the year ended
December 31, 1999. This provision was primarily due to the Company's Canadian
operations. Future income taxes associated with the Company's U.S. operations
will be offset by available net operating loss carryforwards. Due to the
restrictions that accounting standards place on loss carryforwards, the Company
has recorded valuation allowances for the deferred tax assets related to the
Company's potential tax benefit of such loss carryforwards. For the year ended
December 31, 1998, the Company recognized an income tax benefit of $1.2 million.
A partial tax benefit was recognized because of the ability to obtain tax refund
due and fully realize the income tax benefit on the Company's available U.S.
income tax loss carrybacks.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary operating cash needs on both a short-term and long-term
basis include the payment of salaries, office rent and travel expenses, as well
as capital expenditures. The Company has historically financed these
expenditures, as well as acquisitions, with cash flow from operations,
issuance's of equity securities and borrowings under its lines of credit. The
Company utilizes its working capital to finance these expenditures pending
receipt of its receivables. Contract receipts from the Company's clients vary
according to the terms of each contract.

Prerequisites for billings are generally established by contractual provisions
that include predetermined date certain payment schedules (which may include
payment at or near the time the trial is initiated), the achievement of
negotiated performance requirements or milestones, or the submission of required
billing detail. Unbilled receivables arise from those contracts under which
services performed exceed billings which are rendered upon the achievement of


                                       24
<PAGE>   26


certain negotiated performance requirements or on a date-certain basis. Advance
billings represent contractual billings for services not yet rendered. As of
December 31, 2000, the Company's advance billings totaled $12.8 million and its
accounts receivable of $35.4 million included $16.4 million of unbilled
receivables. The Company expects to bill and collect these unbilled receivables
within one year of revenue recognition. Cash receipts do not correspond to costs
incurred and revenue recognition (which is typically based on cost-to-cost type
of percentage of completion accounting) and therefore, the Company's cash flow
is influenced by the interaction of changes in receivables and advance billings.
The Company typically receives a low volume of large-dollar cash receipts. The
number of days sales outstanding in accounts receivable (which includes unbilled
receivables) was 94 days at December 31, 2000, compared to 111 days at December
31, 1999. The number of days sales outstanding in accounts receivable (which
includes unbilled receivables) net of advance billings was 61 days at December
31, 2000, compared to 82 days at December 31, 1999.

The Company had cash and cash equivalents of $9.2 million at December 31, 2000
as compared to $7.9 million at December 31, 1999.

During the year ended December 31, 2000, net cash generated by operating
activities totaled $3.1 million. The net loss of $4.2 million was more than
offset by depreciation and amortization of $7.0 million. Other changes in
balance sheet accounts provided a net increase in cash of approximately
$365,000.

Cash used in investing activities of $4.9 million during the year ended December
31, 2000 related to capital expenditures primarily for expenditures on facility
expansion in Canada Preclinical, computer system additions and upgrades, and
personal computer equipment. During the year ended December 31, 2000, the
Company borrowed $4.4 million under its domestic credit facility.

During the first quarter of 2000, the Company extended its $15.0 million
domestic credit facility through September 2001. The extension provides for
expansion capabilities to $25.0 million provided the Company meets certain
financial requirements. Credit availability under the Company's domestic line of
credit and foreign line of credit totals approximately $18.3 million. The lines
are collateralized by certain of the Company's assets and bear interest at a
fluctuating rate based either on the respective banks' prime interest rate or
the London Interbank Offered Rate (LIBOR), as elected by the Company. On
December 31, 2000, $4.4 million was outstanding under the Company's domestic
credit facility. Interest on outstanding borrowings under the domestic credit
agreement was based upon the LIBOR plus an applicable margin. The weighted
average interest rate during the year 2000 and at December 31, 2000 was 8.9%.
Credit availability at December 31, 2000 has been further reduced by issued
letters of credit of approximately $717,000. Borrowings available under the
lines of credit are subject to certain financial and operating covenants. The
Company is in compliance with these bank covenants.

On or before September 30, 2001, the Company may elect to exercise an extension
option under its domestic credit agreement whereby any or all of the then
outstanding balance may be termed out over six quarters. Under this extension
option, interest is due monthly and 5% of outstanding principal is due quarterly
beginning on the second quarterly date after exercise of the extension option.

The Company's Canadian subsidiary has outstanding borrowings of approximately
$336,000 from the Canadian government. This borrowing bears no interest and is
repayable in four equal annual installments beginning August 2000 and ending in
2003.

The Company expects to continue expanding its operations through internal growth
and strategic acquisitions. The Company expects such activities will be funded
from existing cash and cash equivalents, cash flow from operations, and
available borrowings under its Credit Facilities. Although pressure on cash
reserves is expected, the Company estimates that its sources of cash, including
its credit facilities, will be sufficient to fund the Company's current




                                       25
<PAGE>   27


operations, including planned capital expenditures, over the next year. There
may be acquisition or other growth opportunities which require additional
external financing, and the Company may from time to time seek to obtain
additional funds from public or private issuance's of equity or debt securities.
There can be no assurances that such financings will be available on terms
acceptable to the Company.

QUARTERLY RESULTS

The Company's quarterly operating results may fluctuate as a result of factors
such as delays experienced in implementing or completing particular clinical
trials and termination of clinical trials, the costs associated with integrating
acquired operations, foreign currency exchange fluctuations, as well as the
costs associated with opening new offices. Since a high percentage of the
Company's operating costs are relatively fixed while revenue is subject to
fluctuation, minor variations in the timing of contracts or the progress of
clinical trials (both delays and accelerations) may cause significant variations
in quarterly operating results. Results of one quarter are not necessarily
indicative of results for the next quarter.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133) which was required to be
adopted in years beginning after June 15, 1999. In July 1999, SFAS No. 137 was
issued which deferred for one year the effective date of SFAS No. 133 to all
fiscal quarters of all fiscal years beginning after June 15, 2000. On June 15,
2000, the FASB issued SFAS No. 138 which clarified and amended certain
provisions of SFAS No. 133. Accordingly, the Company plans to adopt SFAS No. 133
and No. 138 effective January 1, 2001.

From time to time, the Company uses foreign exchange forward contracts to hedge
the risk of changes in foreign currency exchange rates associated with contracts
in which the expenses for providing services are incurred in the functional
currency of the Company's foreign subsidiary, but payments on contracts are made
by the client in another currency. The Company does not anticipate that the
adoption of SFAS No. 133 and No. 138 will have a significant effect on the
financial statements of the Company. Furthermore, SFAS No. 133 and No. 138 would
not have affected the financial statements of the Company contained herein.
During the year ended December 31, 2000, the Company did not have any derivative
instruments and did not engage in any hedging activities.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin 101, "Revenue Recognition in Financial Statements" (SAB No. 101). SAB
No.101 summarizes certain of the SEC staff's views on applying generally
accepted accounting principles to revenue recognition. The Company adopted SAB
No. 101 in the quarter ended December 31, 2000 and it did not have a material
effect on its financial position or results of operations.

FOREIGN CURRENCY

The Company is exposed to foreign currency risk by virtue of its international
operations. The Company conducts business in several foreign countries.
Approximately 75%, 69%, and 55% of the Company's net revenue for the years ended
December 31, 2000, 1999, and 1998, respectively, were derived from the Company's
operations outside the United States. During 2000, the Company's preclinical
operations in Canada generated 70% of the Company's non-U.S. revenue.
Accordingly, exposure exists to potentially adverse movement in foreign currency
rates, especially the Canadian dollar and British pound sterling. Canada and the
United Kingdom have traditionally had relatively stable currencies in recent
years, however, the British pound sterling has declined by approximately 8%



                                       26
<PAGE>   28


since January 2000. The Company continually monitors international events which
could affect currency values. Accordingly, from time to time, the Company uses
foreign exchange forward contracts to hedge the risk of changes in foreign
currency exchange rates associated with contracts in which the expenses for
providing services are incurred in the functional currency of the Company's
foreign subsidiary, but payments on contracts are made by the client in another
currency. The objective of these contracts is to reduce the effect of foreign
currency exchange rate fluctuations on the Company's foreign subsidiary's
operating results. During the year ended December 31, 2000, the Company did not
have any derivative instruments and did not engage in any foreign currency
hedging activities.

Additionally, the Company's consolidated financial statements are denominated in
U.S. dollars and, accordingly, changes in the exchange rates between the
Company's subsidiaries' local currency and the U.S. dollar will affect the
translation of such subsidiaries' financial results into U.S. dollars for
purposes of reporting the Company's consolidated financial results. Translation
adjustments are reported with accumulated other comprehensive income (loss) as a
separate component of stockholders' equity. Such adjustments may in the future
be material to the Company's financial statements.

INCOME TAXES

The Company's financial statements do not reflect U.S. or additional foreign
taxes on the possible distribution of undistributed earnings of foreign
subsidiaries as those earnings have been permanently reinvested. Should the
Company determine the need to distribute these undistributed earnings of foreign
subsidiaries, it would be subject to both U.S. income taxes (subject to an
adjustment for foreign tax credits) and withholding taxes payable to various
countries.

The Company's provision for income taxes was $2.1 million and $1.3 million for
each of the years ended December 31, 2000 and 1999, respectively. These
provisions were primarily due to the Company's Canadian operations. Future
income taxes associated with the Company's U.S. operations will be offset by
available net operating loss carryforwards. Due to the restrictions that
accounting standards place on loss carryforwards, the Company has recorded
valuation allowances for the deferred tax assets related to the Company's
potential tax benefit of such loss carryforwards. For the year ended December
31, 1998, the Company recognized an income tax benefit of $1.2 million. A
partial tax benefit was recognized because of the ability to obtain tax refund
due and fully realize the income tax benefit on the Company's available U.S.
income tax loss carrybacks.

