|FORM 10-Q


SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549


(Mark one)
|----------------------------------------------------------------------------------

| |  | [X] |  | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934.
| |  | --- |  | -----------------------------------------------------------------------------------------

|For the quarterly
period ended March 31, 2002 OR
|------------------------------------------------

| |  | [_] |  | TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
| |  | --- |  | ----------------------------------------------------------------------------------------

|For the transition period from _____
to _____



Commission file number
0-27750 IMPATH INC. 
(exact name of registrant as specified in its charter)
|---------------------------------------------------------------------------------------------------------------------------------------------------

|Delaware
(State or other jurisdiction of
incorporation or organization) | 8071
(Primary Standard Industrial
Classification Code Number) | 13-3459685
(I.R.S. Employer
Identification No.)
|----------------------------------------------------------------------- | ------------------------------------------------------------- | -----------------------------------------------

|521 West
57th StreetNew York, New York 10019
(212) 698-0300
(Address, including zip code, and telephone number,
including area code, of registrants
principal executive offices)




Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.



Yes [X]      No [_]


Indicate
the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|CLASSCommon Stock, par value
$ .005 per share | OUTSTANDING AT MARCH 31, 200216,280,890
|--------------------------------------------- | ---------------------------------------

|Index


IMPATH Inc.
and Subsidiaries
|------------------------------------

|PART I. Financial Information | PAGE NUMBER
|----------------------------- | -----------
|                             
|Item 1.                       |            
|                             
|                              |            
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|                             
|Item 2.                       |            
|                              |            
|                             
|Item 3.                       |            
|                             
|PART II                       |            
|                             
|Item 6.                       |            
|                             
|Signatures                    |            

|2
|-

|Part I.
Financial Information


Item 1. Consolidated
Financial Statements (Unaudited)



IMPATH Inc.
and Subsidiaries


Consolidated Balance
Sheets (unaudited)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                             | March 31,2002 | December 31,2001
|------------------------------------------------------------ | ------------- | ----------------
|ASSETS                                                       |               |                 
|Current assets:                                              |              
|Cash and cash equivalents                                    |               | $    7,318,307  
|Marketable securities, at market value                       |               | 15,069,956      
|Accounts receivable, net of allowance for doubtful accounts  |               | 66,083,680      
|Prepaid expenses                                             |               | 1,607,198       
|Deferred tax assets                                          |               | 5,227,139       
|Other current assets                                         |               | 16,832,494      
|                                                             |               |                 
|Total current assets                                         |               | 112,138,774     
|                                                            
|Fixed assets, less accumulated depreciation and amortization |               | 85,899,818      
|Deposits and other non-current assets                        |               | 628,727         
|Intangible assets, net of accumulated amortization           |               | 30,378,799      
|Goodwill                                                     |               | 47,744,470      
|                                                             |               |                 
|Total assets                                                 |               | $276,790,588    
|                                                             |               |                 
|                                                            
|
|                                                            
|Current liabilities:                                         |               |                 
|Current portion of capital lease obligations                 |               | $   14,536,886  
|Current portion of note payable                              |               | 1,225,000       
|Accounts payable                                             |               | 5,165,863       
|Deferred revenue                                             |               | 4,864,054       
|Income taxes payable                                         |               | 3,707,914       
|Accrued expenses & other current liabilities                 |               | 5,746,588       
|                                                             |               |                 
|Total current liabilities                                    |               | 35,246,305      
|                                                             |               |                 
|Capital lease obligations, net of current portion            |               | 24,309,918      
|Long term note payable, net of current portion               |               | 51,375,000      
|Deferred tax liabilities                                     |               | 7,844,249       
|                                                            
|Stockholders equity:                                        |              
|Common stock                                                 |               | 92,452          
|Additional paid-in capital                                   |               | 139,299,140     
|Retained earnings                                            |               | 45,675,214      
|Accumulated other comprehensive (loss)                       |               | (186,711        
|                                                             |               |                 
|                                                             |               | 184,880,095     
|Less:                                                        |              
|Cost of 2,209,476 shares of common stock                     |              
|held in treasury in 2002 and 2001                            |               | (26,750,281     
|Deferred compensation                                        |               | (114,698        
|                                                             |               |                 
|Total stockholders equity                                   |               | 158,015,116     
|                                                             |               |                 
|Total liabilities and stockholders equity                   |               | $ 276,790,588   
|                                                             |               |                 

|See accompanying notes
to consolidated financial statements


3
|---------------------------------------------------------------

|IMPATH Inc.
and Subsidiaries



Consolidated Statements
of Operations 
(Unaudited)
|----------------------------------------------------------------------------------

