UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB

 [X]              ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2002
                                             -----------------

                         Commission File Number: 1-16119
                                                 -------

                            SFBC International, Inc.
                            ------------------------
        (Exact name of small business issuer as specified in its charter)

                  Delaware                         59-2407464
                  --------                         ----------
      (State or other jurisdiction of            (IRS Employer
      incorporation or organization)          Identification No.)

                      11190 Biscayne Blvd., Miami, FL 33181
                      -------------------------------------
               (Address of principal executive offices) (Zip code)

                                 (305) 895-0304
                                 --------------
                           (Issuer's telephone number)

         Securities registered under Section 12(b) of the Exchange Act:

                                      None

       Securities Registered Pursuant to Section 12(g) of the Exchange Act

                                  Common Stock
                                  ------------
                                (Title of Class)

<PAGE>


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. [X] Yes [ ] No Indicate by check mark if
disclosure of delinquent filers in response to Item 405 of Regulation S-B is not
contained in this form, and no disclosure will 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-KSB or any amendment to
this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year.   $64,740,047

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.) $95,941,558 as of March 21, 2003 computed using
the average bid and asked price of the common stock of the Company, par value
$.001 per share, as listed on the National Market System of the Nasdaq Stock
Market on the aforementioned date.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date 7,223,444 shares of common stock were
outstanding as of March 28, 2003.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      -2-
<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

ABOUT SFBC INTERNATIONAL, INC.
------------------------------

     As used in this Form 10-KSB "we", "our", "us" and "SFBC" refer to SFBC
International, Inc. and its subsidiaries unless the context requires otherwise.
We provide pharmaceutical and biotechnology companies with specialized drug
development services primarily in the areas of Phase I and Phase II clinical
trials and bioanalytical laboratory services. With the acquisition of New Drug
Services Inc. (NDS) in September 2002, we now provide early clinical
pharmacology research, biostatistics and data management, and regulatory and
drug submission. This acquisition now permits us to provide full range of
services to our clients in the drug development industry. See "Our Acquisition
of NDS". We also provide niche Phase III and IV services.

     We are already a market leader in early clinical development. We also
conduct clinical trials for other drug development services companies. We
differentiate ourselves from our competitors based on our ability to recruit
specialized populations for difficult-to-recruit clinical trials. Our clients
include 100 of the largest pharmaceutical and biotechnology companies based on
research and development expenditures. We have conducted Phase I and Phase II
clinical trials of many leading drugs, including Vioxx, Claritin, Zoloft,
Azithromax and Celebrex. Our revenues have grown from approximately $4.3 million
in 1997 to $64.7 million in 2002.

     We have developed and currently maintain an extensive database of
individuals appropriate for future trials. Our database enables us to contact
and enroll trial participants quickly and to initiate clinical trials without
having to go through a lengthy and costly advertising process to recruit
participants. In addition to conducting clinical trials involving normal healthy
participants, we have significant expertise in recruiting for and conducting
trials involving the following special populations:

     o  Cardiac;

     o  Diabetes;

     o  Dermatology;

     o  Geriatrics;

     o  Hepatic (liver) disease;

     o  HIV positive;

     o  Renal (kidney) disease;

     o  Ophthalmology;

     o  Pediatrics; and

     o  Post-menopausal

                                      -3-
<PAGE>

     Our largest freestanding facility located in Miami, Florida is a 500-bed,
73,000-square foot facility, which we believe is the largest Phase I and Phase
II clinical trials facility in the United States. Our Miami facility allows us
to conduct several large clinical trials simultaneously. Our strength in
recruiting clinical trial participants and our ability to conduct large clinical
trials provide our clients with the opportunity to generate the data they
require with fewer clinical trials. We believe this capability helps our clients
to reduce their drug development lead times and makes us a desirable drug
development services partner.

     In Canada, as a result of the acquisition of Anapharm Inc. on March 18,
2002, we now operate two clinical trials facilities in Quebec City and Montreal
with a total of 212 beds. See "Our Acquisition of Anapharm". Effective in April
2003, we will open a new Ft. Myers, Florida Phase I and Phase II 20,000 sq. ft.
facility with a 120 bed capacity. We are moving from our current smaller Ft.
Myers facility with 7,500 square feet and 48 beds. We also have a Phase II - IV
clinical trials management operation in Charlotte, North Carolina. Additionally,
we operate bioanalytical laboratories in Quebec City, Canada and in
Philadelphia, Pennsylvania. Finally, we operate two state-of-the-art clinical
laboratories. We opened our first laboratory in Miami, Florida in December 2001
and our new laboratory in Montreal, Canada in February 2003. The Miami facility
serves all of our United States facilities and enables us to screen clinical
trial subjects more quickly and efficiently than in the past as well as
providing more enhanced services to our clients. The Montreal facility is
expected to operate in a similar manner in Canada.

OUR ACQUISITION OF ANAPHARM

     On March 18, 2002, we acquired 100% of the capital stock of Anapharm, Inc.
which was the largest privately-held Canadian provider of drug development
services. Anapharm derives approximately 50% of its revenues from each of Phase
I clinical trials and bioanalytical laboratory services. Due to the nature of
Anapharm's business and the mix of contracts, this allocation of revenues is
subject to quarterly and annual fluctuations. Anapharm also owns 49% of
Danapharm, Inc., a London, Ontario, Canada based corporation specializing in
Phase III and IV clinical trials. Danapharm's results of operations are
currently not material with respect to Anapharm's operations and are accounted
for using the equity method of accounting.

     We acquired 100% of the issued and outstanding stock of Anapharm for
approximately $26.8 million in cash and approximately $2.9 million in common
stock (167,375 shares at $17.51 per share) plus transaction fees and costs. The
$17.51 per share was based upon a mutually agreed upon formula. However, for
financial statement purposes the shares of common stock were valued at $3.3
million ($19.45 per share) which represents the value of the stock at the time
of the first public announcement of the transaction. All dollar references in
this Report are in United States dollars. Anapharm executives received
approximately 30% of the total consideration including all of the SFBC common
stock. Additionally, key Anapharm employees received options to purchase a total
of 110,000 shares of SFBC common stock exercisable at $23.97 per share. All
employees of Anapharm have remained employed with Anapharm including its founder
and president, Dr. Marc LeBel.

                                      -4-
<PAGE>

OUR ACQUISITION OF NDS

     On September 6, 2002, SFBC, through its wholly-owned subsidiary, SFBC New
Drug Services, Inc. or SFBC NDS acquired NDS located in Kennett Square,
Pennsylvania. SFBC NDS provides early clinical drug development, biostatistical,
data management and consulting services to the pharmaceutical and biotechnology
industries. SFBC NDS purchased substantially all of the assets and assumed all
of the operating liabilities of NDS. The net assets purchased from NDS were
approximately $1.67 million, which included approximately $819,000 of cash. The
net impact of the NDS acquisition to cash and cash equivalents on SFBC's balance
sheet was approximately $7.2 million. The purchase price consisted of (i) $8
million in cash paid at the closing, and (ii) $2.5 million of our common stock
based upon a pre-closing market value formula (234,060 shares). The shares were
initially held in escrow and have been released based upon the combined
achievement by NDS (pre-acquisition) and SFBC NDS (post-acquisition) of certain
conditions based upon earnings before interest, taxes, depreciation and
amortization for 2002. The sale of these 234,060 shares is subject to the
restrictions listed below:

     o  NDS may publicly sell up to 58,515 of the shares of our common stock
        upon effectiveness of a Form S-3 Registration Statement.

     o  NDS may only sell the remaining 75% of its common stock as follows: up
        to 58,515 shares each year, cumulatively, beginning one year following
        the effectiveness of the Form S-3 Registration Statement.

     For financial statement purposes the 234,060 shares were valued at the
December 31st closing price of our common stock of $12.98 per share, or a total
value of approximately $3 million. Additionally, under the terms of the Asset
Purchase Agreement, NDS will have the opportunity to achieve up to $8 million in
earn-out payments contingent on SFBC NDS meeting annual pre-tax income targets
over the three 12 month periods. The first 12 month period commenced on October
1, 2002. Effective April 1, 2003, we are merging SFBC NDS into SFBC Charlotte
and changing the later company's name to SFBC NDS. Thus, SFBC Charlotte's future
results of operations will also be calculated in determining NDS' future
earn-out.

     All of the employees of NDS have become employees of SFBC NDS including its
chief executive officer and largest stockholder, Dr. Michael P. Adams.

ACQUISITION OF PDI-RESEARCH LABORATORIES

     On March 26, 2003, SFBC, through its wholly-owned subsidiary, Anapharm,
acquired substantially all of the common stock of an Ontario corporation the
name of which is being changed to SynFine Research Inc. Earlier in 2003, Synfine
acquired the assets of PDI-Research Laboratories located in suburban Toronto,
Canada. PDI's business is to provide synthesized research compounds used by
bioanalytical laboratories. Prior to the acquisition, both Anapharm and SFBC
Analytical were customers of PDI.

                                      -5-
<PAGE>

     The assets acquired by SynFine are comprised primarily of scientific
equipment, customer lists and real estate. Additionally, SynFine assumed certain
operating liabilities and bank debt of approximately $1.4 million. Anapharm used
its own cash without borrowing any funds to consummate the transaction. All of
the 12 employees of SynFine have remained as employees. This new business unit
within Anapharm will pursue the same research activities and same business as
PDI under the new name of SynFine Research. This acquisition is not expected to
have a material impact on Anapharm's revenues or earnings during 2003 and is not
material for financial reporting purposes.

INDUSTRY OVERVIEW

     According to IMS Health Incorporated, a leading provider of global
information solutions to the pharmaceutical and healthcare industries, worldwide
pharmaceutical drug sales were estimated to be approximately $337 billion in
1999, and are projected to increase to $506 billion by 2004. Pharmaceutical and
biotechnology companies invested approximately $65.5 billion in research and
development activities in 2000, and we expect this number to grow. Discovering
and developing new drugs is an expensive and time-consuming process. IMS Health
estimates that the average cost of developing a drug exceeds $500 million and on
average takes almost 15 years.

The Drug Development Process.

     The drug research and development process consists of two stages:
pre-clinical and clinical. The pre-clinical stage consists of screening chemical
compounds to identify the most promising leads for continued drug development
prior to human clinical trials. The clinical stage includes clinical trials with
healthy participants, as well as those with targeted diseases, impairments or
conditions.

     Prior to commencing human clinical trials in the United States, a
pharmaceutical or biotechnology company must file an Investigational New Drug,
or IND, application with the United States Food & Drug Administration, which
includes manufacturing data, pre-clinical data, information about any use of the
drug in humans for other purposes and a detailed plan for the proposed clinical
trials. The design of these trials, referred to as a study protocol, is
essential to the success of the drug development effort. The study protocol must
anticipate correctly the nature of the data to be generated and results that the
FDA require before approving the drug. If the FDA does not comment within 30
days after an IND application is filed, human clinical trials may begin.