EUROPEAN MONETARY UNION

Within Europe, the European Economic and Monetary Union (the "EMU") introduced a
new currency, the Euro, on January 1, 1999. The new currency is in response to
the EMU's policy of economic convergence to harmonize trade policy, eliminate
business costs associated with currency exchange and to promote the free flow of
capital, goods and services.

On January 1, 1999, the participating countries adopted the Euro as their local
currency, initially available for currency trading on currency exchanges and non
cash (banking) transactions. The existing local currencies, or legacy
currencies, are planned to remain legal tender through January 1, 2002.
Beginning on January 1, 2002, Euro-denominated bills and coins are planned to be
issued for cash transactions. For a period of nine months from this date, both
legacy currencies and the Euro are planned to be legal tender. On or before July
1, 2002, the participating countries are planning to withdraw all legacy
currency and use the Euro exclusively.

The introduction of the Euro may have potential implications for the Company's
existing operations. Currently, Germany, Spain, Belgium, France and Italy are
participating countries in the EMU in which the Company has operations. While
one cannot predict such events, many authorities expect non-participating



                                       27
<PAGE>   29


European Union countries, such as the United Kingdom, to eventually join the
EMU. The Company does not currently expect to experience any operational
disruptions or to incur substantial costs as a result of the introduction of the
Euro that would materially affect the Company's liquidity or capital resources.
A substantial portion of the Company's contracts with customers provide for
payment in U.S. dollars, Canadian dollars, and British pound sterling;
accordingly, the Euro has not been used except to a minor degree.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is a global provider of preclinical and clinical research services
to pharmaceutical, biotechnology and medical device clients. As such, the
Company's ability to win new outsourced contracts from the pharmaceutical
industry is dependent upon the rate of research and development expenditure by
that industry. This in turn can be influenced by a variety of factors, including
mergers within the pharmaceutical industry, the availability of capital to the
biotechnology industry, and by the impact of government reimbursement rates for
medicare and medicaid programs. Consequently, the success of the company to grow
and win new outsourced contracts is highly dependent upon the ability of the
pharmaceutical and biotechnology industries to continue to spend on R&D at rates
close to or at historical levels.

The Company is exposed to foreign currency risk by virtue of its international
operations. The Company conducts business in several foreign countries.
Approximately 75%, 69%, and 55% of the Company's net revenue for the years ended
December 31, 2000, 1999, and 1998, were derived from the Company's operations
outside the United States. During 2000, the Company's preclinical operations in
Canada generated 70% of the Company's non-U.S. revenue. Accordingly, exposure
exists to potentially adverse movement in foreign currency rates, especially the
Canadian dollar and British pound sterling. Canada and the United Kingdom have
traditionally had relatively stable currencies in recent years, however, the
British pound sterling has declined by approximately 8% since January 2000. The
Company continually monitors international events which could affect currency
values. Accordingly, from time to time, the Company uses foreign exchange
forward contracts to hedge the risk of changes in foreign currency exchange
rates associated with contracts in which the expenses for providing services are
incurred in the functional currency of the Company's foreign subsidiary, but
payments on contracts are made by the client in another currency. The objective
of these contracts is to reduce the effect of foreign currency exchange rate
fluctuations on the Company's foreign subsidiary's operating results.

Additionally, the Company's consolidated financial statements are denominated in
U.S. dollars and, accordingly, changes in the exchange rates between the
Company's subsidiaries' local currency and the U.S. dollar will affect the
translation of such subsidiaries' financial results into U.S. dollars for
purposes of reporting the Company's consolidated financial results. Translation
adjustments are reported with accumulated other comprehensive income (loss) as a
separate component of stockholders' equity. Such adjustments may in the future
be material to the Company's financial statements.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The information for this item is set forth herein on pages F-1 through
F-22.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.



                                       28
<PAGE>   30


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

Information concerning this Item is incorporated herein by reference to the
Company's definitive proxy materials for the Company's 2001 annual meeting of
stockholders.

ITEM 11. EXECUTIVE COMPENSATION

Information concerning this Item is incorporated herein by reference to the
Company's definitive proxy materials for the Company's 2001 annual meeting of
stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information concerning this Item is incorporated herein by reference to the
Company's definitive proxy materials for the Company's 2001 annual meeting of
stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On January 30, 1998, the Company entered into an option agreement (the MPI
Option) with MPI Research, LLC (MPI) and its shareholders, Jerry R. Mitchell,
M.D., Ph.D. and William U. Parfet, who each owned 50% of MPI. Dr. Mitchell was
the President, Chief Executive Officer and Chairman of the Board of Directors of
the Company until August 2000 and Mr. Parfet was the Company's Director of
Business Planning and Analysis until April 1999. Pursuant to the MPI Option, the
Company paid $1,500,000 in cash in exchange for an exclusive option to purchase
all of the outstanding stock of MPI at its fair market value at any time on or
prior to March 31, 2000. The shareholders of MPI had the right to cancel the MPI
Option at any time after March 31, 1999, by returning the $1,500,000 cash
without interest, provided they gave the Company written notice of their intent
to cancel the option and the Company did not exercise the option within twenty
business days of receipt of such notice.

The Company recorded an asset impairment charge of $2,178,000 in the fourth
quarter of 1999 to write-off the purchase option costs included in other assets
on the balance sheet relating to MPI Research. The option expired March 31, 2000
and it was determined that as of December 31, 1999, it was unlikely to be
exercised. The option was not exercised.



                                       29
<PAGE>   31


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

       (a)    Financial Statements and Financial Statement Schedule

              1.  The consolidated financial statements of the Company filed as
                  part of this Report are listed in the attached Index to
                  Consolidated Financial Statements and Financial Statement
                  Schedule on page F-1.

              2.  Reference is hereby made to pages F-1 and F-22 of this report
                  for the financial statement schedule required by Regulation
                  S-X.

              3.  The exhibits filed as part of this Report are listed in Item
                  14c below.
       (b)    Reports on Form 8-K. None.
       (c)    Exhibits.

EXHIBIT NO.         DESCRIPTION
-----------         -----------

   3.1 --           Restated Certificate of Incorporation, as amended, of the
                    Registrant (incorporated by reference to Exhibit 3.1 to the
                    Company's Annual Report on Form 10-K for the year ended
                    December 31, 1993)

   3.2 --           Restated Bylaws of the Registrant (incorporated by
                    reference to Exhibit 3.2 to the Company's Registration
                    Statement No. 33-69586 on Form S-1)

   4.1 --           Restated Certificate of Incorporation, as amended, of the
                    Registrant (see Exhibit 3.1)

   4.2 --           Restated Bylaws of the Registrant (see Exhibit 3.2)

   4.3 --           Specimen Common Stock Certificate (incorporated by
                    reference to Exhibit 4.3 to the Company's Annual Report on
                    Form 10-K for the year ended December 31, 1993)

   10.1 --          Executive Compensation Plans and Arrangements (a) Form of
                    Employment Agreement between the Company and certain of its
                    officers (incorporated by reference to Exhibit 10.1 (a) to
                    the Company's Annual Report on Form 10-K for the year ended
                    December 31, 1997); (b) Employment Agreement between the
                    Company and Michael F. Ankcorn (incorporated by reference to
                    Exhibit 10.1(b) to the Company's Annual Report on Form 10-K
                    for the year ended December 31, 1996); (c) Form of
                    Employment Agreement between the Company and its President,
                    Chief Executive Officer and Chairman of the Board
                    (incorporated by reference to Exhibit 10.1(c) to the
                    Company's Annual Report on Form 10-K for the year ended
                    December 31, 1997); (d) Form of Employment Agreement between
                    the Company and S. Colin Neill (incorporated by reference to
                    Exhibit 10.1 (d) to the Company's Annual Report on Form 10-K
                    for the year ended December 31, 1998); (e) Form of Amendment
                    to Employment Agreement between the Company and Jerry R.
                    Mitchell, M.D., Ph.D.; (f) Form of Amendment to Employment
                    Agreement between the Company and Paul J. Ottaviano; (g)
                    Form of Amendment to Employment Agreement between the
                    Company and S. Colin Neill

   10.2 --          Form of Indemnification Agreement between the Registrant
                    and each of its directors (incorporated by reference to
                    Exhibit 10.2 to the Company's Registration Statement No.
                    33-69586 on Form S-1)

   10.3 --          1989 Stock Option Plan, as amended (incorporated by
                    reference to Exhibit 10.5 to the Company's Registration
                    Statement No. 33-69586 on Form S-1)

   10.4 --          Amendment No. 4 to 1989 Stock Option Plan (incorporated
                    by reference to Exhibit 10.5 to the Company's Annual Report
                    on Form 10- K for the year ended December 31, 1994)

   10.5 --          Profit Sharing 401(k) Plan (incorporated by reference to
                    Exhibit 10.6 to the Company's Registration Statement No.
                    33-69586 on Form S-1)

   10.6 --          Lease Agreements for the Registrant's Research Triangle
                    Park, North Carolina office space (incorporated by reference
                    to Exhibit 10.11 to the Company's Registration Statement No.
                    33-69586 on Form S-1)


                                       30
<PAGE>   32


   10.6.1 --        Sublease Agreement dated June 3, 1994 for additional
                    space in Research Triangle Park, North Carolina
                    (incorporated by reference to Exhibit 10.8.1 to the
                    Company's Annual Report on Form 10-K for the year ended
                    December 31, 1994)

   10.7 --          Lease Agreement for the Registrant's Lexington, Kentucky
                    office space (incorporated by reference to Exhibit 10.12 to
                    the Company's Registration Statement No. 33-69586 on Form
                    S-1)