|                                              | Three Months EndedMarch 31
|--------------------------------------------- | --------------------------
|
|                                              |                           
|Revenues:                                     |                           
|Net Physicians Services                       |                           
|IMPATH Predictive Oncology                    |                           
|Information Services                          |                           
|                                              |                           
|                                              |                           
|                                              |                           
|Cost of sales                                 |                           
|                                              |                           
|                                             
|Gross Profit                                  |                           
|                                              |                           
|                                             
|Operating expenses:                           |                           
|Selling, general and administrative           |                           
|Depreciation and amortization                 |                           
|Acquired in process research & development    |                           
|                                              |                           
|Total operating expenses                      |                           
|                                              |                           
|                                             
|Income from operations                        |                           
|                                             
|Interest income                               |                           
|Interest expense                              |                           
|                                              |                           
|                                             
|Other expense, net                            |                           
|                                              |                           
|                                             
|Income before income tax expense              |                           
|Income tax expense                            |                           
|                                              |                           
|Net income                                    |                           
|                                              |                           
|                                             
|Earnings per share:                           |                           
|Basic:                                        |                           
|Net income per common share                   |                           
|                                              |                           
|                                             
|Weighted average common shares outstanding    |                           
|Diluted:                                      |                           
|Net income per common share-assuming dilution |                           
|                                              |                           
|                                             
|Weighted average common and common equivalent |                           
|shares outstanding-assuming dilution          |                           
|                                              |                           

|See accompanying notes to
consolidated financial statements.


4
|----------------------------------------------------------------

|IMPATH Inc. and
Subsidiaries
Consolidated Statement
of Stockholders Equity Three Months Ended
March 31, 2002 
(Unaudited)
|--------------------------------------------------------------------------------------------------------------------------

|                           | Common Stock | AdditionalPaid-in |  | Retained |  | Accumulated OtherComprehensive |  | Treasury    |  | Deferred  |   |             
|-------------------------- | ------------ | ----------------- |  | -------- |  | ------------------------------ |  | ----------- |  | --------- | - | ------------
|
|                           |              |                   |  |          |  |                                |  |             |  |           |   |             
|Balance at December31,2001 |              | 18,406,579        |  | $92,033  |  | $138,259,994                   |  | $44,226,341 |  | ($ 10,776 | ) | ($26,750,281
|                          
|Common shares issued upon  |             
|exercise of stock options  |              | 83,787            |  | 419      |  | 1,039,146                      |  |             |  |           |   |             
|                          
|Issuance of common shares  |              |                   |  |          |  |                                |  |             |  |           |   |             
|                          
|Change in deferred         |             
|compensation               |              |                   |  |          |  |                                |  |             |  |           |   |             
|Comprehensive income:      |             
|Change in unrealized net   |             
|depreciation of securities |              |                   |  |          |  |                                |  |             |  | (175,935  | ) |             
|Net income for the period  |             
|Ended March 31, 2002 .     |              |                   |  |          |  |                                |  | 1,448,873   |  |           |   |             
|                           |              |                   |  |          |  |                                |  |             |  |           |   |             
|Total comprehensive income |              |                   |  |          |  |                                |  |             |  |           |   |             
|                           |              |                   |  |          |  |                                |  |             |  |           |   |             
|Balance at March 31, 2002  |              | 18,490,366        |  | $92,452  |  | $139,299,140                   |  | $45,675,214 |  | ($186,711 | ) | ($26,750,281
|                           |              |                   |  |          |  |                                |  |             |  |           |   |             

|See accompanying notes to
consolidated financial statements


5
|---------------------------------------------------------------

|IMPATH Inc.
and Subsidiaries


Consolidated Statements
of Cash Flows 
(Unaudited)
|---------------------------------------------------------------------------------

|                                                               | Three Months Ended March 31,
|-------------------------------------------------------------- | ----------------------------
|
|                                                               |                             
|Cash flows from operating activities:                          |                             
|Net income                                                     |                             
|Adjustments to reconcile net income to net cash provided by    |                             
|operating activities:                                          |                             
|Acquired in process research & development                     |                             
|Depreciation and amortization                                  |                             
|Provision for uncollectible accounts receivable                |                             
|Non-cash deferred compensation                                 |                             
|Changes in assets and liabilities (net of effect from          |                             
|acquisition of business):                                      |                             
|(Increase) in accounts receivable                              |                             
|(Increase) in prepaid expenses and current assets              |                             
|Decrease in deposits and other assets                          |                             
|(Decrease)/increase in accounts payable and accrued expenses   |                             
|(Decrease)/increase in income taxes payable                    |                             
|(Decrease)/increase in deferred revenues                       |                             
|                                                               |                             
|Total adjustments                                              |                             
|                                                               |                             
|Net cash provided by operating activities                      |                             
|                                                              
|Cash flows from investing activities:                          |                             
|Purchases of marketable securities                             |                             
|Sales/maturities of marketable securities                      |                             
|Acquisitions of business, net of cash acquired                 |                             
|Purchase of intangible assets                                  |                             
|Capital expenditures                                           |                             
|                                                               |                             
|Net cash (used in) investing activities                        |                             
|                                                               |                             
|                                                              
|Cash flows from financing activities:                          |                             
|Issuance of common stock from exercise of options and warrants |                             
|Payments of capital lease obligations                          |                             
|Proceeds from bank loans                                       |                             
|Payments of notes payable                                      |                             
|                                                               |                             
|Net cash provided by/(used in) financing activities            |                             
|                                                               |                             
|Net increase/ (decrease) in cash and cash equivalents          |                             
|Cash and cash equivalents at beginning of period               |                             
|                                                               |                             
|Cash and cash equivalents at end of period                     |                             
|                                                               |                             