                                      -6-
<PAGE>

     The clinical trials stage is the most time-consuming and expensive part of
the drug research and development process. Human trials usually start on a small
scale to assess safety and then expand to larger trials to test efficacy. Trials
usually are grouped into three stages known as Phase I through Phase III.
Multiple trials generally are conducted within each phase. These phases are:

     o  Phase I trials involve testing a drug on a limited number of
        participants, typically 20 to 80 persons, to determine the drug's basic
        safety data, including tolerance, absorption, metabolism and excretion.
        This phase, which lasts an average of six months to one year, is
        comprised of numerous clinical trials of short duration;

     o  Phase II trials involve testing a small number of participants,
        typically 100 to 200 persons, who qualify for inclusion in a clinical
        trial based upon meeting the protocol's criteria and having a particular
        condition, to determine the drug's effectiveness and how different doses
        work. This phase, which lasts an average of one to two years, is
        comprised of several longer duration clinical trials; and

     o  Phase III trials involve testing large numbers of participants,
        typically several hundred to several thousand persons, to verify drug
        efficacy on a large scale, as well as long-term safety. These trials
        involve numerous sites and generally last up to three years.

     After successfully completing all three clinical phases, a company submits
a new drug application to the FDA requesting that the drug be approved for
marketing. The new drug application is a comprehensive filing that includes,
among other things, the results of all pre-clinical and clinical studies. Phase
IV clinical trials, which are conducted after drug approval, may be required by
the FDA. The FDA may require these additional trials in order to monitor
long-term risks and benefits, to study different dosage levels or to evaluate
different safety and efficacy parameters.

     The Drug Development Services Industry.

     The drug development services industry provides product development
services to the pharmaceutical and biotechnology industries. This industry has
evolved from providing limited clinical trial services in the 1970s to a
full-service industry today that provides clients with comprehensive services,
including pre-clinical evaluations, study protocol design, clinical trial
management, data collection, and bioanalytical and statistical analysis.

     We believe that a number of trends are driving the growth and direction of
the drug development services industry:

     Cost Containment Pressures.

     Market forces and governmental initiatives have placed downward pressure on
drug prices. We believe that the pharmaceutical industry is responding to these
price pressures by converting some of the fixed costs associated with
maintaining their own research and development personnel and facilities to
variable costs by outsourcing drug development activities to drug development
services companies.

                                      -7-
<PAGE>

     Biotechnology Industry Growth.

     The United States biotechnology industry has grown rapidly over the last
ten years. Biotechnology companies generate significant numbers of new drug
candidates that require development and regulatory approval. Many of these new
drug candidates are moving into clinical development at a time when many
biotechnology companies do not have the necessary staff, operating procedures,
experience or expertise to conduct their own clinical trials.

     Difficulties in Recruiting Trial Participants are Lengthening Drug
Development Times.

     One of the largest expenses and greatest delays in developing new drugs is
recruiting clinical trial participants. According to CenterWatch, a publisher
focused on clinical trials, 78% of all clinical trials are delayed by problems
associated with recruiting participants and 12% face delays of more than six
months. An increase in the number of drugs being tested by pharmaceutical and
biotechnology companies and an increase in FDA testing requirements have
exacerbated this trend.

     Importance of Therapeutic Expertise and Ability to Recruit Special
Populations.

     Pharmaceutical companies increasingly are organizing their internal
research and development departments into multiple groups according to
therapeutic expertise. Therefore, a single pharmaceutical company typically
represents multiple potential client groups, with each having authority to award
drug development contracts.

     We believe that pharmaceutical and biotechnology companies increasingly are
selecting drug development services partners based on their experience in
recruiting for and conducting clinical trials within particular therapeutic
areas and with special populations of trial participants. Recruiting
difficulties often cause clinical trials to be conducted in multiple smaller
groups of participants at multiple locations, which can lengthen development
times and increase costs. We believe that specialization in a particular
therapeutic area or within a special population allows a drug development
services company to deliver a higher level of service in helping to develop
trial protocols, in quickly recruiting participants from special populations, in
conducting clinical trials and in gathering and reporting data.

     Increasing Regulatory Demands.

     We believe that regulatory agencies are becoming more demanding with regard
to the data required to support new drug approvals and are seeking more evidence
that new drugs are safer and more effective than existing products. According to
the U.S. Department of Health and Human Services, the number of clinical trial
participants per drug has expanded from an average of 1,321 in the early 1980s
to 4,237 in 1994-95. In addition, according to the Boston Consulting Group, an
international consulting firm, the number of drug development trials for a
specific new drug has increased from 30 in 1994-95 to 68 in 1997. We believe
that this trend will continue in the future. As a result, the complexity of
clinical trials and the number of participants required for clinical trials are
increasing. We believe that these demands are increasing the demand for the
services provided by drug development services companies.

                                      -8-
<PAGE>

OUR SOLUTION

     We have been providing pharmaceutical, biotechnology and drug development
services companies with specialized drug development services for 19 years.

Our Ability to Recruit.

     We have the ability to recruit clinical trial participants from special
populations and to conduct large clinical trials, creating value for our clients
by saving time and costs and by quickly generating data for the FDA approval
process. Our largest individual clinical trials facility is located in Miami,
Florida, an area with a diverse population of more than five million residents
which facilitates our recruiting efforts.

     Since 1996, we have implemented and grown a proprietary database of
potential future clinical trial participants, who have expressed a desire to
participate in our future trials. Virtually all of our clinical trial
participants for our Miami site are recruited from our database. We believe that
our database gives us an advantage over our competitors in that it enables us to
markedly reduce the costs and delays associated with advertising and other
recruitment methods typically used in our industry.

     At our Anapharm facilities, the corridor linking Quebec City-Trois
Riviers-Montreal has close to five million inhabitants and represents an
excellent source of subjects for studies. In its nine years of operation,
Anapharm has developed a database of approximately 40,000 subjects including
young male and female volunteers, post-menopausal women, elderly subjects, and
special populations.

     We strive to provide a positive experience for our clinical trial
participants. We believe that our reputation in the local communities where we
operate is critical to the continued successful recruitment of clinical trial
participants. Our business philosophy is to treat our clinical trial
participants like our clients. In keeping with this belief, we have designed
each of our Miami, Ft. Myers, Montreal and Quebec City facilities with numerous
amenities for our clinical trial participants who usually spend several days or
weeks with us in the course of a clinical trial.

Our Largest Clinical Trials Operations.

     We believe our 500-bed, 73,000-square foot Miami, Florida Phase I and Phase
II facility is the largest clinical trials site in the United States. This
facility contains four clinical units, which we can segment further in order to
facilitate conducting several smaller trials. We have designed our facility to
enable us to conduct a number of clinical trials efficiently at the same time
while maintaining all of the appropriate controls. The size and design of our
facility combined with our ability to recruit gives us an important competitive
advantage in that we can attract business from clients who prefer to outsource
clinical trials involving a large number of participants to a single company at
one location.

                                      -9-
<PAGE>

     We believe that the high fixed cost, low variable cost nature of the Phase
I and Phase II business gives us a significant opportunity to take advantage of
our large Phase I and Phase II operation in Miami, Florida. Our Miami
operation's fixed costs include our facility, our dedicated staff of on-site
physician investigators and clinical personnel, our administrative staff and our
senior management team. As utilization of our Miami facility increases, we have
the potential to generate higher revenues without the need to hire a
considerable number of additional personnel or incur significant expenses beyond
our current levels. We currently utilize approximately 33% of our capacity.

     Anapharm has 212 beds. Our Quebec City location has 130 beds with four
independent units; our Montreal site has two independent units totaling 82 beds.
The independent units give us the flexibility to conduct different studies at
the same time. The quality assurance unit operates independently to ensure the
overall quality of the work performed. The Trois-Rivieres center is primarily is
a recruitment center that determines which facility the subjects will be
directed to.


OUR STRATEGY

Increase Market Share With Existing Clients and Gain Clients.

     Our clients are pharmaceutical and biotechnology companies that outsource a
portion of their drug development activities in order to focus their efforts on
drug discovery. We often generate business from multiple, and often independent,
groups within our client companies. Our sales and marketing team focuses on
gaining new business from our existing clients, developing relationships with
new groups at existing clients, and marketing our services to pharmaceutical and
biotechnology companies which we have not serviced in the past. As a result of
our recent acquisition of Anapharm we gained a substantial number of new clients
primarily generic drug manufacturers located in North America, Europe and Asia.

Expand Our Bioanalytical Laboratory Business.

     Our experience indicates that our clients spend approximately one dollar
for bioanalytical laboratory services work for every dollar spent on Phase I and
Phase II clinical trials. In furtherance of this strategy, we have made two
bioanalytical laboratory acquisitions. Our acquisition of Anapharm brought us a
well regarded generic laboratory, which generated significant revenues and
profits in 2002. Anapharm derives approximately 50% of its revenues from its
bioanalytical laboratory, which substantially increases our capacity to provide
these services to our clients. In August 2001, we acquired our first
bioanalytical laboratory, SFBC Analytical Laboratories, Inc. located in
Philadelphia, Pennsylvania. This laboratory, also generates significant revenues
and profits. Prior to these acquisition adds, our clients independently
outsourced the services we did not perform.

                                      -10-
<PAGE>

     As a result of our first acquisition of a bioanalytical laboratory that was
primarily focused on pre-clinical, toxicology, and other studies for major
pharmaceutical companies, we began providing bioanalytical laboratory services
to several of our existing clients and began also attracting new clients. With
the availability of the Anapharm laboratory which focuses primarily on generic
drug testing, our bioanalytical business is substantially larger and we are now
serving a broad spectrum of our clients' needs. Providing bioanalytical
laboratory services within the same organization reduces administrative costs,
coordination efforts, and clinical trial completion times and improves the level
of control that we and our clients can exercise over the entire clinical trials
process.

     Our management believes that our ability to provide bioanalytical
laboratory services, in addition to our other services, enables us to compete
more successfully for new business. We intend to devote more sales and marketing
resources to encourage existing clients to use our bioanalytical laboratory
services and to attract new business from companies that prefer to award all of
their drug development services to one company.

We Plan to Continue to Expand Our Services to Generic Manufacturers.

     We believe that we have a significant market opportunity to serve generic
pharmaceutical companies since most of Anapharm's revenues are derived from the
generic market. Over the next four years, more than $41 billion of branded
pharmaceuticals are expected to lose patent protection, which is expected to
drive demand for bioanalytical laboratory services by generic pharmaceutical
companies. Bioanalytical laboratory services are necessary to determine whether
a generic drug is equivalent to the branded drug facing patent expiration.
Furthermore, drug development services companies that are able to provide
bioanalytical laboratory services typically are able to attract the Phase I
clinical trials work associated with the generic drug candidate.