   10.8 --          Lease Contract for the Registrant's Brussels, Belgium
                    office space (incorporated by reference to Exhibit 10.13 to
                    the Company's Registration Statement No. 33-69586 on Form
                    S-1)

   10.9 --          Agreement for Lease for the Registrant's Maidenhead,
                    England office space (incorporated by reference to Exhibit
                    10.14 to the Company's Registration Statement No. 33-69586
                    on Form S-1)

   10.10 --         (a) Second Amended and Restated Loan and Security
                    Agreement dated December 8, 1993 by and between NationsBank
                    of Tennessee, N.A., the Registrant and its subsidiaries
                    (incorporated by reference to Exhibit 10.11 to the Company'
                    Annual Report on Form 10-K for the year ended December 31,
                    1993) (b) Loan and Security Agreement dated March 27, 1998
                    by and between NationsBank of Tennessee, N.A., the
                    Registrant and its subsidiaries (incorporated by reference
                    to Exhibit 10.1 to the Company's Quarterly Report for the
                    period ended March 31, 1998)

   10.11 --         Lease Agreement dated December 19, 1995 for the Company's
                    headquarters space in Nashville, Tennessee (incorporated by
                    reference to Exhibit 10.12 to the Company's Annual Report on
                    Form 10-K for the year ended December 31, 1995)

   10.12 --         Asset Purchase Agreement among Bio-Research Laboratories
                    Ltd., certain shareholders thereof, and the Company
                    (incorporated by reference to the Company's Current Report
                    on Form 8-K filed on June 19, 1996)

   10.13 --         Lease dated September 30, 1996 for new offices
                    (commencing in 1998) in Cary, North Carolina (incorporated
                    by reference to Exhibit 10.14 to the Company's Annual Report
                    on Form 10-K for the year ended December 31, 1996)

   10.14 --         Option Agreement to purchase MPI Research, LLC dated
                    January 30, 1998 between the Company and Jerry R. Mitchell,
                    M.D., Ph.D. and William U. Parfet (incorporated by reference
                    to Exhibit 10.14 to the Company's Annual Report on Form 10-K
                    for the year ended December 31, 1997)

   10.15 --         1998 Nonqualified Stock Option Plan for Directors
                    (incorporated by reference to Exhibit A to the Company's
                    Proxy Statement for the annual meeting of stockholders held
                    on May 11, 1998 as filed with the SEC on April 10, 1998)

   10.16 --         Amendment No. 6 to 1989 Stock Option Plan of ClinTrials
                    Research Inc. (incorporated by reference to Exhibit B to the
                    Company's Proxy Statement for the annual meeting of
                    stockholders held on May 11, 1998 as filed with the SEC on
                    April 10, 1998)

   10.17 --         1999 Long-Term Incentive Compensation Plan of ClinTrials
                    Research Inc. (incorporated by reference to Exhibit A to the
                    Company's Proxy Statement for the annual meeting of
                    stockholders held on June 22, 1999 as filed with the SEC on
                    May 26, 1999)

   10.18 --         Amended and Restated Loan and Security Agreement dated
                    March 30, 2000 by and among Bank of America, N.A., a
                    national banking association and the successor to
                    NationsBank of Tennessee, N.A., and the Registrant and its
                    U.S. subsidiaries (incorporated by reference to the
                    Company's Quarterly Report on Form 10-Q as filed with the
                    SEC on August 10, 2000)

   10.19 --         Form of Employment Agreement between the Company and its
                    President of the Americas, Graham S. May, M.D. (incorporated
                    by reference to the Company's Quarterly Report on Form 10-Q
                    as filed with the SEC on August 10, 2000)

                                       31
<PAGE>   33
   10.20 --         Amendment No. 2 to Employment Agreement between the
                    Company and its President and Chief Executive Officer, Paul
                    J. Ottaviano (incorporated by reference to the Company's
                    Quarterly Report on Form 10-Q as filed with the SEC on
                    November 13, 2000)

   10.21 --         Amendment No. 2 to Employment Agreement between the
                    Company and its Senior Vice President and Chief Financial
                    Officer, S. Colin Neill (incorporated by reference to the
                    Company's Quarterly Report on Form 10-Q as filed with the
                    SEC on November 13, 2000)

      21 --         List of Subsidiaries of the Registrant

      23 --         Consent of Independent Auditors





                                       32
<PAGE>   34


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

CLINTRIALS RESEARCH INC.

By:      /s/ Paul  J. Ottaviano                                  March 2, 2001
         -----------------------------------------------
         Paul J. Ottaviano
         President and Chief Executive Officer, Director

Pursuant to the requirements of the Securities Exchange Act of 1934 this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>


NAME                                                              TITLE                                   DATE
----                                                              -----                                   ----
<S>                                              <C>                                                 <C>
/s/ S. COLIN NEILL                               Senior Vice President and                            March 2, 2001
----------------------------                     Chief Financial Officer
S. Colin Neill                                   (Principal Financial and
                                                 Accounting Officer)

/s/ EDWARD G. NELSON                             Director and Chairman of the Board                   March 2, 2001
----------------------------
Edward G. Nelson

/s/ RICHARD J. ESKIND                            Director                                             March 2, 2001
----------------------------
Richard J. Eskind

/s/ IRWIN B. ESKIND                              Director                                             March 2, 2001
----------------------------
Irwin B. Eskind, M.D.

/s/ ROSCOE R. ROBINSON                           Director                                             March 2, 2001
----------------------------
Roscoe R. Robinson, M.D.

</TABLE>



                                       33
<PAGE>   35





                            CLINTRIALS RESEARCH INC.
                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
                          FINANCIAL STATEMENT SCHEDULE

<TABLE>
<CAPTION>

                                                                                                        PAGE
                                                                                                        ----

<S>                                                                                                       <C>
Report of Independent Auditors                                                                          F-2

Consolidated Balance Sheets as of December 31, 2000 and 1999                                            F-3

Consolidated Statements of Operations for the Years Ended
      December 31, 2000, 1999 and 1998                                                                  F-4

Consolidated Statements of Cash Flows for the Years
      Ended December 31, 2000, 1999 and 1998                                                            F-5

Consolidated Statements of Stockholders' Equity for the Years
      Ended December 31, 2000, 1999 and 1998                                                            F-6

Notes to Consolidated Financial Statements                                                              F-7

Quarterly Financial Information (Unaudited)                                                             F-21

Consolidated Financial Statement Schedule

      Schedule II - Valuation and Qualifying Accounts                                                   F-22

</TABLE>


                                      F-1
<PAGE>   36


                         REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders

ClinTrials Research Inc.

We have audited the accompanying consolidated balance sheets of ClinTrials
Research Inc. and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2000. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ClinTrials
Research Inc. and subsidiaries at December 31, 2000 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

                                                           /s/ ERNST & YOUNG LLP


Raleigh, North Carolina
February 13, 2001, except for Note 15,
as to which the date is February 22, 2001



                                      F-2
<PAGE>   37


                            CLINTRIALS RESEARCH INC.
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>

                                                                        DECEMBER 31
                                                                  -------------------------
                                                                     2000            1999
                                                                  ---------       ---------
<S>                                                               <C>             <C>
      ASSETS
      Current assets:
        Cash and cash equivalents                                 $   9,178       $   7,889
        Accounts receivable, net of allowance for doubtful
           accounts of $983 in 2000 and $1,420 in 1999               35,408          31,084
        Income taxes receivable                                       2,135           1,454
        Other current assets                                          3,416           1,757
                                                                  ---------       ---------
      Total current assets                                           50,137          42,184

      Property, plant and equipment:
        Land, buildings and leasehold improvements                   23,630          22,995
        Equipment                                                    35,253          32,725
        Furniture and fixtures                                        4,929           4,946
                                                                  ---------       ---------
                                                                     63,812          60,666
        Less accumulated depreciation                                25,507          21,161
                                                                  ---------       ---------
                                                                     38,305          39,505

      Excess of purchase price over net assets acquired              31,923          34,304
      Other assets                                                      411             411
                                                                  ---------       ---------
                                                                  $ 120,776       $ 116,404
                                                                  =========       =========

      LIABILITIES AND STOCKHOLDERS' EQUITY
      Current liabilities:
        Accounts payable                                          $   5,719       $   4,095
        Advance billings                                             12,790           8,338
        Payables to investigators                                     4,499           4,683
        Accrued expenses                                              6,644           7,469
        Income taxes payable                                          1,148           1,174
        Current maturates of long-term debt                             112             114
        Revolving note payable to bank                                4,400              --
                                                                  ---------       ---------
      Total current liabilities                                      35,312          25,873

      Deferred income taxes                                           7,243           4,982
      Long-term debt                                                    238             381
      Commitments and contingencies                                      --              --

      Stockholders' equity:
        Preferred Stock, $.01 par value--1,000,000
          shares authorized; no shares issued or outstanding             --              --
        Common Stock, $.01 par value--50,000,000
          shares authorized; issued and outstanding
          18,402,172 shares in 2000 and 1999                            184             184
        Additional paid-in capital                                  126,651         126,651
        Accumulated deficit                                         (42,717)        (38,490)
        Accumulated other comprehensive loss                         (6,135)         (3,177)
                                                                  ---------       ---------
      Total stockholders' equity                                     77,983          85,168
                                                                  ---------       ---------
                                                                  $ 120,776       $ 116,404
                                                                  =========       =========
</TABLE>



          See accompanying notes to consolidated financial statements.