|See accompanying notes to consolidated
financial statements.

6
|---------------------------------------------------------------

|IMPATH Inc.

Notes to Consolidated
Financial Statements (unaudited)
General:



The accompanying unaudited
consolidated financial statements have been prepared by management in accordance
with the rules and regulations of the United States Securities and Exchange
Commission.


In the opinion of IMPATH
Inc. (the Company), the accompanying unaudited consolidated
financial statements contain all adjustments, consisting only of
normal recurring adjustments, necessary for the fair presentation of the
financial information for all periods presented. Results for the interim periods
are not necessarily indicative of the results for an entire year and do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete annual financial
statements. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
contained in the Companys Annual Report on Form 
10-K for the year ended December 31, 2001.

Net Income Per Share:


Net income per share,
basic, is based on the weighted average number of shares of common stock
outstanding and includes shares to be issued from the date the commitment to
issue was consummated. Diluted earnings per share is based on the weighted
average number of shares of common stock, shares to be issued and common
equivalent shares outstanding. Common equivalent shares from stock options and
warrants are included in the computation assuming the related options and
warrants had been exercised to the extent their effect is dilutive.


Comprehensive
Net Income:


Comprehensive net income is
equal to the net income reported adjusted for the unrealized net depreciation of
marketable securities, net of related deferred taxes. Comprehensive net income
for the three months ended March 31, 2002 and 2001 was $1,272,938 and
$4,054,953, respectively.

Investments:


In accordance with
Statement of Financial Accounting Standards (SFAS) No. 115, the
Companys investments (consisting primarily of government and corporate
fixed income securities) were classified as available for sale. As a result, the
unrealized depreciation is recorded as a separate component of
stockholders equity, net of related deferred taxes. At March 31, 2002,
approximately $1,193,542 of securities with original maturities of three months
or less were included as cash equivalents. The remaining securities included in
the investment portfolio with original maturities that exceed three months are
included in marketable securities.


Accounts
Receivable, Net of Allowance for Doubtful Accounts:


In accordance with
accounting principles generally accepted in the United States of America
("GAAP") and consistent with healthcare industry practices, the Company
presents its accounts receivable at net realizable value. Net accounts
receivable balances are comprised of the following as of March 31, 2002 and
December 31, 2001:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                               
|-------------------------------
|                               
|Gross accounts receivable      
|Allowance for doubtful accounts
|Contractual allowance reserve  
|                               
|                               
|                               

|7
|-

|Segment
information:


The Company operates in three
reportable business segments: (1) Physician Services, (2) IMPATH Predictive Oncology(IPO)
and (3) Information Services. Physician Services derives revenue from performing
specialized cancer analyses. IPO provides (i) contract laboratory services (ii) cancer
database and pharmacoeconomic information and (iii) clinical trials support services to
genomics, biotechnology and pharmaceutical companies. Information Services derives
revenues by licensing its tumor registry software to community hospitals and state
agencies. Beginning with the acquistion of Tamtron, Information Services also provides
pathology information management software, which is licensed to hospitals
and academic medical centers around the country. The Company measures the performance of its operating segments through Income
(loss) from operationsas defined on the accompanying consolidated statements of
operations.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Three Months Ended($ in Thousands) |  | TotalIMPATH Inc. |  | PhysicianServices |  | IMPATHPredictive Oncology |  | InformationServices
|---------------------------------- |  | ---------------- |  | ----------------- |  | ------------------------- |  | -------------------
|                                   |  |                  |  |                   |  |                           |  |                    
|2002                               |  |                  |  |                   |  |                           |  |                    
|Revenue, net                       |  | $52,580          |  | $44,335           |  | $5,970                    |  | $ 2,275            
|Income (loss) from operations      |  | $  3,231         |  | $  4,686          |  | $1,374                    |  | $(2,829            
|Depreciation and                   | 
|Amortization                       |  | $  7,925         |  | $  6,755          |  | $   857                   |  | $    313           
|                                   |  |                  |  |                   |  |                           |  |                    
|2001                               | 
|Revenue, net                       |  | $42,136          |  | $38,004           |  | $3,012                    |  | $ 1,120            
|Income (loss) from operations      |  | $  7,410         |  | $  7,798          |  | $   100                   |  | $  (488            
|Depreciation and                   | 
|Amortization                       |  | $  3,420         |  | $  2,889          |  | $   247                   |  | $    284           
|                                   |  |                  |  |                   |  |                           |  |                    

|8
|-

|Intangible
Asset:


Payments to acquire tissue
and tumor samples for use in GeneBank has been classified as an
intangible asset and has total purchases of $2,933,717 for the three months ended March 31, 2002.
GeneBank is being amortized using the straight-line method over
its estimated useful life of seven years.