Expand into New Areas of Therapeutic Expertise.

     We believe that we are better able to serve our clients' needs by offering
therapeutic expertise in addition to our core offering of drug development
services. We have experience in a number of therapeutic areas, which we believe
enables us to grow our revenues from existing clients and generate new business.
We plan to continue adding expertise in our existing therapeutic areas and
developing new areas of expertise by hiring experienced personnel, training our
existing staff in new areas, and selectively making strategic acquisitions.

Pursue Strategic Acquisitions.

     We have grown significantly by acquiring and integrating related businesses
over the last three years. Our five acquisitions have broadened our range of
services, strengthened our management team and expanded our client base. Our
industry is highly fragmented and includes a large number of small competitors
that have expertise in different business segments. As part of our growth
strategy, we monitor acquisition opportunities and will make accretive
acquisitions which enhance our array of services or otherwise strengthen our
ability to provide exceptional services to our clients.

                                      -11-
<PAGE>

OUR SERVICES

     We believe our specialized drug development services assist our clients in
managing their research and development programs efficiently and cost
effectively through the drug development process.

Phase I and Phase II Clinical Trials Services.

     We provide specialized drug development services for studies ranging from
short-term Phase I trials to longer-term Phase II trials. Our services include
developing study design, recruiting and screening study participants, conducting
Phase I and II clinical trials, and collecting and reporting to our clients the
clinical data collected during the course of our clinical trials. We conduct
Phase I and II clinical trials at our Miami, Florida, Ft. Myers, Florida and
Quebec City and Montreal, Quebec locations.

     We assist our clients in preparing the study protocol, designing case
report forms and conducting any necessary clinical trial audit functions.
Additionally, we collect data throughout a clinical trial and enter it onto case
report forms according to good clinical practice guidelines, in order to meet
our clients' needs and the FDA or other regulatory requirements identified in
the study protocol. Our data management services also provide our clients with
statistical analysis, medical report writing and assistance with regulatory
submissions.

Bioanalytical Laboratory Services.

     We provide bioanalytical laboratory services through good laboratory
practice compliant facilities located in Quebec City, Quebec and Philadelphia,
Pennsylvania. Our bioanalytical laboratories have or develop the scientific
methods, or assays, necessary to analyze clinical trial samples. Our
bioanalytical laboratories provide bioanalytical support for preclinical
studies, bioavailability and drug metabolism studies, processing clinical study
samples and drug interaction studies. During the clinical trial process, we
conduct laboratory analysis on various biological specimens, including blood, to
determine the quantity of a drug present in each specimen. We format and present
the data resulting from this process to our clients for their use and
interpretation. Finally, we now provide products used by bioanalytic
laboratories with Anapharm's recent acquisition of Synfine. (see Acquisition of
PDI-Research Laboratories)

Clinical Trials Management Services.

     Through our Charlotte, North Carolina facility, we provide specialized
Phase II through IV clinical management services focused on ophthalmology,
dermatology, women's' health, medical device, infectious disease and central
nervous system clinical trials. SFBC NDS brings us expertise in cardiovascular
studies. Since our acquisition of NDS, we have operated SFBC Charlotte and SFBC
NDS as a single business unit and are merging them together effective April 1,
2003. We offer our clients the following integrated services:

     o  project design;

     o  study design;

     o  data management; and

     o  study monitoring.

                                      -12-
<PAGE>

     Study monitoring for Phase III clinical studies involves a high degree of
logistical coordination as larger Phase III studies can involve hundreds of
investigative sites, including hospitals, clinics and doctors' offices, located
across the country. Our study monitoring services include:

     o  investigative site selection;

     o  qualified study participant recruitment;

     o  investigator recruitment; and

     o  auditing and quality assurance.

Early Clinical Pharmacology Research, Biostatistics and Data Management and
Regulatory and Drug Submission.

     With our acquisition of NDS we now offer a full range of services to our
clients. SFBC NDS adds expertise in early clinical pharmacology research,
biostatistics and data management and FDA regulatory and new drug submission
expertise.

CLIENTS AND MARKETING

     Our clients are leading pharmaceutical and biotechnology companies. With
our acquisition of Anapharm, we now serve many leading generic manufacturers.
Since our inception, we have developed a strong reputation for client service
and have cultivated relationships with key decision makers within our clients'
organizations. We focus on meeting or exceeding our clients' expectations and we
believe that this has been a leading factor in generating repeat business from
our clients. Each of our pharmaceutical and biotechnology company clients
represents multiple sources of business for us since there are usually a number
of therapeutic specialty or other groups that contract separately for services
within one client company. The decision by one group to award a contract to us
generally is made independently of decisions made by other groups within the
same client.

     As recognition of our high quality niche services and growing reputation in
the drug development services industry, we perform Phase I and II clinical
trials services for some of our competitors. This typically occurs when a
competitor has difficulty in recruiting special populations. The mix of our
clients and revenues generated from individual clients varies from year-to-year.
As is typical in our industry, various clients have comprised more than 10% of
our consolidated revenues in prior years. For the 12 months ended December 31,
2001, one of the top 25 pharmaceutical companies in the United States accounted
for 17% of our consolidated revenues. For the 12 months ended December 31, 2002,
no client accounted for 10% or more of our revenues.

                                      -13-
<PAGE>

     We employ a team of sales and marketing professionals who market our
services to pharmaceutical and biotechnology companies primarily in North
America. Additionally, members of our senior management play a very active role
in managing our relationships with existing clients and in helping to generate
business from new clients.

OUR COMPETITORS

     The drug development services industry is highly fragmented and is
comprised of a number of large, full-service drug development services companies
and many small companies and limited service providers. Our major competitors in
this industry include the research departments of pharmaceutical and
biotechnology companies, drug development services companies including,
Quintiles Transnational, Covance, PPD and MDS Pharma, and the research
departments of universities and teaching hospitals. We compete in the Phase I
and Phase II portion of the business on the basis of our ability to recruit
special populations and conduct large trials at one location, our experience in
targeted therapeutic areas, and our high quality personalized service. Our Phase
III clinical trials management business competes by specializing in a limited
number of niche specialties.

     Our bioanalytical laboratories compete primarily through the development of
validated methodologies. The availability of these methodologies represents the
best tool to sell our services to manufacturers, especially generic
manufacturers conducting bioequivalence studies. In order to better attract
generic business these methodoligies are often developed in a proactive way even
before the generic clients need it. Our major competitors in this area are MDS
Pharma and PPD.

     SFBC NDS competes with numerous large and small drug development companies
and consulting firms. It uses its past experience and the personal relationships
of its management to obtain new contracts from clients.

     Many of our competitors are larger and have substantially greater
financial, human, and other resources than we do. Generally, drug development
services companies principally compete on the basis of following factors:

     o  the ability to recruit doctors and special population participants for
        clinical trials;

     o  medical and scientific expertise in specific therapeutic areas;

     o  the quality of their services;

     o  the range of services they provide;

     o  the ability to organize and manage large-scale trials; and

     o  financial stability.

                                      -14-
<PAGE>

     The general trend toward consolidation in our industry has resulted in
increased competition for clients. Consolidation within the pharmaceutical and
biotechnology industries as well as the trend by the pharmaceutical and
biotechnology industries to limit outsourcing to fewer rather than more drug
development services companies has also heightened competition for contracts in
our industry.

INDEMNIFICATION AND INSURANCE

     We manage our risk of liability for personal injury or death to clinical
trials participants by obtaining contractual indemnification provisions from our
clients and maintaining insurance. The contractual indemnifications generally do
not protect us against our own negligence. Our contractual arrangements are
subject to negotiation with clients and the terms and scope of such
indemnification vary by client and by clinical trial. Although most of our
clients are large, well-capitalized companies, the financial performance of
these indemnities is not secured. Therefore, we bear the risk that an
indemnifying party may not have the financial ability to fulfill its
indemnification obligations. We could be materially adversely affected if we
were required to pay damages or incur defense costs in connection with a claim
that is not covered by an indemnification provision or beyond the scope or level
of insurance coverage maintained by a client or by us or where the indemnifying
party does not fulfill its indemnification obligations. We cannot be certain
that our insurance coverage will be adequate, or that insurance coverage will
continue to be available on terms acceptable to us.

GOVERNMENT REGULATION

     All phases of a clinical trial are governed by FDA regulations as well as
other regulatory agencies including Therapeutic Products Directorate of Health
Canada and European Medicine Evaluation Agency. We comply with the International
Conference of Harmonization guidelines which affect global drug development. Our
clients are responsible for selecting qualified drug development services
companies, providing those companies with study protocols, monitoring the
clinical trials, reporting any changes or modification of the clinical trials to
the FDA or other regulatory agency, and reporting any serious and unexpected
adverse reaction to the new drug to the regulatory agency. In the course of
providing our drug development services, we must comply with a variety of
regulatory requirements.

     Our services are subject to various regulatory requirements designed to
ensure the quality and integrity of the clinical trials process. The industry
standard for conducting clinical research and development studies is contained
in regulations established for good clinical practice. The FDA requires that the
results submitted to it be based on studies conducted according to these
regulations. The regulations address the following:

     o  selecting qualified investigators and sites;

     o  obtaining specific written commitments from investigators;

     o  verifying that informed consent is obtained from participants;

     o  monitoring the validity and accuracy of data;

     o  verifying that we account for the drugs provided to us by our clients;
        and

     o  instructing investigators to maintain records and reports.

                                      -15-
<PAGE>

     Similar guidelines exist in Canada. Failure to comply with these
regulations can result in the disqualification of all data collected during the
clinical trials. We may be subject to regulatory action if we fail to comply
with these rules.

     Additionally, because we frequently deal with contaminated or hazardous
medical waste material, we must comply with environmental regulations of the
federal, state, and local governments regarding disposal of these materials. We
contract with outside licensed companies to handle our waste disposal and rely
on their compliance with the rules for proper disposal.

     Because we use narcotic drugs and other controlled substances in some of
our clinical trials, we are required to have a license from the United States
Drug Enforcement Administration. Anapharm complies with similar laws in Quebec
and Canada. We also must use special care and security procedures to safeguard
and account for all controlled substances. We are in material compliance with
all federal, state, provincial, and local regulations.

EMPLOYEES

     At March 10, 2003, we had 716 full-time and 158 part-time employees
including 563 in Canada. None of our employees are subject to a collective
bargaining agreement. We believe that our relations with our employees are good.