                                      F-3
<PAGE>   38



                            CLINTRIALS RESEARCH INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                                              YEAR ENDED DECEMBER 31
                                                                                        -----------------------------------
                                                                                           2000         1999         1998
                                                                                        ---------    ---------    ---------
<S>                                                                                     <C>          <C>          <C>
      Revenue:
            Gross service revenue                                                       $ 121,836    $ 113,892    $ 109,254
            Less subcontractor costs                                                       16,511       16,961       19,563
                                                                                        ---------    ---------    ---------
      Net service revenue                                                                 105,325       96,931       89,691

      Operating costs and expenses:
            Direct costs                                                                   66,164       58,317       62,936
            Selling, general and administrative expenses                                   35,749       36,034       38,823
            Depreciation and amortization                                                   5,888        6,155        5,738
            Restructuring charge                                                               --           --        6,364
            Gain on sale of Ovation                                                            --         (484)          --
            Nashville lease termination costs                                                  --          845           --
            Write-off of purchase option costs                                                 --        2,178           --
                                                                                        ---------    ---------    ---------
      Loss from operations                                                                 (2,476)      (6,114)     (24,170)
      Other income (expense):
            Interest income                                                                   498          442          841
            Interest expense                                                                 (195)         (25)         (29)
                                                                                        ---------    ---------    ---------
      Loss before income taxes                                                             (2,173)      (5,697)     (23,358)
      Provision (benefit) for income taxes                                                  2,054        1,348       (1,226)
                                                                                        ---------    ---------    ---------
      Net loss                                                                          $  (4,227)   $  (7,045)   $ (22,132)
                                                                                        =========    =========    =========
      Loss per share:
            Basic                                                                       $   (0.23)   $   (0.39)   $   (1.22)
            Diluted                                                                     $   (0.23)   $   (0.39)   $   (1.22)

      Number of shares and common stock equivalents used in computing loss per share:
            Basic                                                                          18,402       18,116       18,207
            Diluted                                                                        18,402       18,116       18,207

</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-4
<PAGE>   39


                            CLINTRIALS RESEARCH INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                                YEAR ENDED DECEMBER 31
                                                                           --------------------------------
                                                                             2000        1999        1998
                                                                           --------    --------    --------
<S>                                                                        <C>         <C>         <C>
      CASH FLOWS FROM OPERATING ACTIVITIES
       Net loss                                                            $ (4,227)   $ (7,045)   $(22,132)

       Adjustments to reconcile net loss to net cash provided by
          (used in) operating activities:

       Depreciation and amortization of property,
            plant and equipment                                               5,743       5,891       5,333
       Amortization of intangible assets                                      1,243       1,242       1,277
       Provision for doubtful accounts                                          189         146       2,159
       Deferred income taxes                                                  2,261       1,571       2,820
       Gain on sale of Ovation                                                   --        (484)         --
       Write-off of purchase option costs                                        --       2,178          --
       Loss on disposal of fixed assets                                          66         204         142
       Write down of assets associated with closing
             of Lexington facility                                               --          --       1,983
       Other                                                                     --           2          29
       Changes in operating assets and liabilities:
               Accounts receivable                                           (5,052)       (746)        672
               Advance billings                                               4,624      (4,338)      2,325
               Payables to investigators                                       (184)      2,877         528
               Accounts payable and accrued expenses                            734      (3,587)        893
               Advance payments to investigators                                 --         492         447
               Income taxes                                                    (583)      2,869        (269)
               Other assets and liabilities                                  (1,690)        393         403
                                                                           --------    --------    --------
        Net cash provided by (used in) operating activities                   3,124       1,665      (3,390)

      CASH FLOWS FROM INVESTING ACTIVITIES
      Purchases of property, plant and
            equipment, net                                                   (4,928)     (5,071)    (12,227)
      Proceeds from sale of fixed assets                                         38          --          --
      Costs associated with option to acquire MPI                                --        (456)     (1,722)
                                                                           --------    --------    --------
        Net cash used in investing activities                                (4,890)     (5,527)    (13,949)

      CASH FLOWS FROM FINANCING ACTIVITIES
          Proceeds from short-term borrowings                                 4,400          --          --
          Proceeds from long-term borrowings                                     --         118         382
          Proceeds from exercise of common stock options                         --         167         140
          Payments on long-term debt                                           (145)         --          --
                                                                           --------    --------    --------
        Net cash provided by financing activities                             4,255         285         522

      Effect of foreign currency exchange rate changes
        on cash                                                              (1,200)        599        (591)
                                                                           --------    --------    --------
      Increase (decrease) in cash and cash equivalents                        1,289      (2,978)    (17,408)

      Cash and cash equivalents at beginning of year                          7,889      10,867      28,275
                                                                           --------    --------    --------
      Cash and cash equivalents at end of year                             $  9,178    $  7,889    $ 10,867
                                                                           ========    ========    ========

      Supplemental cash flow information:

        Interest paid                                                      $    180    $     23    $     38
                                                                           ========    ========    ========
        Income tax refunds, net of taxes paid of $1,586, $853 and $1,580   $   (131)   $ (2,956)   $ (2,601)
                                                                           ========    ========    ========
        Equipment purchased included in accounts
          payable                                                          $    566    $    616    $  1,518
                                                                           ========    ========    ========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>   40


                            CLINTRIALS RESEARCH INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                                                                     ACCUMULATED
                                                               COMMON STOCK            ADDITIONAL                        OTHER
                                                             --------------------       PAID-IN       ACCUMULATED    COMPREHENSIVE
                                               TOTAL         SHARES        AMOUNT       CAPITAL         DEFICIT      INCOME (LOSS)
                                               -----         ------        ------       -------         -------      -------------
<S>                                             <C>                 <C>            <C>            <C>            <C>       <C>
       Balance at January 1, 1998          $   115,778     18,181,765    $       182    $   127,160    $    (9,313)   $    (2,251)
       Exercises of stock options                  140         48,407             --            140             --             --
        Comprehensive income (loss):
            Foreign currency translation
               adjustments                      (4,259)                                                                    (4,259)
            Net loss for 1998                  (22,132)                                                    (22,132)
                                           -----------
        Comprehensive income (loss)            (26,391)
                                           -----------
        Other                                       29                                           29
                                           -----------     ----------    -----------    -----------    -----------    -----------
      Balance at December 31, 1998              89,556     18,230,172            182        127,329        (31,445)        (6,510)
       Sale of Ovation                            (838)      (213,000)            (2)          (836)            --             --
       Exercises of stock options                  167        385,000              4            163             --             --
       Comprehensive income (loss):
            Foreign currency translation
               adjustments                       3,333                                                                      3,333
            Net loss for 1999                   (7,045)                                                     (7,045)
                                           -----------
        Comprehensive income (loss)             (3,712)
                                           -----------
        Other                                       (5)                                          (5)
                                           -----------     ----------    -----------    -----------    -----------    -----------
      Balance at December 31, 1999              85,168     18,402,172            184        126,651        (38,490)        (3,177)
      Comprehensive income (loss):
      Foreign currency translation
            adjustments                         (2,958)                                                                    (2,958)
      Net loss for 2000                         (4,227)                                                     (4,227)
                                           -----------
        Comprehensive income (loss)             (7,185)
                                           -----------     ----------    -----------    -----------    -----------    -----------
      Balance at December 31, 2000         $    77,983     18,402,172    $       184    $   126,651    $   (42,717)   $    (6,135)
                                           ===========    ===========    ===========    ===========    ===========    ===========

</TABLE>









          See accompanying notes to consolidated financial statements.



                                      F-6
<PAGE>   41




                            CLINTRIALS RESEARCH INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998)

1. ORGANIZATION

ClinTrials Research Inc. (the Company) is a full service contract research
organization serving the pharmaceutical, biotechnology and medical device
industries. The Company designs, monitors and manages preclinical and clinical
trials, provides data management and biostatistical services, and offers product
registration and pharmacoeconomic services throughout the United States, Canada
and Europe.

Information on the Company's operations by segment and geographic area is
included in Note 9.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying financial statements include the accounts of ClinTrials
Research Inc. and its subsidiaries. All material intercompany balances and
transactions have been eliminated in consolidation.

ACCOUNTING ESTIMATES

Judgment and estimation is exercised by management in certain areas of the
preparation of the financial statements including revenue recognition, reserves
for self-insurance risks and the allowance for uncollectible accounts.
Management believes that such estimates are fairly stated; however, actual
results could differ from amounts estimated.

FOREIGN CURRENCIES

Assets and liabilities of the Company's subsidiaries located outside of the
United States that operate in a local currency environment are translated to
United States dollars at year-end foreign currency exchange rates in accordance
with FASB SFAS No. 52 "Foreign Currency Translation." Income statement amounts
have been translated at the average rates of exchange for the year. The gains
and losses resulting from the changes in exchange rates from year to year are
accumulated in a separate component of stockholders' equity entitled accumulated
other comprehensive income (loss). Transaction gains and losses are included in
the determination of net income (loss).

CASH AND CASH EQUIVALENTS

For the purpose of the statement of cash flows, cash and cash equivalents
include demand deposits and money market accounts held with a financial
institution. The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.