Recently
Issued Accounting Standards:


In July 2001, the FASB issued SFAS
No. 141, Business Combinations (SFAS 141), which requires business
combinations initiated after June 30, 2001 to be accounted for using the purchase method
of accounting, and SFAS No. 142, Goodwill and Other Intangible Assets (SFAS
142), which broadens the criteria for recording intangible assets separate from
goodwill. SFAS 142 requires the use of a nonamortization approach to account for
purchased goodwill and certain intangibles. Under the nonamortization approach, goodwill
and intangibles with indefinite lives will not be amortized into results of operations,
but instead will be reviewed for impairment at least annually and an impairment charge
will be recorded in the periods in which the recorded carrying value of goodwill and
certain intangibles is more than its estimated fair value. The provisions of SFAS 141
have been adopted for any business combination consummated after June 30, 2001. Goodwill
acquired in a business combination for which the acquisition date is after June 30, 2001
will not be amortized. The Company has adopted the provisions of SFAS 142, related to
goodwill acquired prior to June 30, 2001 and intangible assets, on January 1, 2002. The
Company has reclassified to goodwill approximately $100,000 which was previously assigned
to the workforce. Furthermore, the Company anticipates that intangible asset
amortization, including the effects of the Tamtron acquistion, will be approximately $3.7
million annually, for the next several years. The adoption of this accounting standard is
expected to reduce the amount of amortization of goodwill recorded in our consolidated
financial statements, excluding the Tamtron acquisition, by approximately $1.3 million
annually, commencing January 1, 2002. The Company has not yet completed its transition
impairment testing, but does not expect any material impairment charge to be recorded.


In August 2001, the FASB
issued SFAS No. 144 Accounting for Impairment or Disposal of Long-Lived
Assets (SFAS 144), which supercedes SFAS No. 121. SFAS 144
further refines SFAS 121s requirement that companies recognize an
impairment loss if the carrying amount of a long-lived asset is not recoverable
based on its undiscounted future cash flows and measure an impairment loss as
the difference between the carrying amount and fair value of the asset. In
addition, SFAS 144 provides guidance on accounting and disclosure issues
surrounding long-lived assets to be disposed of by sale. SFAS 144 also extends
the presentation of discontinued operations to include more disposal
transactions. SFAS 144 was adopted January 1, 2002 and did not have a material
effect on the Company's consolidated results of operations or financial position.


The following table
provides a reconciliation of the prior years reported net income to
adjusted net income had SFAS 142 been applied as of the beginning of fiscal
2001.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                   | For the three months endedMarch 31, 2001
|---------------------------------- | ----------------------------------------
|                                  
|
|                                   |                                         
|Reported net income                |                                         
|                                  
|Add back amortization of goodwill, |                                         
|net of income tax benefit          |                                         
|                                   |                                         
|                                   |                                         
|Adjusted net income                |                                         
|                                   |                                         

|9
|-

|Recent
Acquisitions


On January 18, 2002, the Company
completed its acquisition of Tamtron Corporation (Tamtron) for $25,930,241
million in cash, plus debt repayment of $651,492, as well as acquisition expenses of
$2,622,326 for a total purchase price of $29,204,059. Tamtron is a San Jose, California,
based company whose flagship PowerPath
software is designed specifically for companies providing surgical pathology,
cytology and autopsy services (e.g. anatomic pathology) to streamline operations and support
multi-site or multi-entity healthcare networks and will be part of the Information Services segment.
The source of funds for the acquisition was a combination of the Companys available cash, as well as advances totaling $25
million under its amended credit facility. In connection with the Tamtron acquisition, on January 18, 2002,
the Company amended its original credit facility and converted its $25 million 364-day facility to a $28 million
term loan. The term loan is to be repaid over a five-year period, with interest only payable for the
first twelve months. Thereafter, the loan is payable in seventeen payments of principal plus interest,
with principal of $4.9 million in 2003, 2004, 2005 and 2006 and a final principal payment of $8.4 million in 2007.
Both in revolving credit line and the term loan bear interest at LIBOR plus 1.25%.