OUR HISTORY

     We are a Delaware corporation organized in 1999 when we acquired our
predecessor that was a Florida corporation which commenced providing drug
development services in Miami, Florida in 1984. We have grown rapidly both
internally and through strategic acquisitions of related businesses which
broaden our range of services. These acquisitions have been:

     o  Our March 2000 acquisition of our Charlotte, North Carolina clinical
        trials management business;

     o  Our February 2001 acquisition of our Ft. Myers, Florida Phase I and II
        clinical trials facility;

     o  Our August 2001 acquisition of our first bioanalytical laboratory
        located in Philadelphia, Pennsylvania;

     o  Our March 2002 acquisition of Anapharm, a Quebec City, Quebec based
        provider of Phase I clinical trials and bioanalytical laboratory
        services;

     o  Our September 2002 acquisition of NDS, a Kennett Square, Pennsylvania
        provider of early clinical drug development, biostatistical, data
        management and consulting services to the pharmaceutical and
        biotechnology industries; and

     o  Anapharm's March 2003 acquisition of Synfine.

                                      -16-
<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY.

     We lease all of our facilities under long-term written leases that
generally provide for base monthly rents with annual escalation clauses based
upon cost of living increases. These increase are calculated using various
methods on a lease by lease basis. All of our facilities are in excellent
condition and enable us to serve our clients efficiently.

     Our corporate headquarters are located in Miami, Florida where we operate a
73,000 square foot 500-bed Phase I and Phase II facility. We have a 10-year
lease expiring in 2011 with a monthly base rent of approximately $50,000.

     SFBC Charlotte leases approximately 11,700 square feet in Charlotte, North
Carolina at a rate of approximately $14,700 per month. The lease expires on
August 31, 2005. SFBC Charlotte also leases approximately 850 square feet of
space in the Charlotte vicinity at a monthly cost of $1,900 per month expiring
December 31, 2003.

     SFBC NDS leases 8,000 square feet of space at a monthly cost of
approximately $15,700 monthly. This lease expires August 31, 2006.

     In April 2003, SFBC Ft. Myers will be moving to a larger 20,000 square foot
facility in Ft. Myers, Florida with an expanded capacity of 120 beds. The base
monthly rent for this facility will be approximately $20,600 per month, expiring
in April 2008. SFBC Ft. Myers currently leases approximately 6,100 square feet,
where it operates a 48-bed facility in Ft. Myers, Florida. The lease expires in
December 2005. The base monthly rent for this facility is approximately $7,000.
In late March and early April 2003 SFBC Ft. Myers plans to completely vacate
this facility and sublease it. SFBC Ft. Myers, also, has a one year lease
expiring in September 2003 for approximately 2,300 square feet of office space
in Tampa, Florida, for which its pays $2,450 per month.

     Our Anapharm, Quebec City, Phase I facility and bioanalytical laboratory
occupy 67,000 square feet. The lease expires in May 2006. Anapharm's monthly
base rent is approximately $46,000.

     Our Anapharm Montreal, Phase I facility occupies approximately 40,000
square feet. This location is covered by three separate leases at a combined
monthly cost of approximately $41,000 per month. These leases expire between
March 2008 and March 2011.

     Our Trois-Rivieres, Canada recruitment center occupies approximately 1,300
square feet. The lease expires in March 2005. The monthly base rent at this
facility is approximately $1,000.

                                      -17-
<PAGE>

ITEM 3. LEGAL PROCEEDINGS.

     We are not a party to any material litigation.

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

      No matters were submitted to a vote for our security holders during the
fourth quarter of the year ended December 31, 2002.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

MARKET INFORMATION

     The following table sets forth, for the periods indicated, the range of
quarterly high and low sales prices for our common stock which has traded on the
Nasdaq National Market system under the symbol "SFCC" since June 19, 2001 and
which previously traded on the American Stock Exchange under the symbol "SFC"
since its original listing on October 11, 2000 through June 18, 2001.

Common Stock                     High          Low
------------                    ------        ------
2001
----
Fourth Quarter                  $22.15        $13.90
Third Quarter                   $34.99        $11.04
Second Quarter                  $29.55        $ 8.65
First Quarter                   $ 9.50        $ 3.63

2002
----
Fourth Quarter                  $15.80        $10.31
Third Quarter                   $17.45        $ 7.80
Second Quarter                  $25.98        $14.72
First Quarter                   $26.74        $16.00

HOLDERS

     As of March 27, 2003, there were approximately 58 registered holders of
record of our common stock. We believe that there are approximately 3,651
beneficial owners of our common stock.

DIVIDEND POLICY

     We have never paid cash dividends on our common stock. Payment of dividends
is within the discretion of our board of directors and will depend upon our
earnings, capital requirements and operating and financial condition. Our bank
facility with Wachovia Bank (see Liquidity Section that follows) enables us to
pay dividends provided that we remain in compliance with required financial
operating ratios after giving effect to the dividend payment. Currently, we
intend to follow a policy of retaining future earnings in order to finance the
growth and development of our business, and for general corporate purposes.

                                      -18-
<PAGE>

RECENT SALES OF UNREGISTERED SECURITIES

     During the two year period ended December 31, 2002, we issued shares of our
common stock to the following individuals and corporations upon the exercise of
warrants as acquisitions and as employee consideration, which were not covered
by an effective registration statement but were exempt under Section 4 (2) of
the Securities Act of 1933.

<TABLE>
<CAPTION>
                                                        NUMBER OF
DATE                     NAME                            SHARES     CONSIDERATION
----------------         ----------------------          ------     -------------
<S>                      <C>                             <C>        <C>
April 24, 2001           Nick P. Tootle                  5,556      Signing Bonus

May 11, 2001             Howard Fogelsong                1,772      $14,176
                                                                    Warrant Exercise

May 17, 2001             Edith Marion                    3,476      Cashless
                                                                    Warrant Exercise

June 1, 2001             Patrick Murphy, M.D.            6,929      Cashless
                                                                    Warrant Exercise

June 8, 2001             Rudolph Dickson                 2,667      Cashless
                                                                    Warrant Exercise

June 11, 2001            Margaret Miller Trust           5,682      Cashless
                                                                    Warrant Exercise

June 22, 2001            Dennis Hieronymus               1,935      Cashless
                                                                    Warrant Exercise

June 22, 2001            Maurice and Mary Baldwin,       2,878      Cashless
                         Trustees                                   Warrant Exercise

June 26, 2001            Philip and Linda Magyar         2,450      Cashless
                                                                    Warrant Exercise

June 28, 2001            Norman Cloutier                 1,178      Cashless
                                                                    Warrant Exercise

July 2, 2001             James Williams                  11,886     Cashless
                                                                    Warrant Exercise

July 3, 2001             Roland Boone                    4,252      Cashless
                                                                    Warrant Exercise

July 3, 2001             Robert Dible                    3,988      Cashless
                                                                    Warrant Exercise
</TABLE>

                                      -19-
<PAGE>

<TABLE>
<CAPTION>
<S>                      <C>                             <C>        <C>
July 5, 2001             Margaret R. Greene              2,070      Cashless
                                                                    Warrant Exercise

July 5, 2001             Jay L. Rentzel                 15,947      Cashless
                                                                    Warrant Exercise

July 5, 2001             William Havel                   2,761      Cashless
                                                                    Warrant Exercise

July 5, 2001             Hilda S. Davis                  3,218      Cashless
                                                                    Warrant Exercise

July 5, 2001             Robert Reynoldson               3,727      Cashless
                                                                    Warrant Exercise

July 5, 2001             Robert Wawrousek               23,398      Cashless
                                                                    Warrant Exercise

July 6, 2001             Kurt H. Knecht                 10,833      Cashless
                                                                    Warrant Exercise

July 6, 2001             Edmond W. Gardiner              1,191      Cashless
                                                                    Warrant Exercise

July 23, 2001            Roscoe M. Smith                 1,592      Cashless
                                                                    Warrant Exercise

October 12, 2001         Raymond Zuczuski                1,770      Cashless
                                                                    Warrant Exercise

February 1, 2002         Robert Dudley                   2,050      Cashless
                                                                    Warrant Exercise

March 8, 2002            George L. May and               1,174      Cashless
                         Linda J. May                               Warrant Exercise

March 11, 2002           Keith C. Carini, D.D.S.         1,211      Cashless
                                                                    Warrant Exercise

March 18, 2002           Gestion Marc Lebel, Inc.       48,352      Common Stock
                                                                    Of Anapharm, Inc.

March 18, 2002           Marc Lebel                     41,750      Common Stock
                                                                    Of Anapharm, Inc.
</TABLE>

                                      -20-
<PAGE>

<TABLE>
<CAPTION>
<S>                      <C>                            <C>         <C>
March 18, 2002           Francois Vallee                56,335      Common Stock of Anapharm, Inc.


March 18, 2002           Guylaine Perron                 3,590      Common Stock of Anapharm, Inc.

March 18, 2002           Eric Masson                     3,590      Common Stock of Anapharm, Inc.

March 18, 2002           Stephane Marin                  2,991      Common Stock of Anapharm, Inc.

March 18, 2002           Johane Boucher Champagne        5,983      Common Stock of Anapharm, Inc.

March 18, 2002           Denis Hache                     1,196      Common Stock of Anapharm, Inc.

March 18, 2002           Nicolas Stephen D'Ulise         1,196      Common Stock of Anapharm, Inc.

March 18, 2002           Jean Couture                    1,196      Common Stock of Anapharm, Inc.

March 19, 2002           H.D. Brous & Co., Inc.         15,861      Cashless Warrant Exercise

April 1, 2002            H.D. Brous & Co., Inc.         16,667      Cashless Warrant Exercise

April 18, 2002           David M. Kushner                3,906      $9.60 Warrant Exercise

April 19, 2002           Joanne B. May                   2,715      Cashless Warrant Exercise

May 9, 2002              Joseph E. Webb                  5,672      Cashless Warrant Exercise

May 17, 2002             Jerry Nash                      2,611      Cashless Warrant Exercise

June 6, 2002             Harold T. George and Ruth       3,599      Cashless Warrant Exercise
                         B. George, TTEE UAD

June 6, 2002             Jerry Frost                     2,505      CashlessWarrant Exercise

June 6, 2002             Robert P. Bisaillon             1,896      Cashless Warrant Exercise

June 11, 2002            Carl J. Wallace                 1,849      Cashless Warrant Exercise
</TABLE>

                                      -21-
<PAGE>

<TABLE>
<CAPTION>
<S>                      <C>                             <C>        <C>
June 13, 2002            Frank L. Jenkins                1,532      Cashless Warrant Exercise

June 13, 2002            Dennis D. Glass                 3,727      Cashless Warrant Exercise

June 18, 2002            Leo Watkins                     3,856      Cashless Warrant Exercise

July 16, 2002            Harold and Marilyn F.           8,577      Cashless Warrant Exercise
                         Chalmers

September 6, 2002        New Drug Services             234,060      Purchase of New Drug Services
</TABLE>

        The warrant holders acquired their warrants when the Company converted
        notes previously issued to the warrant holders. The March 18, 2002
        common stock issuances were partial consideration for the Company's
        purchase of the common stock of Anapharm, Inc. The September 6, 2002
        common stock issuances were partial consideration for the Company's
        purchase of substantially all of the assets of NDS.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

     The following discussion of our financial condition and results of
operations should be read together with the financial statements and related
notes included in this Report. This discussion contains forward-looking
statements that involve risks and uncertainties. Our actual results may differ
materially from those anticipated in those forward-looking statements as a
result of certain factors, including but not limited to, those contained in the
discussion on forward-looking statements that follows this section and those
contained in "Special Factors Relating to Our Business". We disclaim any
intention or obligation to publicly announce the results of any revisions to any
of the forward-looking statements contained herein to reflect future events or
developments.