REVENUE RECOGNITION

Many of the Company's contracts are fixed-price contracts over one year in
duration. Revenue for such contracts is recorded in accordance with the American
Institute of Certified Public Accountants (AICPA) Statement of Position (SOP)
81-1 Accounting for Performance of Construction-Type and Certain Production-Type
Contracts. Revenue is recognized as costs are incurred and includes estimated
earned fees or profits calculated on the basis of the relationship between costs
incurred and total estimated costs (cost-to-cost type of
percentage-of-completion method of accounting). Additionally, the Company may



                                      F-7
<PAGE>   42


begin work on a project before a contract is signed for customers with whom the
Company has formed a strategic alliance or has a long-term relationship. Revenue
is recognized in the same manner as signed contracts based upon terms orally
agreed with the customer. The Company also has contracts ranging in duration
from 28 days to one year. Revenue is recognized on these contracts in accordance
with contract terms as services are provided. The Company recognizes revenue
related to contract modifications when realization is assured and the amounts
can be reasonably determined. Contract milestone revenue contingent upon the
Company's achievement of specific targets is recognized when the milestone is
achieved. The Company also follows the views of the Staff of the Securities and
Exchange Commission's Staff Accounting Bulletin No. 101 (SAB 101) on revenue
recognition. SAB 101 states that revenue should be recognized when all four of
these conditions exist: persuasive evidence of an arrangement exists; services
have been rendered or delivery has occurred; the price is fixed or determinable;
and collectibility is reasonably assured. When estimated contract costs indicate
that a loss will be incurred on a contract, the entire loss is provided for in
such period.

The Company routinely subcontracts with third party investigators in connection
with multi-site clinical trials and with other third party service providers for
laboratory analysis and other specialized services. Subcontractor costs are
passed through to clients and, in accordance with industry practice, are
included in gross service revenue. Subcontractor costs are accrued on a
straight-line basis over the investigator phase of the contract. Investigator
payments are made based on predetermined contractual arrangements, which may
differ from the accrual of the expense. Payments to investigators in excess of
the accrued expense represent advance payments to investigators and accrued
expenses in excess of payments represent payables to investigators.

UNBILLED RECEIVABLES AND ADVANCE BILLINGS

Prerequisites for billings are generally established by contractual provisions
that include predetermined date certain payment schedules (which may include
payment at or near the time the trial is initiated), the achievement of
negotiated performance requirements or milestones, or the submission of required
billing detail. Unbilled receivables arise from those contracts under which
billings are rendered upon the achievement of certain negotiated performance
requirements or on a date-certain basis and services rendered exceed billings.
The Company expects to bill and collect these unbilled receivables within one
year of revenue recognition. Advance billings represent contractual billings for
services not yet rendered.

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially expose the Company to credit risk
include unsecured accounts receivable. Concentrations of credit risk on accounts
receivable is limited due to the large number of clients. Additionally, the
Company maintains allowances for potential credit losses and credit losses
incurred have not exceeded management's expectations. The Company's exposure to
credit loss in the event that payment is not received for revenue recognized
equals the outstanding accounts receivable and unbilled services balance.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost.

Depreciation is provided on the straight-line method over the estimated useful
lives of the respective properties, which approximate 5 to 40 years.




                                      F-8
<PAGE>   43


INCOME TAXES

Income taxes are accounted for under the liability method in accordance with
Financial Accounting Standards Board (the FASB) Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Deferred tax
assets, net of valuation allowance, and liabilities are determined based on
differences between financial reporting and tax basis of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.

EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED

The excess of the purchase price over net assets acquired is being amortized
over periods of 20 to 40 years using the straight-line method. The carrying
value of the excess of purchase price over net assets acquired is reviewed if
the facts and circumstances suggest that it may be impaired. If this review
indicates that the excess of purchase price over net assets acquired will not be
recoverable, as determined based on the undiscounted cash flows of the entity
acquired over the remaining amortization period, the Company's carrying value of
the excess of purchase price over net assets acquired is reduced by the
estimated shortfall of cash flows on a discounted basis. Accumulated
amortization of the excess of purchase price over fair value of assets acquired
was approximately $7,471,000 and $6,323,000 at December 31, 2000 and 1999,
respectively.

FOREIGN CURRENCY HEDGING

Foreign exchange forward contracts are legal agreements between two parties to
purchase and sell foreign currency for a specified price, with delivery and
settlement in the future. From time to time the Company uses foreign exchange
contracts to hedge the risk of changes in foreign currency exchange rates
associated with contracts in which the expenses for providing services are
incurred in the functional currency of the Company's foreign subsidiary, but
payments on contracts are made by the client in another currency. During the
year ended December 31, 2000, the Company did not have any derivative
instruments and did not engage in any hedging activities.

EARNINGS (LOSS) PER SHARE

Earnings (loss) per share is computed in accordance with FASB SFAS No. 128,
"Earnings per Share" (SFAS No. 128). SFAS No. 128 requires presentation of both
Basic Earnings per Share (Basic EPS) and Diluted Earnings per Share (Diluted
EPS). Basic EPS is based on the weighted average number of shares of common
stock outstanding during the year while Diluted EPS also includes the dilutive
effect of common stock equivalents. Diluted loss per share for the years ended
December 31, 2000, 1999 and 1998 does not include common stock equivalents
(stock options) of 135,000, 390,000 and 430,000, respectively, as their effect
would be anti-dilutive. The Company's stock is currently traded in the Nasdaq
Stock Market and sale information is included on the Nasdaq National Market
Issues System under the symbol CCRO.

COMPREHENSIVE INCOME (LOSS)

The Company adopted FASB SFAS No. 130, "Reporting Comprehensive Income" (SFAS
No. 130) on January 1, 1998. SFAS No. 130 established new rules for reporting
and displaying comprehensive income and its components; however, the adoption of
SFAS No. 130 had no impact on the Company's net income (loss) or stockholders'
equity. SFAS No. 130 requires the Company to include foreign currency
translation adjustments, which were previously reported by the Company as a
separate component of stockholders' equity, in other comprehensive income and
loss. Accumulated other comprehensive income (loss) consists entirely of
accumulated foreign currency translation adjustments and is a separate component
of stockholders' equity under SFAS No. 130.




                                      F-9
<PAGE>   44


STOCK-BASED COMPENSATION

The Company accounts for employee stock awards using the intrinsic value based
method as prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" because the Company believes the alternative fair
value accounting provided for under FASB SFAS No. 123 "Accounting for
Stock-Based Compensation" requires the use of option valuation models that were
not developed for use in valuing employee stock options. Accordingly, no
compensation expense is recognized because the exercise price of the Company's
stock options was equal to the market price of the underlying stock on the date
of grant.

RECLASSIFICATIONS

Certain prior period amounts have been reclassified in order to conform to
current period presentation. Such reclassifications had no material effect on
the financial position and results of operations as previously reported.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133) which was required to be
adopted in years beginning after June 15, 1999. In July 1999, SFAS No. 137 was
issued which deferred for one year the effective date of SFAS No. 133 to all
fiscal quarters of all fiscal years beginning after June 15, 2000. On June 15,
2000, the FASB issued SFAS No. 138 which clarified and amended certain
provisions of SFAS No. 133. Accordingly, the Company plans to adopt SFAS No. 133
and No. 138 effective January 1, 2001.

From time to time, the Company uses foreign exchange forward contracts to hedge
the risk of changes in foreign currency exchange rates associated with contracts
in which the expenses for providing services are incurred in the functional
currency of the Company's foreign subsidiary, but payments on contracts are made
by the client in another currency. The Company does not anticipate that the
adoption of SFAS No. 133 and No. 138 will have a significant effect on the
financial statements of the Company. Furthermore, SFAS No. 133 and No. 138 would
not have affected the financial statements of the Company contained herein.
During the year ended December 31, 2000, the Company did not have any derivative
instruments and did not engage in any hedging activities.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin 101, "Revenue Recognition in Financial Statements" (SAB No. 101). SAB
No.101 summarizes certain of the SEC staff's views on applying generally
accepted accounting principles to revenue recognition. The Company adopted SAB
No. 101 in the quarter ended December 31, 2000 and it did not have a material
effect on its financial position or results of operations.

3. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at December 31 (in thousands):

                                                 2000        1999
                                               --------    --------
      Trade:
             Billed                            $ 19,997    $ 17,449
             Unbilled                            16,394      14,489
             Allowance for doubtful accounts       (983)     (1,420)
                                               --------    --------
                                                 35,408      30,518
      Other                                          --         566
                                               --------    --------
                                               $ 35,408    $ 31,084
                                               ========    ========



                                      F-10
<PAGE>   45


4. CREDIT FACILITIES AND DEBT

During the first quarter of 2000, the Company extended its $15.0 million
domestic credit facility through September 2001. The extension provides for
expansion capabilities to $25.0 million provided the Company meets certain
financial requirements. Credit availability under the Company's domestic line of
credit and foreign line of credit totals approximately $18.3 million. The
domestic credit facility is collateralized by certain of the Company's U.S.
based assets that have a net carrying value of approximately $16 million. The
foreign line of credit is collateralized by accounts receivable of the Company's
Canadian subsidiary. Borrowings under these agreements bear interest at a
fluctuating rate based either on the respective banks' prime interest rate or
the London Interbank Offered Rate (LIBOR), as elected by the Company.

On December 31, 2000, $4.4 million was outstanding under the Company's domestic
credit facility. Interest on outstanding borrowings under the domestic credit
agreement was based upon the LIBOR plus an applicable margin. The weighted
average interest rate during the year 2000 and at December 31, 2000 was 8.9%.
Credit availability at December 31, 2000 has been further reduced by issued
letters of credit of approximately $717,000. Borrowings available under the
lines of credit are subject to certain financial and operating covenants. The
Company is in compliance with these bank covenants.

On or before September 30, 2001, the Company may elect to exercise an extension
option under its domestic credit agreement whereby any or all of the then
outstanding balance may be termed out over six quarters. Under this extension
option, interest is due monthly and 5% of outstanding principal is due quarterly
beginning on the second quarterly date after exercise of the extension option.

The Company's Canadian subsidiary has outstanding borrowings of approximately
$336,000 from the Canadian government. This borrowing bears no interest and is
repayable in four equal annual installments beginning August 2000 and ending in
2003.