The acquisition has been
accounted for under the purchase method, in accordance with SFAS 141, whereby the purchase
price is allocated to the underlying assets and liabilities based on their
estimated fair values. The resulting goodwill from this transaction of $24.3
million will not be amortized and intangibles of $11.0 million will be amortized
over periods ranging from five to ten years. The following table reflects the allocation of the purchase price.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                          | 
|--------------------------------------------------------- | 
|Cash                                                      | 
|Prepaid expenses and other current assets                 | 
|Accounts receivables, net of allowance                    | 
|Property and equipment, net of accumulated depreciation   | 
|Intangible assets - customer lists and acquired software  | 
|Goodwill                                                  | 
|Acquired in process research & development                | 
|Current and other liabilities, including deferred revenue | 
|Deferred tax                                              | 
|                                                          | 
|                                                          | 
|                                                          | 

|Tamtron has annualized
revenue of approximately $10 million, which is generated primarily through
software sales and maintenance contracts. Tamtrons current customer base includes
more than 350 sites, including hospitals and academic medical centers around the
country, which process over 5 million cases per year.


Pro forma historical
results (unaudited) for the three months ended March 31, 2001, adjusted, as if
Tamtron had been acquired on January 1, 2001, approximates $42.8 million in
revenue, $4.1 million in net income, and $0.25 in diluted earnings per share.
The pro forma results are not necessarily indicative of what actually would have
occurred if the acquisition had been completed as of January 1, 2001, nor are
they necessarily indicative of future results.

10
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Commitments
and Contingencies:


From time to time, the
Company is involved in various legal actions in the normal course of
business, some of which seek monetary damages. While the Company cannot predict
with absolute certainty the outcome of any of the proceedings in which it is
involved, the Company believes any ultimate liability associated with these
contingencies would not have a material adverse effect on the Companys
consolidated financial position or results of operations.


Certain executive officers
of the Company have entered into agreements which provide severance of up to one
years salary in the event of termination without cause.


During the course of the Companys
strategic review for the quarter ended March 31, 2002, it was determined that the Company
would no longer offer certain products based on technology which was purchased from
Biologic & Immunologic Science Laboratories, Inc. (BIS), an acquisition
that was completed in July 1998. As a result, the Company recorded a goodwill write-down
of $3,200,000, which eliminated all remaining goodwill from the BIS acquisition. The
goodwill impairment was necessitated by the Companys decision to completely discontinue
the BIS product offering. Additionally, the Company recorded a one-time charge of
$1,900,000 to account for severance and related costs, as well as, an increase in
allowances for bad debt expenses related to those accounts the Company will no longer be
servicing.


11
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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


Forward-Looking
Statements


This Quarterly Report on
Form 10-Q may contain statements that the Company believes are, or may be
considered to be, forward-looking statements within the meaning of
various provisions of the Securities Act of 1933 and the Securities Exchange Act
of 1934. These forward-looking statements generally can be identified by the use
of statements that include phrases such as the Company believes,
expects, anticipates, intends,
plans, foresees or other similar words or phrases.
Similarly, statements that describe the Companys projected growth and
goals and its plans for expansion also are forward-looking statements. All of
these forward-looking statements are subject to certain risks and uncertainties,
many of which are outside of managements control, and which could cause
the Companys actual results to differ materially from those contemplated
by the relevant forward-looking statement. Some of the most significant factors
that could cause the actual results to differ materially from the
forward-looking statement, alone or in combination, would be the failure to
continue to successfully integrate the businesses acquired by the Company,
unanticipated disagreements with the Companys joint venture partners,
unanticipated changes in the healthcare industry (as a result of cost
containment measures, changes in governmental regulations, including
reimbursement programs and patient confidentiality issues, or other factors), an
inability to procure consented, well-characterized tissue specimens, the adverse
effect of any legal proceedings involving the Company, an unanticipated failure
in the commercialization of the Companys biopharmaceutical products, or an
unanticipated loss of business. In addition, the September 11, 2001 terrorist
attacks, and change in international political conditions as a result of these
events, may continue to effect the United States and the global economy and
increase other risks. Readers are urged to consider these factors carefully in
evaluating the forward-looking statements. The forward-looking statements
included in this Quarterly Report on Form 10-Q are made only as of the date of
this Quarterly Report and the Company undertakes no obligation to publicly
update these forward-looking statements to reflect subsequent events or
circumstances.