CRITICAL ACCOUNTING POLICIES

     The preparation of the Company's financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
revenues and expenses during the period. Future events and their effects cannot
be determined with absolute certainty; therefore, the determination of estimates
requires the exercise of judgment. Actual results inevitably will differ from
those estimates, and such differences may be material to our financial
statements. Management continually evaluates its estimates and assumptions,
which are based on historical experience and other factors that are believed to
be reasonable under the circumstances. These estimates and the Company's actual
results are subject to the risk factors listed below.

                                      -22-
<PAGE>

     Management believes that the following may involve a higher degree of
judgment or complexity:


     Collectibility of Accounts Receivable
     -------------------------------------

     The Company's allowance for doubtful accounts and allowance for changes in
     contracts are based on management's estimates of the creditworthiness of
     its clients, analysis of subsequent changes in contracts, analysis of
     delinquent accounts, the payment histories of the accounts and management's
     judgment with respect to current economic conditions and, in the opinion of
     management, is believed to be an amount sufficient to respond to normal
     business conditions. Management sets reserves for customers based upon
     historical collection experience, and sets specific reserves for customers
     whose accounts have aged significantly beyond this historical collection
     experience. Should business conditions deteriorate or any major client
     default on its obligations to the Company, this allowance may need to be
     significantly increased, which would have a negative impact upon the
     Company's operations.

     The allowance for changes in contracts is an estimate established through
     reductions to net revenue while the allowance for doubtful accounts is an
     estimate established through charges to selling, general and administrative
     expenses.

     Revenue and Cost Recognition
     ----------------------------

     Revenues from contracts are generally recognized as services are performed
     on the percentage-of-completion method of accounting with performance
     generally assessed using output measures, such as units-of-work performed
     to date as compared to the total units-of-work contracted. Contracts may
     contain provisions for renegotiation in the event of cost overruns due to
     changes in the level of work scope. Renegotiated amounts are included in
     revenue when the work is performed and realization is assured. Provisions
     for losses to be incurred on contracts are recognized in full in the period
     in which it is determined that a loss will result from performance of the
     contractual arrangement.

     Direct costs include all direct costs related to contract performance.
     Costs are not deferred in anticipation of contracts being awarded, but
     instead are expensed as incurred. Changes in job performance and estimated
     profitability may result in revisions to costs and income and are
     recognized in the period in which the revisions are determined. Due to the
     inherent uncertainties in estimating costs, it is at least reasonably
     possible that the estimates used will change in the near term and the
     change could be material.

     Included in accounts receivable are unbilled amounts, which represent
     revenue recognized in excess of amounts billed. Advance billings represent
     amounts billed in excess of revenue recognized.

     Income Taxes
     ------------

     Significant management judgment is required in developing the Company's
     provision for income taxes, including the determination of foreign tax
     liabilities, deferred tax assets and liabilities and any valuation
     allowances that might be required against the deferred tax assets. The
     Company evaluates quarterly its ability to realize its deferred tax assets
     and adjusts the amount of its valuation allowance, if necessary. The
     Company operates within multiple taxing jurisdictions and is subject to
     audit in those jurisdictions. Because of the complex issues involved, any
     claims can require an extended period to resolve. In management's opinion,
     adequate provisions for income taxes have been made.

     Impairment of Assets
     --------------------

     The Company reviews long-lived assets and certain identifiable intangibles
     held and used for possible impairment whenever events or changes in
     circumstances indicate that the carrying amount of an asset may not be
     recoverable. In evaluating the fair value and future benefits of its
     intangible assets, management performs an analysis of the anticipated
     undiscounted future net cash flows of the individual assets over the
     remaining amortization period. The Company recognizes an impairment loss if
     the carrying value of the asset exceeds the expected future cash flows.

     In 2002, the Company began to perform an annual test for impairment of
     goodwill. This test is performed by comparing, at the reporting unit level,
     the carrying value of goodwill to its fair value. The Company assesses fair
     value based upon its best estimate of the present value of future cash
     flows that it expects to generate by the reporting unit. The test performed
     for 2002 did not identify any instances of impairment. However, changes in
     expectations as to the present value of the reporting unit's future cash
     flows might impact subsequent year's assessments of impairment.

                                      -23-
<PAGE>

     OTHER ESTIMATES. The Company makes a number of other estimates in the
ordinary course of business relating to volume rebates, litigation, etc.
Historically, past changes to these estimates have not had a material impact on
our financial condition. However, circumstances could change which may alter
future expectations.


RESULTS OF OPERATIONS

Net Revenues
------------

     Our net revenues were $64,740,047 for the year ended December 31, 2002,
which is an increase of 106 % from $31,470,528 for the prior year. The increase
is attributable to (i) the inclusion in revenues of a full year of operations
for SFBC Analytical compared to four and one-half months in the prior year; (ii)
inclusion of nine and one-half months of revenues for Anapharm compared to zero
in the prior year; and the inclusion of four months of revenues at NDS compared
to zero in the prior year. In 2002, both our Phase I and II business, and our
Phase III business grew over 2001 levels. On a pro forma basis, if SFBC had
owned all of its subsidiaries as of January 1, 2001, net revenues for the year
ended December 31, 2002 would have increased approximately 16.2% over the same
period in 2001.

Gross Profit Margins
--------------------

     Our gross profit margins increased to 43.3% in 2002 from 42.3% in 2001. The
largest factor affecting the increase in our gross profit margins was the
inclusion of a full year of higher margin bioanalytical business at SFBC
Analytical which we owned for four and one-half months in 2001. The increase in
gross profit margins was partially offset by the inclusion of nine and one-half
months of Anapharm's margins in 2002. Anapharm's gross profit margins are lower
than we experienced historically.

     For the three months ended December 31, 2002 our gross margins were 40.1%
compared to 45.0% for the same three months ended December 31, 2001. On a going
forward basis, our gross margins will vary from quarter to quarter. With the
acquisition of Anapharm and NDS in 2002, as described throughout this Report, we
now perform a wide array of different services. Typically, gross margins for our
Phase I and II clinical and bioanalytical services are higher than our Phase III
trials management, and other services we provide. Our future gross margins will
vary based upon the mix of contracts and the amount of revenue generated for
each type of service we perform. This could impact our future profit margins and
gross profit comparisons to historical levels. For 2003 we anticipate our gross
margin will be between 41% and 43%

                                      -24-
<PAGE>

Selling, General and Administrative Expenses
--------------------------------------------

     Our selling, general and administrative expenses or S,G&A expenses
increased from $7,556,126 for the year ended December 31, 2001 to $17,867,455
for the year ended December 31, 2002, an increase of 136.5%. As a percentage of
net revenues, our S,G&A expenses increased from 24.0% for the year ended
December 31, 2001 to 27.6% for the year ended December 31, 2002.

     The increase in total S,G&A expenses the period ended December 31, 2002
compared to the same period in 2001, is primarily due to (i) our increased sales
and marketing efforts, (ii) an increase in bad debt expense, depreciation
expense and other expenses consistent with the growth of the Company, (iii) the
inclusion of Anapharm's S,G&A expenses for nine and one half months in 2002 and
(iv) the inclusion of NDS' S,G&A expenses for four months in 2002. The increase
in S,G&A expenses as a percentage of revenues is primarily due to the inclusion
of Anapharm expenses.

     As a result of the acquisition of Anapharm on March 18, 2002, the Company
expects its S,G&A expenses as a percentage of revenues to remain at, or near,
current levels. This is primarily attributable to the nature of Anapharm's
business where it employs a higher number of research and development employees
and incurs higher S,G&A expenses as a percentage of revenues than our United
States operations. The Canadian government subsidizes a portion of these
additional expenses through tax credits. Under United States GAAP, these credits
are applied against income tax expense rather than against the underlying S,G&A
expenses that generated the credit. The overall impact on our operations is that
S,G&A expenses as a percentage of revenues will be permanently higher and our
effective tax rate will be permanently lower than in the past. Our net income is
not affected by this method. In the future, whenever possible we intend to refer
Phase I and Phase II studies and bioanalytical contracts to Anapharm to benefit
from the lower operating costs in Canada as well as to maximize the availability
of these tax credits. This strategy could also result in increasing our net
income due to the lower Canadian operating costs and the lower prevailing
Canadian tax rates. There will be some practical limitations which prevent us
from referring some studies to Anapharm including differing areas of expertise,
the availability of a special population group in South Florida but not in
Quebec or client preferences on where the work should be performed.

Net Income
----------

     Net income increased from $3,819,468 to $7,868,238 for the year ended
December 31, 2002 compared to the 12 months ended December 31, 2001, an increase
of 106%. On a fully diluted basis, our earnings per share increased from $.81 to
$1.05 for the year ended December 31, 2002 compared to the same period in the
2001. The weighted average number of shares outstanding used in computing
earnings per share on a fully diluted basis increased from 4,739,191 to
7,487,226 for the year ended December 31, 2002 compared to the corresponding
period in the prior year. The increase in the number of shares resulted
primarily from the issuance of 2,000,000 shares of common stock in connection
with our secondary offering in December 2001, the exercise of approximately
709,000 warrants in August 2001, the issuance of approximately 167,000 shares in
connection with the Anapharm acquisition in March 2002, the issuance of
approximately 234,000 shares in the NDS acquisition in September 2002, and the
exercise of approximately 400,000 warrants and options between January 1, 2002
and December 31, 2002.

                                      -25-
<PAGE>

     On July 17, 2002, we announced a common stock buyback plan of up to 750,000
shares. As of December 31, 2002, we had purchased 204,300 shares in various open
market purchases at an average price of approximately $10.65 per share, or a
total expenditure of approximately $2,176,484. These shares are presented as
common stock held in treasury at December 31, 2002 and were retired in February
2003. We have not made any additional treasury share purchases since December
31, 2002. We may continue to purchase our shares, or may discontinue the buyback
at any time depending on the selling price of our common stock, the viability of
potential acquisition targets, and our cash flows from operations and on hand
cash balances.