5. OPERATING LEASES

The Company leases office space and office equipment under various operating
leases. Minimum rental commitments payable in future years under operating
leases having an initial or remaining noncancelable terms of one year or more at
December 31 are as follows (in thousands):

                  2001                                         $ 5,734
                  2002                                           5,070
                  2003                                           4,112
                  2004                                           3,885
                  2005                                           3,876
                  Thereafter                                    30,635
                                                              --------
                  Total minimum rentals                         53,312
                  Less minimum rentals due under
                     noncancellable subleases                    1,626
                                                             ---------
                                                               $51,686
                                                             =========



                                      F-11
<PAGE>   46


Rent expense is comprised of the following for the years ended December 31 (in
thousands):

                                   2000        1999        1998
                                 ------      ------      ------
      Minimum rentals            $6,313      $5,796      $6,765
      Less sublease rentals         344         314         410
                                 ------      ------      ------
                                 $5,969      $5,482      $6,355
                                 ======      ======      ======



6.      INCOME TAXES

Significant components of the Company's deferred tax liabilities and assets as
of December 31 are as follows (in thousands):
<TABLE>
<CAPTION>

                                                                  2000           1999
                                                               --------       --------
<S>                                                            <C>            <C>
      Deferred tax assets:
         Advance billings and receivables                      $  1,231       $  3,994
         Accrued expenses                                           387            682
         Research and development credit carryforward             1,657          1,343
         Undeducted research and development expenditures            81          2,008
         Federal and state net operating losses                  18,362         12,495
         Foreign tax credits                                      1,679             --
         Other                                                      193            193
                                                               --------       --------
      Total deferred tax assets                                  23,590         20,715
      Valuation allowance for deferred tax assets               (21,057)       (17,452)
                                                               --------       --------
      Net deferred tax assets                                     2,533          3,263
      Deferred tax liabilities:
         Depreciation and amortization                           (9,365)        (7,834)
                                                               --------       --------
      Net deferred tax liabilities                             $ (6,832)      $ (4,571)
                                                               ========       ========
</TABLE>



The balance sheet classification of the net deferred tax assets (liabilities) is
as follows at December 31 (in thousands):
<TABLE>
<CAPTION>

                                                               2000           1999
                                                            --------       --------

<S>                                                         <C>            <C>
      Current deferred tax assets                           $  5,147       $  6,212
      Net noncurrent deferred tax assets (liabilities)         9,078          6,669
                                                            --------       --------
                                                              14,225         12,881
      Valuation allowance for deferred tax assets            (21,057)       (17,452)
                                                            --------       --------
      Net deferred tax liabilities                          $ (6,832)      $ (4,571)
                                                            ========       ========
</TABLE>


For financial reporting purposes, income (loss) before income taxes for the
years ended December 31 includes the following components (in thousands):
<TABLE>
<CAPTION>

                                                2000           1999           1998
                                              --------       --------       --------
<S>                                           <C>            <C>            <C>
      Income (loss) before income taxes:
         United States                        $(11,382)      $(14,181)      $(20,308)
         Foreign                                 9,209          8,484         (3,050)
                                              --------       --------       --------
                                              $ (2,173)      $ (5,697)      $(23,358)
                                              ========       ========       ========
</TABLE>



                                      F-12
<PAGE>   47

The Company's Canadian subsidiary qualifies for federal and Quebec Scientific
Research and Development deductions and tax credits. Expenditures on certain
capital assets are fully deductible or may be carried forward indefinitely until
utilized. The tax credits are equal to 30% of certain capital and current
expenditures. The tax credits are accounted for using the flow through method,
in which the credits are recognized as a reduction of income taxes in the year
the credit arises.

Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $27.6 million at December 31, 2000. Provision has not been made
for U.S. or additional foreign taxes on undistributed earnings of foreign
subsidiaries as those earnings have been permanently reinvested. Upon
distribution of those earnings in the form of dividends or otherwise, the
Company would be subject to both U.S. income taxes (subject to an adjustment for
foreign tax credits) and withholding taxes payable to the various countries. It
is not practicable to estimate the amount of deferred tax liability on foreign
undistributed earnings which are intended to be permanently reinvested.
Significant components of the provision (benefit) for income taxes for the years
ended December 31 are as follows (in thousands):

<TABLE>
<CAPTION>

                                                  2000          1999          1998
                                                -------       -------       -------
<S>                                             <C>           <C>           <C>
      Current:
            Foreign                             $  (207)      $  (223)      $  (269)
            Federal                                  --            --        (3,777)
            State and local                          --            --            --
      Deferred:
            Foreign                               2,261         1,571           819
            Federal                                  --            --         1,468
            State                                    --            --           533
                                                -------       -------       -------
      Provision (benefit) for income taxes      $ 2,054       $ 1,348       $(1,226)
                                                =======       =======       =======
</TABLE>


The Company's consolidated effective tax rate differed from the federal
statutory rate for the years ended December 31 as set forth below (in
thousands):

<TABLE>
<CAPTION>

                                                     2000          1999          1998
                                                   -------       -------       -------
<S>                                                <C>           <C>           <C>
      Federal statutory rate                       $  (739)      $(1,937)      $(7,942)
      State and local income taxes
         net of federal benefit                        (87)         (228)          352
      Research and development
         tax credits                                (1,495)         (991)       (2,703)
      Amortization of excess of
         purchase price over net assets
         acquired and other intangible
         assets                                        137           137           484
      Difference between foreign income taxed
         at U.S. Federal Statutory rates
         and foreign income tax expense                633          (196)         (351)
      Increase in federal valuation allowance        3,605         5,828         9,611
      Other                                             --        (1,265)         (677)
                                                   -------       -------       -------
                                                   $ 2,054       $ 1,348       $(1,226)
                                                   =======       =======       =======
</TABLE>



                                      F-13
<PAGE>   48


A valuation allowance has been established for the amount of United States
deferred tax assets primarily related to the Company's potential tax benefit
associated with loss carryforwards. At December 31, 2000, the Company had
approximately $46 million of federal net operating loss carryforwards which
begin to expire in 2018.

7. STOCK OPTION PLANS AND WARRANTS

1999 Long-Term Incentive Compensation Plan

In April 1999, the Board of Directors approved adoption of the Company's 1999
Long-Term Incentive Compensation Plan (1999 Plan). The 1999 Plan was approved by
the Company's stockholders on June 22, 1999 to replace the Company's 1989 Stock
Option Plan. The 1989 Stock Option Plan expired in December 1999 and could not
be extended due to restrictions imposed by the Internal Revenue Code of 1986, as
amended (the Code).

The purpose of the 1999 Plan is to provide an opportunity for certain persons
performing services to the Company, including officers, key employees and
directors of the Company and its subsidiaries to acquire shares of Common Stock
and be rewarded for achieving certain performance goals. Through the 1999 Plan,
the Company seeks to continue to attract and retain qualified personnel, and to
further align the interests of its key personnel with the success of the Company
and its stockholders.

The 1999 Plan provides for the grant of stock options, which may be either
incentive stock options meeting the requirements of Section 422 of the Code, or
non-qualified stock options, stock appreciation rights, restricted stock,
performance shares or performance units.

The number of shares which may be issued under the 1999 Plan total 1,500,000 in
the aggregate. Options under the 1999 Plan expire ten years from the date of
grant and vest at dates ranging from the issuance date to four years.

Information with respect to the 1999 Stock Option Plan is as follows:

                                                           WEIGHTED-
                                                            AVERAGE
                                                         EXERCISE PRICE
                                                         --------------
                                              2000           2000
                                            --------       --------

      Options outstanding at January 1            --       $   0.00
           Granted                           306,000       $   3.44
           Exercised                              --       $   0.00
           Cancelled                         (35,500)      $   3.31
                                            --------
      Outstanding at December 31             270,500       $   3.45
                                            ========
      Option price range at
           December 31             $ 3.06 to $ 5.31
                                   ================
      Options exercisable
           at December 31                     50,000       $   3.31
                                            ========       ========


There were 1,229,500 shares available for grant at December 31, 2000. The
weighted-average fair value of options granted during 2000 was $2.36.


                                      F-14
<PAGE>   49


1989 Stock Option Plan

The Company's 1989 Stock Option Plan, as amended, provided for the grant of
options to purchase shares of Common Stock to directors, officers and other key
persons. On May 11, 1998, the stockholders approved an amendment to the 1989
Stock Option Plan to increase the options available to 2,625,000. The 1989 Stock
Option Plan expired in December 1999 and could not be extended due to
restrictions imposed by the Code.

Information with respect to the 1989 Stock Option Plan is as follows:
<TABLE>
<CAPTION>

                                                                                                               WEIGHTED-
                                                                                                                AVERAGE
                                                                                                            EXERCISE PRICE
                                                                                                       -------------------------
                                                 2000                  1999              1998          2000       1999      1998
                                                 ----                  ----              ----          ----       ----      ----
<S>                                              <C>                 <C>                <C>            <C>       <C>      <C>
Options outstanding at January 1                 1,746,651           1,589,196          1,336,579      $ 5.23    $ 4.29   $ 5.86
     Granted                                            --             943,150            906,975      $ 0.00    $ 5.13   $ 4.55
     Exercised                                          --            (385,000)           (48,407)     $ 0.00    $ 0.44   $ 3.01
     Cancelled                                    (258,611)           (400,695)          (605,951)     $ 5.16    $ 4.43   $ 6.29
                                              -------------         ----------         ----------
Outstanding at December 31                       1,488,040           1,746,651          1,589,196      $ 5.24    $ 5.23   $ 4.29
                                                 =========           =========          =========
Option price range at
     December 31                         $ 2.77 to $ 12.92     $2.75 to $12.92     $.35 to $12.92
                                         =================     ===============    ==============
Options exercisable
     at December 31                                908,991             503,533            613,900      $ 4.24     $4.18    $3.27
                                                   =======             =======            =======      ======     =====    =====
</TABLE>


There were no shares available for grant at December 31, 2000 and December 31,
1999 since the plan expired as discussed above. At December 31, 1998 there were
588,067 shares available for grant. The weighted-average fair value of options
granted during 1999 and 1998 was $3.31 and $2.04, respectively.