Three Months
Ended March 31, 2002
Compared with Three Months Ended March 31, 2001


The Companys total
net revenues for the three months ended March 31, 2002 and 2001 were $52.6
million and $42.1 million, respectively, representing an increase of $10.5
million, or 24.9%, in 2002. This growth was primarily attributable to a 13%
increase in case volume, resulting from increased sales and marketing
activities. During the 2002 quarter, the Company increased its provision rate
for contractual allowances due to a shift toward in-network revenues related
primarily to cases referred by oncology offices. The Company also executed and
renewed several managed care agreements in the quarter that resulted in higher
contractual allowance rates. As a result, the growth in lymphoma and leukemia
cases, which increased 24% over the year ago quarter, was offset by these higher
contractual allowance rates resulting in a 3% increase in net revenue per case
over the first quarter 2001 amount. IPO revenues increased 98% to $6.0 million this quarter as
compared to the year ago quarter primarily driven by increases in the numbers of
projects with biopharmaceutical companies.


Cost of sales, which
primarily includes payroll, laboratory supplies, logistics and outside services,
for the three months ended March 31, 2002 and 2001 were $16.5 million and $14.2
million, respectively, representing an increase of $2.3 million, or 16.2% in
2002. This increase was necessitated by case volume growth, a continuing product
shift to more complex cases, as well as costs associated with the operations of
the recently-acquired Tamtron. In addition, the Company reported a one-time
charge in the first quarter of $1.0 million relating to certain severance
payments in conjunction with the decision to no longer offer certain non-core
products based on technology purchased from Biologic and Immunologic Science
Laboratories (BIS), an acquisition that was completed in July 1998.
Cost of sales as a percentage of total revenues decreased to 31.4% in 2002 from
33.7% in 2001.


Gross profit for the three
months ended March 31, 2002 and 2001 were $36.1 million and $27.9 million,
respectively, representing an increase of $8.2 million or 29.4% in 2002. Gross
profit margins increased to 68.6% in 2002, up from 66.3% in 2001.

12
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|Selling, general and
administrative expenses for the three months ended March 31, 2002 and 2001 were
$24.0 million and $17.1 million, respectively, representing an increase of $6.9
million, or 40.4%, in 2002. The increase is primarily due to an additional $3.1
million in bad debt expense associated with higher revenues and managed care
receivables. In addition, the Company incurred a one-time charge of $1.8
million, which includes a $900,000 increase in bad-debt allowances related to BIS
and an additional $900,000 one-time pre-tax charge in connection with
the Companys acquisition of Tamtron for Acquired
in Process Research and Development pursuant to FASB requirements. The
Company also incurred an additional $2.0 million in incremental laboratory
supplies and courier services due to case volume growth. Selling, general and
administrative expenses, as a percentage of revenues, increased to 45.6 % in
2002 from 40.6% in 2001, primarily due to the increase in bad debt expenses and
the one-time charges.


Depreciation and
amortization expense for the three months ended March 31, 2002 and 2001 was $7.9
million and $3.4 million, respectively, representing an increase of $4.5
million, or 132.4%, in 2002. This increase was primarily due to a one-time
charge of $3.2 million in amortization expense for the write-down of BIS
goodwill and $715,000 of depreciation expense for new furniture, office and lab
equipment, as well as leasehold improvements incurred in connection with the
expansion the Companys New York and Los Angeles facilities. The Company
also recorded $400,000 in depreciation expense for enhancements made to the
Companys clinical and billing systems. Additionally, $206,000 in expense
was recorded for the amortization of GeneBank. Amortization of goodwill
was reduced by $171,000 as a result of the January 1, 2002 adoption of SFAS 142.
As a percentage of total revenues, depreciation and amortization expense
increased to 15.0% in 2002 from 8.1% in 2001.


Income from operations for
the three months ended March 31, 2002 and 2001 was $3.2 million and $7.4
million, respectively, representing a decrease of $4.2 million, or 56.8%, in
2002. The decrease was due to the one-time charges totaling $6.0 million, which
consists of $5.1 million relating to the decision to no longer offer certain
non-core products based on technology purchased from BIS, as well as $900,000 in connection with
the Companys acquisition of Tamtron for Acquired
in Process Research and Development pursuant to FASB requirements. As a
percentage of total revenues, income from operations decreased to 6.1% in 2002
from 17.6% in 2001, as a result of the aforementioned charges.


Other income (expense), net
for the three months ended March 31, 2002 and 2001 was $(689,000) and
$(336,000), respectively, representing a decrease of $353,000 in 2001. The
decrease was primarily due to increased interest expense associated with capital
lease obligations and long-term borrowings, as well as a reduction in the amount
of interest bearing securities on hand.


The tax provision for the
three months ended March 31, 2002 of approximately $1.1 million reflects
federal, state and local income tax expense. The effective tax rate for 2002 and
2001 remained consistent at 43.0%.


Net income for the three
months ended March 31, 2002 and 2001 was $1.4 million and $4.0 million,
respectively, representing a decrease of $2.6 million, or 65.0%, in 2002. Due to
the non-recurring charges, net income as a percentage of revenues decreased to
2.7% in 2002 from 9.5% in 2001.
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|Liquidity and
Capital Resources


Since inception, the
Company has raised approximately $103.9 million of capital through the public
offerings of its common stock and $6.6 million of capital from private placements of
preferred stock. All of the Companys preferred stock was converted into common stock at the closing of
the Companys initial public offering in February 1996. The Companys
working capital and capital expenditure needs have increased and are expected to
continue to increase as the Companyexpands its existing facilities and
pursues its growth strategy.