     Our effective tax rate for the 12 month period ended December 31, 2002 was
23.7% compared to 37.3% for the same period in 2001. This decrease is primarily
attributable to Anapharm's significantly lower tax rate as compared to the
United States tax rate. As described throughout this Report, Anapharm receives
significant tax credits from the government of Canada for incurring research and
development expenses. These credits lower our effective tax rate. We expect the
nature of Anapharm's business and the generation of significant tax credits to
continue; however, there can be no assurance on the future amount of these
credits on a quarterly or annual basis.

     On a going forward basis, we expect our effective tax rate to be between
24% and 26% as compared to the historical tax rate of 35% to 38.5% (based upon
earnings in the United States only), The effective tax rate will be dependent on
the amount of the credits Anapharm receives and Anapharm's relative contribution
to our consolidated pre-tax income.

LIQUIDITY AND CAPITAL RESOURCES

     For 2002, net cash provided by operating activities was $5,208,040 in
contrast to $3,645,659 of net cash provided by operations in 2001. The change is
primarily due to the substantial increase in net earnings and depreciation and
amortization resulting from the growth of our business in 2002, offset by a
substantial increase in net assets including an increase of approximately
$5,827,328 in accounts receivable. As is typical with growing businesses, an
increase in revenues increases accounts receivables. In turn, this results in an
increase of our cash balances pending collection of the receivables.

     For 2002, net cash used in investing activities was $36,664,352 compared to
$7,324,693 used in investing activities in 2001. The increase resulted primarily
from the use of approximately $29,229,000 of net cash to acquire Anapharm and
NDS in 2002, the purchase of approximately $5,100,000 of property and equipment,
and the purchase of approximately $2,414,000 in marketable securities. In 2001,
we acquired SFBC Ft. Myers and SFBC Analytical for net cash of approximately
$3,379,000 and spent approximately $3,000,000 million in capital expenditures.

                                      -26-
<PAGE>

     During 2002 we used $1,285,331 in financing activities compared to net cash
provided by financing activities of $35,994,570 in 2001. The increase was
primarily due to raising net proceeds of approximately $29,000,000 from a
secondary offering in December 2001, and the receipt of approximately $6,800,000
from the exercise of stock options and warrants in 2001. In addition, in 2002
the Company repurchased approximately $2,176,000 of its common stock.

     On October 16, 2000, we completed our initial public offering and realized
net proceeds of approximately $8,270,000. We have spent all of the net proceeds
including $885,000 to pay indebtedness, $3,379,000 to acquire SFBC Ft. Myers and
SFBC Analytical and the balance for working capital.

     On September 16, 2002, we entered into a $10 million Revolving Credit and
Security Agreement with Wachovia Bank National Association. The interest rate on
this Credit Facility is LIBOR based and variable. As of December 31, 2002, our
average interest rate on the entire Credit Facility was approximately 3.5 %.
This Credit Facility enables SFBC to borrow for general working capital purposes
and for the purpose of financing acquisitions of companies in related
industries. This Credit Facility is secured by substantially all of our assets.
We have not borrowed any funds under this Credit Facility although as of
December 31, 2002 we could have borrowed substantially all $10 million. In order
to qualify to be able to draw down on the Credit Facility we must comply with
covenants requiring us to maintain certain leverage and debt service coverage
ratios, as well as minimum liquidity.

     At March 20, 2003, we had approximately $6.4 million in cash on hand. Based
upon our cash balances and our positive cash flows from operations, we believe
we have enough working capital to meet our operational needs within the next 12
months. If we consummate any acquisitions, we expect to use our Credit Facility
and, if necessary, obtain additional debt or equity financing. Except for the
possibility of issuing stock related to a potential accretive acquisition,
should one arise and the commitments noted below, we do not anticipate issuing
any of our common stock during 2003.

COMMITMENTS

     We acquired SFBC Charlotte in March 2000. As part of the purchase price we
agreed to pay the seller potential additional consideration up to a maximum
payment of $1.2 million earn-out based upon future SFBC Charlotte's operating
performance during the first three post-acquisition years. This three year
period ends on March 31, 2003. No payments have been earned during the first two
years following the acquisition. Based upon the attainment by SFBC Charlotte of
certain operating milestones through the nine-month measurement period ending
December 31, 2003 of the third year, of the earn-out ended December 31, 2003, we
believe, that it is more likely than not, that we will pay the full $1.2 million
to the seller of SFBC Charlotte. As a result both goodwill and accrued
liabilities on our Consolidated Balance Sheet have been increased by $1.2
million. We have the option to pay this earn-out in any combination of cash and
SFBC common stock. We expect to deliver common stock. The number of shares will
be based upon a fair market value formula during April 2003. We will deliver the
shares on May 15, 2003 and have agreed to register them on Form S-3.

     In addition, we may pay NDS up to $8 million as an earn-out based upon SFBC
NDS' future operating results over a three year period with the initial year
ending September 30, 2003. Of this $8 million potential earnout, $6 million is
to be paid in cash and the remaining $2 million will be paid through the
issuance of common stock.

                                      -27-
<PAGE>

RELATED PARTY TRANSACTIONS

     In March 2003, Lisa Krinsky, M.D., our chairman of the board of directors
and president, voluntarily prepaid a note due on July 31, 2003 in the amount of
$94,918 including accrued interest. The loan represented personal expenses we
paid for Dr. Krinsky in 1998 prior to our initial public offering. We will not
make any future loans to our executive officers and directors. Disclosure of
other related party transactions dealing with management compensation will be
contained in the proxy statement referenced to in Part III of this Report.

NEW ACCOUNTING PRONOUNCEMENTS

     In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," ("SFAS 146"). SFAS 146 applies to
costs associated with an exit activity (including restructuring) or with a
disposal of long-lived assets. Those activities can include eliminating or
reducing product lines, terminating employees and contracts and relocating plant
facilities or personnel. SFAS 146 is effective prospectively for exit or
disposal activities initiated after December 31, 2002, with earlier adoption
encouraged. SFBC does not believe the adoption of this standard will have a
material impact on the financial statements.

     In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure" ("SFAS 148"), an amendment
of FASB Statement No. 123". SFAS 148 amends FASB Statement No. 123 "Accounting
for Stock-Based Compensation", to provide alternative methods of transition for
an entity that voluntarily changes to the fair value based method of accounting
for stock-based employee compensation and to require prominent disclosures about
the effects on reported net income of an entity's accounting policy decisions
with respect to stock-based employee compensation. SFAS 148 also amends APB
Opinion No. 28, "Interim Financial Reporting," to require disclosures about
those effects in interim financial information. SFBC currently accounts for its
stock-based compensation awards to employees and directors under the accounting
prescribed by Accounting Principles Board Opinion No. 25 and provides the
disclosures required by SFAS No. 123. SFBC currently intends to continue to
account for its stock-based compensation awards to employees and directors under
the accounting prescribed by Accounting Principles Board Opinion No. 25 and
adopted the additional disclosure provisions of SFAS 148 during the first
quarter in December 2002.

     In November 2002, the FASB issued Interpretation 45 (FIN 45), Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. For a guarantee subject to FASB
Interpretation 45, a guarantor is required to:

o    measure and recognize the fair value of the guarantee at inception (for
     many guarantees, fair value will be determined using a present value
     method); and

o    provide new disclosures regarding the nature of any guarantees, the maximum
     potential amount of future guarantee payments, the current carrying amount
     of the guarantee liability, and the nature of any recourse provisions or
     assets held as collateral that could be liquidated and allow the guarantor
     to recover all or a portion of its payments in the event guarantee payments
     are required.

                                      -28-
<PAGE>

     The disclosure requirements of this Interpretation are effective for
financial statements for fiscal years ending after December 15, 2002 and did not
have a material effect on the Company's financial statements. The initial
recognition and measurement provisions are effective prospectively for
guarantees issued or modified on or after January 1, 2003, which should not have
a material effect on the Company's financial statements.

FORWARD-LOOKING STATEMENTS

     The statements in this Report relating to the growing market for contract
research organizations, the trends affecting contract research organizations,
the increase in outsourcing by the industries we serve, our making accretive
acquisitions, the potential of our Miami facility to generate additional
revenues, our opportunity to serve generic drug companies, our ability to add
additional therapeutic specialties, our payment of the SFBC Charlotte earn-out,
the adequacy of our working capital and liquidity to fund operations and our
ability to finance future acquisitions, are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act").
Additionally, words such as "expects", "anticipates", "intends", "believes",
"will" and similar words are used to identify forward-looking statements within
the meaning of the Act.

     The results anticipated by any or all of these forward-looking statements
might not occur. Important factors, uncertainties and risks that may cause
actual results to differ materially from these forward-looking statements
include (1) an unanticipated decision to make an acquisition of a substantially
larger competitor, which would require us to re-allocate our intended uses of
our cash resources; (2) our ability to successfully implement our plans for
operational and geographical expansion; (3) our ability to successfully achieve
and manage the technical requirements of specialized clinical trial services,
while maintaining compliance with applicable rules and regulations; (4) our
ability to compete in attracting pharmaceutical and biotechnology companies in
order to develop additional business; (5) our continued ability to recruit
participants for clinical studies and efficiently conduct or manage the studies;
(6) the economic climate nationally and internationally as it affects drug
development operations and the future research needs of our clients ; and (7)
our ability to integrate and absorb any acquisitions into our current
operational structure.

     We undertake no obligation to publicly update or revise any forward-looking
statements, whether as the result of new information, future events or
otherwise. For more information regarding some of the ongoing risks and
uncertainties of our business, see the following discussion and our filings with
the Securities and Exchange Commission.

SPECIAL FACTORS RELATING TO OUR BUSINESS AND COMMON STOCK
OUR BUSINESS AND COMMON STOCK ARE SUBJECT TO A NUMBER OF RISKS INCLUDING THOSE
DISCLOSED BELOW.

                                      -29-
<PAGE>

WE RELY ON A LIMITED NUMBER OF CLIENTS FOR A LARGE PERCENTAGE OF OUR REVENUES
WHICH MEANS THAT WE FACE A GREATER RISK OF LOSS OF REVENUES IF WE LOSE A CLIENT
WHICH PROVIDES A MATERIAL AMOUNT OF REVENUES.

     Historically, we have relied on a small number of clients to generate a
large percentage of our revenues. In 2002 no client comprised 10% of our
revenues. Companies that comprise our largest clients vary from year to year,
and our revenues from individual clients fluctuate each year. If we lose one or
more major clients, our business, prospects, financial condition and results of
operations could be materially and adversely affected.

OUR CLIENTS MAY CANCEL OR DELAY OUR CONTRACTS, WHICH COULD REDUCE OUR FUTURE
REVENUES AND RESULT IN OPERATING LOSSES.