On February 6, 1998, the Company's board of directors approved the adoption of
the Company's 1998 Non Qualified Stock Option Plan for Directors (the 1998
Director Option Plan). The 1998 Director Option Plan was approved by the
Company's shareholders on May 11, 1998. The 1998 Director Option Plan is a
formula plan under which options to acquire 10,000 shares of the Company's
common stock are to be initially granted to each director of the Company who is
not an employee and does not beneficially own more than 2.5% of the Company's
outstanding stock upon the date of initial election to the board of directors.
Directors are automatically eligible to receive annual grants of options to
acquire 1,000 shares of the Company's common stock.



                                      F-15
<PAGE>   50


Information with respect to the 1998 Director Option Plan is as follows:

<TABLE>
<CAPTION>

                                                                                                        WEIGHTED-
                                                                                                         AVERAGE
                                                                                                      EXERCISE PRICE
                                                                                                 -------------------------
                                                 2000              1999              1998        2000       1999      1998
                                                 ----              ----              ----        ----       ----      ----
<S>                                             <C>                <C>            <S>            <C>       <C>       <C>
Options outstanding at January 1                19,000             18,000                --       $ 3.84    $ 2.95    $ 0.00

     Granted                                    67,000              7,000            18,000       $ 3.67    $ 5.38    $ 2.95
     Exercised                                      --                 --                --       $ 0.00    $ 0.00    $ 0.00
     Cancelled                                      --             (6,000)               --       $ 0.00    $ 2.95    $ 0.00
                                                ------           --------           -------
Outstanding at December 31                      86,000             19,000            18,000       $ 3.71    $ 3.84    $ 2.95
                                                ======             ======           =======
Option price range at
     December 31                       $2.81 to $ 5.88     $2.81 to $5.88    $2.81 to $3.63
                                       ===============     ==============    ==============
Options exercisable
     at December 31                             86,000             19,000            18,000        $3.71     $3.84    $2.95
                                                ======             ======            ======        =====     =====    =====
</TABLE>

The following table summarizes in more detail information regarding the
Company's stock options outstanding at December 31, 2000.

<TABLE>
<CAPTION>

                                                           WEIGHTED AVERAGE
          RANGE OF                   OPTIONS                  REMAINING                  OPTIONS
       EXERCISE PRICES             OUTSTANDING          CONTRACTUAL LIFE YEARS         EXERCISABLE
--------------------------------------------------------------------------------------------------------
<S>                                 <C>                          <C>                      <C>
       $2.77 - $ 6.00               1,507,314                    7.4                      772,759
       $6.01 - $12.92                 337,226                    5.7                      272,232
--------------------------------------------------------------------------------------------------------
       $2.77 - $12.92               1,844,540                    6.6                    1,044,991
========================================================================================================
</TABLE>


On January 30, 1998, the Company granted four separate warrants to purchase
75,000 shares (300,000 shares in the aggregate) of common stock of the Company
to each Jerry R. Mitchell, M.D., Ph.D. and William U. Parfet at exercise prices
of $7.00, $9.00, $11.00 and $13.00 per share. Each 75,000 share warrant vests
ratably over a period of four years. Each warrant expires on January 30, 2004.
On September 4, 1998, the Company repriced all 600,000 warrants at an exercise
price of $3.25. In April 1999, the company cancelled three of the four warrants
issued to Mr. Parfet totaling 225,000 shares in the aggregate.

On September 4, 1998, the Company repriced 250,000 stock options held by Jerry
R. Mitchell, M.D., Ph.D.,then the Company's President, Chief Executive Officer
and Chairman of the Board to an exercise price of $3.25 which were originally
granted at an exercise price of $7.00 on February 1, 1998.

Pro forma information regarding net loss and loss per share is required by SFAS
No. 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of SFAS No. 123. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 2000,
1999 and 1998, respectively; risk-free interest rates of 6.22%, 5.43%, and
5.10%; dividend yields of 0%, 0% and 0%; volatility factors of the expected
market price of the Company's common stock of .74, .74 and .72; and a
weighted-average expected life of the option of five years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly




                                      F-16
<PAGE>   51


subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows for the years ended December 31 (in thousands, except
for loss per share information):
<TABLE>
<CAPTION>

                                                       2000            1999             1998
                                                       ----            ----             ----
<S>                                                  <C>            <C>            <C>
      Net loss                                       $ (4,227)      $ (7,045)      $(22,132)
      Pro forma compensation expense from stock
         options, net of taxes                          1,873          1,903          2,057
                                                     --------       --------       --------
      Pro forma net loss                             $ (6,100)      $ (8,948)      $(24,189)
                                                     ========       ========       ========
      Pro forma loss per share:
         Basic                                       $  (0.33)      $  (0.49)      $  (1.33)
         Diluted                                     $  (0.33)      $  (0.49)      $  (1.33)
</TABLE>


8. EMPLOYEE BENEFITS

The Company provides defined contribution plans for substantially all of its
employees. Participation is generally subject to the employee's age and length
of employment with the Company. The Company's contributions to the plans are
generally based on employee contributions and may also include additional
discretionary contributions.

The Company's expense for its contributions to the plans was approximately
$1,679,194, $1,507,000 and $1,639,000 for the years ended December 31, 2000,
1999 and 1998, respectively.

9. SEGMENT REPORTING

The Company is a full-service contract research organization (CRO) serving the
pharmaceutical, biotechnology and medical device industries. These research
services comprise two reportable operating segments - Clinical and Preclinical.
Clinical services consist of designing, monitoring, and managing trials of new
pharmaceutical and biotechnology products on humans, and providing clinical data
management, biostatistical, product registration, and pharmacoeconomic services.
Clinical service activities and revenues are performed and earned primarily in
the United States and Europe. The Company's European operations are
headquartered in Maidenhead, U.K. with its primary satellite offices in
Brussels, Belgium and Glasgow, Scotland. The operating results of the Company in
the individual European countries are immaterial and therefore European
operations as a whole are disclosed below. Preclinical services are comprised of
designing and conducting trials of new pharmaceutical and biotechnology products
based primarily upon animal models to produce data required to assess and
evaluate efficacy in and potential risks to humans. Preclinical services are
performed in Montreal, Quebec, Canada. Activity which is not included in the
Clinical or Preclinical segments is shown as Other which includes corporate
expenses, operations not directly related to the business segments, and
restructuring charges.



                                      F-17
<PAGE>   52


Financial data by segment for 2000, 1999, and 1998 are as follows:
<TABLE>
<CAPTION>

                                                   U.S.          EUROPE        TOTAL       CANADA
                                                 CLINICAL       CLINICAL     CLINICAL    PRECLINICAL       OTHER       TOTALS
                                                 --------       --------     --------    -----------       -----       ------
<S>                                             <C>           <C>           <C>           <C>          <C>           <C>
      YEAR ENDED DECEMBER 31, 2000
        Net revenues from external customers    $  26,262     $  23,364     $  49,626     $  55,699    $      --     $ 105,325
        Depreciation and amortization               2,662           812         3,474         2,384           30         5,888
        Segment profit (loss)                      (7,419)       (3,058)      (10,477)       12,136       (4,135)       (2,476)
        Segment assets                             18,907        17,275        36,182        82,698        1,896       120,776
        Long-lived assets                           9,723         2,736        12,459        57,751           18        70,228
        Expenditures for long-lived assets            195           818         1,013         3,915           --         4,928

      YEAR ENDED DECEMBER 31, 1999
        Net revenues from external customers    $  30,108     $  19,914     $  50,022     $  46,909    $      --     $  96,931
        Depreciation and amortization               2,928         1,014         3,942         2,183           30         6,155
        Segment profit (loss)                      (8,859)           12        (8,847)        8,231       (5,498)       (6,114)
        Segment assets                             18,024        15,374        33,398        78,195        4,811       116,404
        Long-lived assets                          12,289         2,910        15,199        58,610           --        73,809
        Expenditures for long-lived assets            854           690         1,544         3,527          456         5,527

      YEAR ENDED DECEMBER 31, 1998
        Net revenues from external customers    $  40,366     $  11,128     $  51,494     $  38,197    $      --     $  89,691
        Depreciation and amortization               2,824         1,136         3,960         1,748           30         5,738
        Segment profit (loss)                      (8,990)       (9,520)      (18,510)        5,851      (11,511)      (24,170)
        Segment assets                             33,148        10,018        43,166        70,419        9,511       123,096
        Long-lived assets                          14,663         3,522        18,185        55,688        1,722        75,595
        Expenditures for long-lived assets          5,487           972         6,459         5,768        1,722        13,949
</TABLE>


In 1999 Segment profit (loss) for Other includes a write-off of purchase option
costs of $2.2 million, Nashville lease termination costs of $845,000, and a gain
on the sale of Ovation of $484,000. Segment profit (loss) for Other includes a
restructuring charge of $6.4 million in 1998.