The Companys cash and
cash equivalent balances at March 31, 2002 and December 31, 2001 were $7.3
million and $5.9 million, respectively, representing an increase of $1.4 million
in 2002. The Company also had approximately $15.1 million in marketable
securities at March 31, 2002, representing a $1.4 million decrease from the
$16.5 million at December 31, 2001. The net increase in cash and cash
equivalents for the three-month period was primarily due to $33.6 million in
loan proceeds, offset by $28.6 million for the acquisition of Tamtron, $5.9
million for capital expenditures and lease payments and $2.9 million for the
acquisition of GeneBank samples. The Company generated
approximately $3.2 million in operating cash flow in the period, due primarily
to a 40% increase in cash collections over the year ago quarter.


In June 2001, the Company
entered into a $50 million Senior Secured Credit Facility consisting of a
five-year commitment for a $25 million revolving credit line and a $25 million
364-day facility intended for acquisitions. The credit facility syndicated by
Fleet National Bank, which will also act as Agent for the lenders, replaced the
Companys previous $15 million unsecured line of credit that expired on
June 28, 2001. In connection with the Tamtron acquisition, on January 18, 2002,
the Company amended its original credit facility and converted its $25 million
364-day facility to a $28 million term loan. The term loan is to be repaid over
a five-year period, with interest only payable for the first twelve months.
Thereafter, the loan is payable in seventeen payments of principal plus
interest, with principal of $4.9 million in 2003, 2004, 2005 and 2006 and a
final principal payment of $8.4 million in 2007. Both the revolving credit line
and the term loan bear interest at LIBOR plus 1.25%. As of March 31, 2002, the
Company had $24.6 million outstanding under the revolving credit line and $28
million drawn down from the term loan. The $24.6 million under the revolving
credit line is due in full in five years. In connection with the amended
facility, the Company also amended certain debt covenants contained in the
original facility. The Company was in compliance with these covenants as of March 31, 2002.



On May 7, 2002, the Company
announced its intentions to resume its repurchase of shares of the Company's common
stock. The share repurchase program was approved by the Companys board of directors in
January of 2000 and authorized the repurchase of up to $15,000,000 of common stock of the
Company from time to time in open market or private transactions, depending on market
conditions, share price and other considerations. Approximately $13,000,000 remains
available for repurchase under the program. The purchases will be funded from available
cash and working capital.



The Company has lines of credit for
financing equipment, leasehold improvements and computer hardware and software. In July
1999, the Company established a $6.0 million credit line with Newcourt Financial
(currently CIT Group) with lease terms that are based on 48 monthly payments
at a rate equal to .35% above yield on four-year treasury notes. As of March 31, 2002,
the Company had fully drawn against this line. In September 1999, the Company established
a $6.0 million credit line with Fleet Bank with lease terms based on 48 monthly payments
at a rate equal to .20% above the yield on four-year treasury notes. As of March 31, 2002
approximately $1.0 million was drawn against this line. In December 1999, the Company
established a $6.2 million credit line with First American Bankcorp, Inc. with lease
terms of 48 months and a rate equal to the yield on four-year treasury notes. The line of
credit was subsequently increased to $21.2 million in March 2001, under the same lease
terms. As of March 31 2002, approximately $20.5 million was drawn against this line. In
November 2001, the Company established an additional $10 million credit line with First
American Bankcorp, Inc. with lease terms of 48 months and a rate equal to the yield on
four-year treasury notes. As of March 31, 2002 the Company had not drawn against this
line. In April 2000, the Company established an $875,000 credit line with Dynamics
Commercial Funding Corp. with lease terms of 36 months and a rate equal to the yield on
three-year treasury notes. As of March 31, 2002, the Company had fully drawn against this
line. In June 2000, the Company established an additional $4.0 million credit line with
Dynamics Commercial Funding Corp. with lease terms of 48 months and a rate equal to the
yield on four-year treasury notes. As of March 31, 2002, the Company had fully drawn
against this line. In November 2000, the Company established an additional $2.9 million
credit line with Dynamics Commercial Funding Corp. with lease terms of 48 months and a
rate equal to the yield on four-year treasury notes. As of March 31,2002, approximately
$2.6 million was drawn against this line. In April 2000, the Company established a $3.0
million credit line with First Sierra Financial, Inc. (currently Popular Leasing,
USA) with lease terms of 48 months and a rate equal to the yield on four-year
treasury notes. As of March 31, 2002, the Company had fully drawn against this line. In
September 2000, the