     Our clients may cancel or delay our contracts at any time for no reason.
They also may cancel a clinical trial for a variety of reasons, including:

     o  manufacturing problems resulting in a shortage or unavailability of the
        drug we are testing;

     o  a decision by a client to de-emphasize or cancel the development of a
        drug;

     o  unexpected clinical trial results;

     o  adverse participant reaction to a drug;

     o  a request by the FDA; and

     o  inadequate participant enrollment.

     The loss or delay of a large project or contract or the loss or delay of
multiple small contracts could have a material adverse effect on our business
and future results of operations.

IF WE CANNOT MANAGE OUR GROWTH EFFECTIVELY, WE MAY NOT CONTINUE TO OPERATE AT
THE SAME LEVELS OF PROFITABILITY, AND OUR GROWTH MAY SLOW AND OUR PROFITABILITY
MAY DECLINE.

     We have grown rapidly since 1998. Businesses which grow rapidly often have
difficulty managing their growth. Although we have expanded our management, we
will have to continue recruiting and employing experienced executives and key
employees capable of providing the necessary support. We cannot assure you that
our management will be able to manage our growth effectively or successfully.
Our failure to meet these challenges could cause us to lose money.

                                      -30-
<PAGE>

BECAUSE OF OUR ACQUISITION STRATEGY, OUR FUTURE RESULTS OF OPERATIONS MAY BE
ADVERSELY AFFECTED.

     One important aspect of our growth strategy is to pursue strategic
acquisitions of related companies that expand or compliment our business. We
cannot assure you that:

     o  we will identify suitable acquisition candidates;

     o  we can consummate acquisitions on acceptable terms;

     o  we can successfully integrate any acquired companies into our
        operations; or

     o  we will be able to retain an acquired company's significant client
        relationships and key personnel or otherwise realize the intended
        benefits of any acquisition.

     Any future acquisition could require significant capital resources and
divert management's attention from our existing business. We may incur
liabilities associated with acquisitions that may not have been known at the
time of acquisition. Acquisitions may create unanticipated tax and accounting
problems. Failure to successfully accomplish future acquisitions could limit our
revenues and earnings potential.

WE DEPEND ON THE DRUG DEVELOPMENT PROGRAMS OF OUR CLIENTS AND A CHANGE IN THESE
PROGRAMS, WHICH ARE BEYOND OUR CONTROL, CAN ADVERSELY AFFECT OUR BUSINESS.

     Most of our contracts are short term. As a result, we must continually
replace our existing contracts with new contracts to sustain our revenues. A
client's drug development program is the driving force in our ability to
initiate new contracts. In addition, a client may cancel or delay existing
contracts if its drug is not ready for testing or if the test results are
unsatisfactory. All of these factors are beyond our control. If we are unable to
generate new contracts on a timely basis this would have a material adverse
effect on our business, financial condition, and results of operations. In
addition, since a large portion of our operating costs are relatively fixed,
variations in the timing and progress of contracts can materially affect our
results.

IF PHARMACEUTICAL AND BIOTECHNOLOGY COMPANIES REDUCE THEIR EXPENDITURES, OUR
FUTURE REVENUES MAY BE REDUCED.

     Our business and continued expansion depend on the research and development
expenditures of our clients. If these companies want to reduce costs, they may
proceed with fewer clinical trials. An economic downturn or other factors may
cause our clients to decrease their research and development expenditures, which
would adversely affect our future revenues.

WE ARE SUBJECT TO CHANGES IN OUTSOURCING TRENDS IN THE PHARMACEUTICAL AND
BIOTECHNOLOGY INDUSTRIES WHICH COULD ADVERSELY AFFECT OUR OPERATING RESULTS.

     Economic factors and industry trends that affect our primary clients,
pharmaceutical and biotechnology companies, also affect our business and
operating results. If these industries reduce the outsourcing of their clinical
research projects, our operations will be affected adversely. A continuing
negative trend would have an ongoing adverse effect on our business. We cannot
predict the likelihood of any of these events or the effects they would have on
our business, results of operations or financial condition.

                                      -31-
<PAGE>


IF WE LOSE THE SERVICES OF OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT QUALIFIED
STAFF, OUR BUSINESS COULD BE ADVERSELY AFFECTED.

     Our success is substantially dependent upon the performance, contributions
and expertise of our senior management team. In addition, we depend on our
ability to attract and retain qualified management, professional and operating
staff. The departure of any of the members of senior management, or any other
key executive, or our inability to continue to attract and retain qualified
personnel could have a material adverse effect on our business.

BECAUSE WE ARE SIGNIFICANTLY SMALLER THAN OUR LARGEST COMPETITORS, WE MAY LACK
THE FINANCIAL RESOURCES NEEDED TO COMPETE EFFECTIVELY.

     There are a large number of drug development services companies ranging in
size from one-person firms to full service, global drug development
corporations. It is easy for a new company to enter our industry. Intense
competition may lead to price pressure or other conditions that could adversely
affect our business. Many of our competitors are substantially larger than us
and have greater resources. We may lack the operating and financial resources
needed to compete effectively.

WE RISK POTENTIAL LIABILITY WHEN CONDUCTING CLINICAL TRIALS, WHICH COULD COST US
LARGE AMOUNTS OF MONEY.

     Our clinical trials involve administering drugs to humans in order to
determine the effects of the drugs. By doing so, we are subject to the general
risks of liability to these persons, which include:

     o  adverse side effects and reactions resulting from administering these
        drugs to a clinical trial participant;

     o  improper administration of the new drug; or

     o  potential professional malpractice of our employees, including
        physicians.

     To protect ourselves, our contracts have indemnification agreements
requiring our clients to indemnify us in the event of adverse consequences to
our participants caused by their drugs. We also carry liability insurance.
However, if there is a damage claim not covered by insurance, the
indemnification agreement is not enforceable or broad enough, or our client is
insolvent, any resulting award against us could result in our experiencing large
losses.

IF WE DO NOT CONTINUE TO DEVELOP NEW SCIENTIFIC METHODS, OR ASSAYS, FOR OUR
BIOANALYTICAL APPLICATIONS, WE MAY BE UNABLE TO COMPETE WITH OTHER ENTITIES
OFFERING BIOANALYTICAL LABORATORY SERVICES.

     We continuously must develop scientific methods to test drug products in
order to meet the needs of our clients and attract new clients. In order to
substantially increase the business of our bioanalytical laboratories, we must
be able to provide solutions for our clients. This requires staying abreast of
current regulatory requirements and identifying methods and applications that
will assist our clients in obtaining approval for their products. If we are not
successful in developing new methods and applications, we may lose our clients.

                                      -32-
<PAGE>


WE FACE A RISK OF LIABILITY FROM OUR HANDLING AND DISPOSAL OF MEDICAL WASTES,
WHICH COULD CAUSE US TO LOSE LARGE AMOUNTS OF MONEY.

     Our clinical trial activities involve the controlled disposal of medical
wastes, which are considered hazardous materials. However, we cannot completely
eliminate the risk of accidental contamination or injury from these materials.
If this occurs, we could be held liable for damages, face significant fines, and
face the temporary or permanent shutdown of our operations.

WE ARE CONTROLLED BY OUR MANAGEMENT, WHICH MEANS THAT OUR MANAGEMENT MAY STOP A
THIRD PARTY FROM ACQUIRING US EVEN IF IT IS IN THE BEST INTERESTS OF OUR
STOCKHOLDERS.

     As of March 31, 2003 Dr. Lisa Krinsky and Mr. Arnold Hartman, our chairman
of the board and our chief executive officer, beneficially own approximately 19%
of our outstanding common stock. As a result, they may be able to exercise
control over all matters requiring stockholder approval including the election
of directors and approval of significant corporate transactions. Their voting
control could have the effect of delaying or preventing a change of control,
which might benefit our stockholders. Additionally, management's voting control
may depress the future market price of our common stock.

WE MAY ISSUE PREFERRED STOCK WITHOUT THE APPROVAL OF OUR STOCKHOLDERS, WHICH
COULD MAKE IT MORE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US AND COULD DEPRESS
OUR STOCK PRICE.

     In the future, our board of directors may issue, without a vote of our
stockholders, one or more series of preferred stock that has more than one vote
per share. This could permit our board of directors to issue preferred stock to
investors who support our management and give effective control of our business
to our management. Additionally, issuance of preferred stock could block an
acquisition resulting in both a drop in the stock price and a decline in
interest in the stock, which could make it more difficult for stockholders to
sell their shares. This could cause the market price of our common stock to drop
significantly, even if our business is performing well.

FLUCTUATIONS IN OUR OPERATING RESULTS MAY CAUSE OUR STOCK PRICE TO FALL.

     Historically, our revenues have been higher in the second half of the year.
These fluctuations are usually due to the level of new business authorizations
in a particular quarter or year and the timing of the initiation, progress, or
cancellation of significant projects. We anticipate that this will continue
because of the way our clients' budget their research and development
expenditures. In addition, we have had some volatility in our quarterly results.
Our varying quarterly results may result in the drop of our common stock price
if investors react to our reporting operating results which are less favorable
than in a prior quarter.

                                      -33-
<PAGE>

OUR STOCK PRICE CAN BE EXTREMELY VOLATILE, AND IT COULD SUFFER A DECLINE IN
VALUE.

     The trading price of our common stock has been, and is likely to be,
volatile and could be subject to wide fluctuations in price in response to
various factors, many of which are beyond our control, including:

     o  actual or anticipated variations in quarterly operating results;

     o  loss of a major client;

     o  new service offerings introduced or announced by our competitors;

     o  changes in financial estimates by securities analysts;

     o  changes in market valuations of other similar companies;

     o  our announcement of significant acquisitions, strategic partnerships,
        joint ventures or capital commitments;

     o  additions or departures of key personnel; and

     o  sales of our common stock, including short sales.

     As a result, investors could lose all or part of their investment. In
addition, the stock market in general experiences extreme price and volume
fluctuations that are often unrelated and disproportionate to the operating
performance of companies.

ITEM 7. FINANCIAL STATEMENTS.

SEE PAGES F-1 - F-38.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     On November 16, 2001 we retained Grant Thornton, LLP as our auditors to
replace Kaufman, Rossin & Co. who was dismissed, to audit our books and
accounts for the fiscal year ending December 31, 2001. Our board of directors
and its Audit Committee approved the decision to change independent accountants.

     The reports of Kaufman Rossin on our consolidated financial statements for
the two fiscal years ended December 31, 2000 contain no adverse opinion or
disclaimer of opinion and were not qualified or modified as to any uncertainty,
audit scope or accounting principle.

     In connection with the audits for the past two fiscal years and through
November 16, 2001, there were no disagreements with Kaufman Rossin on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of Kaufman Rossin would have caused the firm to make reference
thereto in their reports on the financial statements for such period.

                                      -34-
<PAGE>

     During the fiscal years ended December 31, 2000 and 1999 and during
subsequent interim periods prior to engaging Grant Thornton, neither us nor any
person on our behalf consulted with Grant Thornton regarding the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on SFBC's financial
statements.