Net revenue generated under multiple contracts by clients who accounted for more
than 10% of the Company's consolidated net revenue for the years ended December
31 are as follows:

                                   2000        1999        1998
                                   ----        ----        ----
      Client A
          U.S. Clinical               1%          8%         16%
          Europe Clinical            14%         13%          9%
          Total Clinical             15%         21%         25%
          Canada Preclinical          3%          4%          2%
          Total Company               9%         12%         15%



                                      F-18
<PAGE>   53



10. CONTINGENCIES

In 1991, a customer commenced legal action against the predecessor of the
Company's preclinical subsidiary claiming damages resulting from statistical
errors in carrying out two clinical research studies. Judgment was rendered in
February 1997 by the Superior Court of Montreal against the Company's
preclinical subsidiary in the amount of approximately $536,000 plus interest to
accrue from September 1991. The Company's preclinical subsidiary, now
responsible for this action, has reserves adequate to cover the current judgment
amount. The Company's preclinical subsidiary has appealed the amount of the
judgment and the subsidiary's insurance company has appealed the portion of the
judgment which obligates the insurance company to pay the insurance claim
related to this litigation. The Company believes it is entitled, subject to
certain limitations, to indemnification from a former owner of the predecessor
for a portion of this claim. In the opinion of management, the ultimate
resolution of such pending legal proceedings will not have a material effect on
the Company's financial position or results of operations. The appeal was heard
in April 2000 by the Quebec court of appeals but no judgement has yet been
rendered.

11. OPTION TO ACQUIRE MPI

On January 30, 1998, the Company entered into an option agreement (the MPI
Option) with MPI Research, LLC (MPI) and its shareholders, Jerry R. Mitchell,
M.D., Ph.D. and William U. Parfet, who each owned 50% of MPI. Dr. Mitchell was
the President, Chief Executive Officer and Chairman of the Board of Directors of
the Company until August 2000 and Mr. Parfet was the Company's Director of
Business Planning and Analysis until April 1999. Pursuant to the MPI Option, the
Company paid $1,500,000 in cash in exchange for an exclusive option to purchase
all of the outstanding stock of MPI at its fair market value at any time on or
prior to March 31, 2000. The shareholders of MPI had the right to cancel the
Option at any time after March 31, 1999, by returning the $1,500,000 cash
without interest, provided they gave the Company written notice of their intent
to cancel the option and the Company did not exercise the option within twenty
business days of receipt of such notice.

The Company recorded an asset impairment charge of $2,178,000 in the fourth
quarter of 1999 to write-off the purchase option costs included in other assets
on the balance sheet relating to MPI Research. The option expired March 31, 2000
and it was determined that as of December 31, 1999, it was unlikely to be
exercised. The option was not exercised.

12. SALE OF OVATION

On January 4, 1999, the Company sold its pharmacoeconomic subsidiary, Ovation,
back to the principals from whom the shares were originally purchased, as part
of the Company's ongoing consolidation of U.S. operations into its Research
Triangle Park, North Carolina (RTP) facility. Pharmacoeconomic services are now
performed out of the Company's RTP facility as the Company retains the right to
use the ClinTrials Ovation name. The Company received 213,000 shares of its own
stock in the sales transaction and recorded a gain on the sale of $484,000.

13. NASHVILLE LEASE TERMINATION COSTS

The Company entered into an agreement to terminate the lease of its Nashville
office and accrued $845,000 in the first quarter of 1999 for costs related to
the termination of this lease. The termination of this lease relieved the
Company of approximately $11.0 million of future minimum lease payments. The
Company relocated its Corporate office to Research Triangle Park, North Carolina
in the second quarter of 1999.




                                      F-19
<PAGE>   54


14. RESTRUCTURING CHARGE

On April 24, 1998, the Company announced that its data management operations in
Lexington, Kentucky would be closed and consolidated into its new clinical
research center in Research Triangle Park, North Carolina. The Company recorded
a restructuring charge of $6.4 million in the second quarter of 1998 in
connection with the closing of the Company's Lexington facility, severance costs
for the termination of 90 employees and costs associated with lease commitments
following the Company's restructuring decision to consolidate facilities. The
1998 restructuring charge consists of the following (in thousands):

<TABLE>
<CAPTION>

                                                                          AMOUNT OF
                                                                        RESTRUCTURING
                                                                            CHARGE
                                                                        -------------

<S>                                                                        <C>
      Write down of assets in connection with closure of Lexington
          facility                                                         $1,983
      Lease costs associated with consolidation of
          Facilities                                                        1,976
      Severance costs                                                       2,132
      Other                                                                   273
                                                                           ------
                                                                           $6,364
                                                                           ======
</TABLE>


The above lease, severance and other restructuring costs were paid in 1998 and
1999 at amounts that approximated the liabilities recorded and the related
accrued expenses were zero at December 31, 2000 and 1999.

15. SUBSEQUENT EVENT

On February 22, 2001, the Company, Inveresk Research Group Limited and Indigo
Acquisition Corp. ("Indigo") entered into a definitive merger agreement for
Indigo to acquire all of the outstanding shares of the Company for $6.00 per
share in cash. Under the terms of the agreement, Indigo will commence a tender
offer for all of the outstanding shares of the Company at $6.00 per share within
seven business days. The tender offer will be subject to at least a majority of
the outstanding Company shares, on a fully diluted basis, being validly tendered
and not withdrawn. The tender offer will also be subject to regulatory approvals
and other customary conditions. Any of the Company's shares not acquired
pursuant to a successful tender offer will be acquired in a subsequent merger at
the same $6.00 per share cash price. In connection with the execution of the
merger agreement, Indigo has entered into an agreement with the holders of
approximately 21% of the Company's outstanding shares under which such holders
have agreed to tender their shares in the tender offer.



                                      F-20
<PAGE>   55


                            CLINTRIALS RESEARCH INC.
                         QUARTERLY FINANCIAL INFORMATION
                  (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                  2000                           FIRST      SECOND       THIRD     FOURTH(2)
                  ----                           -----      ------       -----     ---------
<S>                                             <C>         <C>         <C>         <C>
      Net revenue                               $ 23,774    $ 25,545    $ 25,994    $ 30,012
      Income (loss) before income taxes         $ (2,006)   $   (736)   $ (2,318)   $  2,887
      Net income (loss)                         $ (2,441)   $ (1,187)   $ (3,153)   $  2,554
      Income (loss) per share:
        Basic                                   $  (0.13)   $  (0.06)   $  (0.17)   $   0.14
        Diluted                                 $  (0.13)   $  (0.06)   $  (0.17)   $   0.14
      Number of shares and dilutive
        common stock equivalents used
        in computing income (loss) per share:
        Basic                                     18,402      18,402      18,402      18,402
        Diluted                                   18,402      18,402      18,402      18,701

      Market prices of common stock:

       High                                     $   5.00    $   3.88    $   5.38    $   5.75

       Low                                      $   3.00    $   2.28    $   2.63    $   4.03
</TABLE>
<TABLE>
<CAPTION>

                  1999                           FIRST      SECOND       THIRD     FOURTH(1)
                  ----                           -----      ------       -----     ---------
<S>                                             <C>         <C>         <C>         <C>

      Net revenue                               $ 23,703    $ 25,214    $ 23,717    $ 24,297
      Income (loss) before income taxes         $ (2,702)   $    271    $   (403)   $ (2,863)
      Net income (loss)                         $ (2,941)   $    153    $   (959)   $ (3,298)
      Income (loss) per share:
        Basic                                   $   (.16)   $    .01    $   (.05)   $  (0.18)
        Diluted                                 $   (.16)   $    .01    $   (.05)   $  (0.18)
      Number of shares and dilutive
        common stock equivalents used
        in computing income (loss) per share:
        Basic                                     18,024      18,017      18,120      18,300
        Diluted                                   18,024      18,678      18,120      18,300

      Market prices of common stock:

        High                                    $   6.63    $   6.31    $   6.88    $   5.38

        Low                                     $   3.41    $   3.75    $   4.75    $   3.00

</TABLE>




Notes:   (1) The fourth quarter of 1999 includes a $2,178 charge to write-off
         the purchase option costs relating to MPI Research.

         (2) The fourth quarter of 2000 includes revenue of $3.7 million from
         successful completion of a contract that had its only revenue milestone
         in December 2000.




                                      F-21
<PAGE>   56


                            CLINTRIALS RESEARCH INC.
                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                  FYE 12/31/00
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>


                COL. A                          COL. B                    COL. C                  COL. D            COL. E
                ------                          ------                    ------                  ------            ------
                                                                         ADDITIONS
                                                                         ---------
                                                BALANCE                          CHARGED
                                                  AT              CHARGED           TO                              BALANCE
                                               BEGINNING            TO             OTHER                              AT
                                                  OF               COST          ACCOUNTS-      DEDUCTIONS-         END OF
              DESCRIPTION                       PERIOD           & EXPENSE       DESCRIBE        DESCRIBE           PERIOD
              -----------                       ------           ---------       --------        --------           ------

<S>                                              <C>               <C>               <C>           <C>                  <C>
      Year Ended December 31, 2000:
      Deducted from asset accounts
      Allowance for Doubtful Accounts            $1,420            $  172            $0            $  609(B)            $  983
                                                 ------            ------            --            ------               ------
      Total                                      $1,420            $  172            $0            $  609               $  983
                                                 ======            ======            ==            ======               ======
      Year Ended December 31, 1999:
      Deducted from asset accounts
      Allowance for Doubtful Accounts            $2,548            $  146            $0            $1,274(A)            $1,420
                                                 ------            ------            --            ------               ------
      Total                                      $2,548            $  146            $0            $1,274               $1,420
                                                 ======            ======            ==            ======               ======
      Year Ended December 31, 1998:
      Deducted from asset accounts
      Allowance for Doubtful Accounts            $  883            $2,159            $0            $  494(A)            $2,548
                                                 ------            ------            --            ------               ------
      Total                                      $  883            $2,159            $0            $  494               $2,548
                                                 ======            ======            ==            ======               ======
</TABLE>

 (A) -   Uncollectible accounts written off.

 (B) -   Reclassified to provide for warranty reserves on unbilled accounts.



                                      F-22