14
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|Company established an
additional $6.0 million credit line with First Sierra Financial, Inc. (currently Popular
Leasing, USA) with the lease terms of 48 months and a rate equal to the yield on
four-year treasury notes. As of March 31, 2002, approximately $5.4 million was drawn
against this line. In November 2001, the Company established an additional $2 million
credit line with Popular Leasing, USA with lease terms of 48 months and a rate equal to
..35% above yield on four-year treasury notes. As of March 31, 2002 approximately $1.4
million was drawn against the line. In July 2000, the Company established a $7.15 million
credit line with Advanced Capital Resources Corp. (currently Applied Financial, Inc.)
with lease terms of 48 months and a rate equal to the yield on four-year treasury notes.
As of March 31, 2002, approximately $6.6 million was drawn against this line. In November
2000, the Company established a $3.0 million credit line with Trimarc Financial Corp.
with lease terms of 48 months and a rate equal to the yield on four-year treasury notes.
As of March 31, 2002, the Company had fully drawn against this line. In April 2001, the
Company established an additional $1.1 million credit line with Trimarc Financial Corp.
with lease terms of 48 months and a rate equal to the yield on four-year treasury notes.
As of March 31, 2002 approximately $1.1 million was drawn against this line. In January
2001, the Company established a $2 million credit line with IFC Credit Corp. with lease
terms of 48 months and a rate equal to the yield on four-year treasury notes. As of March
31 2002, approximately $525,000 was drawn against this line. In January 2002, the Company
established a $2 million credit line with Key Equipment Finance with lease term of 48
months and a rate equal to the yield on four-year treasury notes. As of March 31, 2002,
approximately $229,000 was drawn against this line.


The Companys growth
strategy is anticipated to be financed through its current cash resources and
existing third-party credit facilities. The Company believes the combination of
these sources will be sufficient to fund its operations and satisfy the
Companys cash requirements for the next 12 months and the foreseeable
future. There may be circumstances, however, that would accelerate the
Companys use of cash resources, specifically, acquisitions of businesses
or technologies that could require additional liquidity needs. If this occurs,
the Company may, from time to time, incur additional indebtedness or issue, in
public or private transactions, equity or debt securities. However, there can be
no assurance that suitable debt or equity financing will be available to the
Company. See Forward-Looking Statements.


Impact of
Inflation and Changing Prices


The impact of inflation and
changing prices on the Company has been primarily limited to salary, laboratory
and operating supplies and rent increases and to date has not been material to
the Companys operations. In the future, the Companys revenue
realization per case may not be sufficient to cover the cost of inflation,
although the Company is responding to these concerns by attempting to increase
the case volume and adjust the product mix of its business.


ITEM 3. Quantitative and
Qualitative Disclosures About Market Risk.


The following discussion
about our exposure to market risk of financial instruments contains
forward-looking statements, see Forward Looking Statements. Actual
results may differ materially from those described.


Our holdings of financial
instruments are comprised primarily of U.S. corporate debt, U.S. government debt
and commercial paper. All such instruments are classified as securities
available for sale. We do not invest in portfolio equity securities or
commodities or use financial derivatives for trading purposes. Our debt security
portfolio represents funds held temporarily pending use in our business and
operations. We manage these funds accordingly. We seek reasonable assuredness of
the safety of principal and market liquidity by investing in rated fixed income
securities while at the same time seeking to achieve a favorable rate of return.
Our market risk exposure consists principally of exposure to changes in interest
rates. Our holdings are also exposed to the risks of changes in the credit
quality of issuers. We typically invest in the shorter-end of the maturity
spectrum, and at March 31, 2002, approximately 78% of our holdings were in
instruments maturing in two years or less and more than 76% of such holdings
maturing in one year or less.

15
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|PART II. Other
Information


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

|(a) |  | Exhibits:
|--- |  | ---------

| | There
are no exhibits required to be filed as part of this Quarterly Report on Form 10-Q.
| | -----------------------------------------------------------------------------------------

|(b) |  | Reports
on Form 8-K:
|--- |  | --------------------

| | A
current report on Form 8-K dated January 18, 2002 was filed on February 4, 2002 by the
registrant, in connection with the completed acquisition of Tamtron Corporation dated
January 18, 2002.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|16
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|SIGNATURES


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

|Dated: March 14, 2002 |  | IMPATH INC.
(Registrant)                                                                                
|--------------------- |  | ----------------------------------------------------------------------------------------------------------------------
|Dated: March 14, 2002 |  | By: /s/ ANU D. SAAD
Anu D. Saad, Ph.D.Chief Executive Officer                                           
|Dated: March 14, 2002 |  | By: /s/ DAVID J. CAMMARATA
 David J. Cammarata
Chief Financial Officer
 and Principal Accounting Officer

|17
|--