     Kaufman Rossin did not inform us of the existence of any reportable events
as defined in Regulation S-B. SFBC has authorized Kaufman Rossin to respond
fully to any inquiries of Grant Thornton relating to their engagement as the
Company's independent accountant.

     Kaufman Rossin furnished a letter addressed to the Securities Exchange
Commission dated November 16, 2001 agreeing with the above statements. A copy of
the letter was filed as an Exhibit to our Report on Form 8-K dated November 16,
2001.

     There were no disagreements with Grant Thornton related to the audit for
the years ended December 31, 2002 or 2001.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.

     The information required by this Item shall be contained in the proxy
statement for the 2003 annual meeting, which shall be filed within 120 days of
December 31, 2002.

ITEM 10. EXECUTIVE COMPENSATION.

     The information required by this Item shall be contained in the proxy
statement for the 2003 annual meeting which shall be filed within 120 days of
December 31, 2002.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

     The information required by this Item shall be contained in the proxy
statement for the 2003 annual meeting which shall be filed within 120 days of
December 31, 2002.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required by this Item shall be contained in the proxy
statement for the 2003 annual meeting which shall be filed within 120 days of
December 31, 2002.

                                      -35-
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         (a)      EXHIBIT INDEX

Exhibit
Number   Description
------   ---------------------------------------------------------------------

3.1      Certificate of Incorporation(1)
3.2      First Amendment to Certificate of Incorporation(1)
3.3      Certificate of Correction to Certificate of Incorporation(2)
3.4      Bylaws(1)
3.5      First Amendment to the Bylaws(2)
3.6      Second Amendment to the Bylaws
4.1      Form of Common Stock Certificate(1)
10.1     Employment Agreement of Arnold Hantman(3)
10.2     Employment Agreement of Lisa Krinsky, M.D.(3)
10.3     Employment Agreement of Dr. Gregory Holmes(1)
10.6     Employment Agreement of David Natan(4)
10.7     Employment Agreement of Marc Lebel(4)
10.8     Employment Agreement of Allan Xu(5)
10.9     Employment Agreement of Dr. Michael Adams
10.10    Second Amended and Restated 1999 Stock Option Plan(4)
10.11    Asset Purchase Agreement (SFBC Charlotte, Inc.)*(2)
10.12    Share Purchase Agreement (Anapharm)*(6)
10.13    Agreement and Plan of Merger (SFBC Analytical Laboratories, Inc.)(7)
10.14    Asset Purchase Agreement (SFBC New Drug Services, Inc.)*(8)
10.15    Audit Committee Charter - 2002
21       Subsidiaries
23       Consent of Grant Thornton LLP dated March 31, 2003
----------------
* Confidential Portions omitted and filed separately with the Commission
pursuant to a Request for Confidential Treatment.

(1) Contained in Form SB-2 filed on August 17, 1999
(2) Contained in Form SB-2 filed on October 5, 2000
(3) Contained in Form SB-2 filed on July 21, 2000
(4) Contained in Form 10-KSB filed April 1, 2002
(5) Contained in Form SB-2 filed on September 7, 2001
(6) Contained in Form 10-KSB/A filed on April 10, 2002.
(7) Contained in Form 8-K/A filed on August 29, 2001.
(8) Contained in Form 8-K/A filed on March 21, 2003.

         (b) Two Reports on Form 8-K were filed during the last quarter of the
period covered by this Report. The Report filed on November 20, 2002, contained
the required financial information relating to the NDS acquisition. The Report
filed on December 30, 2002 disclosed the establishment of 10b5-1 sales plans by
two executive officers of SFBC.

                                      -36-
<PAGE>

ITEM 14.  CONTROLS AND PROCEDURES

     Our chief executive officer and chief financial officer evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-14(c) under the Securities Exchange Act of 1934, as amended) within 90 days
of the filing date of this report (the "Evaluation Date") and, based on that
evaluation, concluded that, as of the Evaluation Date, our disclosure
controls and procedures were effective in timely alerting them to the material
information relating to us that is required to be disclosed in our reports under
the Securities Exchange Act of 1934, as amended, within the time periods
specified in the Securities and Exchange Commission's rules and forms.

     Since the Evaluation Date, there have not been any significant changes to
our internal controls, including any corrective actions with regard to
significant deficiencies and material weaknesses.

                                      -37-
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 31st day of March,
2003.

                       SFBC International, Inc.

                       By /s/ Arnold Hantman
                          ------------------
                       Arnold Hantman, Chief Executive Officer

In accordance with 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>
<S>                           <C>                                            <C>
/s/ Lisa Krinsky, M.D.        Chairman of the Board of Directors             March 31, 2003
---------------------------
Lisa Krinsky, M.D.


/s/ Arnold Hantman            Director                                       March 31, 2003
---------------------------
Arnold Hantman


/s/  David Natan              Vice President of Finance (Principal           March 31, 2003
----------------              Financial Officer)
David Natan


/s/ Ramiro Casanas            Chief Accounting Officer                       March 31, 2003
---------------------------
Ramiro Casanas


/s/ Jack Levine               Director                                       March 31, 2003
---------------
Jack Levine


/s/ Dr. Leonard Weinstein     Director                                       March 31, 2003
-------------------------
Dr. Leonard Weinstein


/s/ David Lucking
-------------------------
David Lucking                 Director                                       March  31, 2003
</TABLE>

                                      -38-
<PAGE>


                                 C O N T E N T S



                                                                   Page

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                  F-2


CONSOLIDATED FINANCIAL STATEMENTS

     CONSOLIDATED BALANCE SHEETS                                     3

     CONSOLIDATED STATEMENTS OF EARNINGS                             4

     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
       EQUITY                                                        5

     CONSOLIDATED STATEMENTS OF CASH FLOWS                         6 - 7

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                    8 - 34


                                      F-1
<PAGE>

Board of Directors and Stockholders
SFBC International, Inc.

We have audited the accompanying consolidated balance sheets of SFBC
International, Inc. and Subsidiaries (the "Company") as of December 31, 2002 and
2001, and the related consolidated statements of earnings, changes in
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 SFBC
International, Inc. and Subsidiaries as of December 31, 2002 and 2001 and the
consolidated results of their operations and their consolidated cash flows for
the years then ended, in conformity with accounting principles generally
accepted in the United States of America.

As discussed in Note A to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standard 142 "Goodwill and Other
Intangible Assets" on January 1, 2002.


/s/ Grant Thornton LLP

Miami, Florida
February 18, 2003


                                      F-2
<PAGE>

SFBC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND DECEMBER 31, 2001
================================================================================

<TABLE>
<CAPTION>
ASSETS
                                                                                               December 31,       December 31,
                                                                                                   2002               2001
                                                                                                   ----               ----
<S>                                                                                             <C>               <C>
Current Assets
      Cash and cash equivalents                                                                  6,361,496        39,103,139
      Investment in marketable securities                                                        2,413,522                --
      Accounts receivable, net                                                                  21,753,778        10,453,729
      Income tax receivable                                                                        290,221                --
      Loans receivable from officers/stockholders                                                  343,400           363,517
      Prepaids and other current assets                                                          4,256,584           289,248
                                                                                               -----------       -----------
           Total current assets                                                                 35,419,001        50,209,633
Loans receivable from officers                                                                     600,000           800,000
Property and equipment, net                                                                     16,612,579         3,928,584
Goodwill, net                                                                                   30,151,148         4,483,690
Other intangibles, net                                                                           2,662,603           684,973
Deferred income taxes                                                                              283,665                --
Other assets, net                                                                                  230,444           376,650
                                                                                               -----------       -----------
           Total assets                                                                         85,959,440        60,483,530
                                                                                               ===========       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
      Accounts payable                                                                           6,323,414         1,538,903
      Accrued liabilities                                                                        3,041,087         1,318,730
      Advance billings                                                                           3,802,754         1,483,216
      Income taxes payable                                                                              --         1,046,420
      Deferred income taxes                                                                         85,308           222,713
      Capital lease obligaions and notes payable, current portion                                1,361,231             7,490
                                                                                               -----------       -----------
           Total current liabilities                                                            14,613,794         5,617,472
Capital lease obligations and notes payable                                                      2,786,956             1,248
Deferred income taxes                                                                                   --           233,602
Commitments                                                                                             --                --
Stockholders' equity
      Preferred stock. $0.10 par value, 5,000,000 shares authorized, none issued                        --                --
      Common stock, $0.001 par value, 20,000,000 shares authorized, 7,408,682 and
         6,670,320 shares issued and outstanding as of December 31, 2002 and
         December 31, 2001                                                                           7,409             6,670

      Additional paid-in capital                                                                58,068,002        49,913,845
      Retained earnings                                                                         12,641,431         4,773,193
      Note receivable - officer                                                                         --           (62,500)
      Accumulated other comprehensive earnings                                                      18,332                --
      Common stock held in treasury, at cost - 204,300 shares at December 31, 2002
        and -0- shares at December 31, 2001                                                     (2,176,484)               --
                                                                                               -----------       -----------
           Total stockholders' equity                                                           68,558,690        54,631,208
                                                                                               -----------       -----------
           Total liabilities and stockholders' equity                                           85,959,440        60,483,530
                                                                                               ===========       ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                      F-3
<PAGE>

SFBC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
================================================================================
<TABLE>
<CAPTION>

                                                              Twelve Months Ended
                                                                  December 31,
                                                            2002                2001
                                                            ----                ----
<S>                                                     <C>                <C>
Net revenue                                             $ 64,740,047       $ 31,470,528
Costs and expenses
      Direct costs                                        36,727,571         18,150,867
      Selling, general and administrative expenses        17,867,455          7,556,126
                                                        ------------       ------------
           Total costs and expenses                       54,595,026         25,706,993
           Earnings from operations                       10,145,021          5,763,535
Other income (expense)
      Interest income                                        446,662            359,159
      Interest expense ($0 and
       $12,691 to related parties in 2002
       and 2001 respectively.)                              (281,880)           (27,112)
                                                        ------------       ------------
           Total other income (expense)                      164,782            332,047
                                                        ------------       ------------
           Earnings before taxes                          10,309,803          6,095,582
Income tax expense                                         2,441,565          2,276,114
                                                        ------------       ------------
           Net earnings                                 $  7,868,238       $  3,819,468
                                                        ============       ============
Earnings per share:
      Basic                                             $       1.12       $       0.94
                                                        ============       ============
      Diluted                                           $       1.05       $       0.81
                                                        ============       ============
Shares used in computing earnings per share:
      Basic                                                7,043,518          4,073,292
                                                        ============       ============
      Diluted                                              7,487,226          4,739,191
                                                        ============       ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>

SFBC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
================================================================================


<TABLE>
<CAPTION>

                                                   Common Stock
                                               -------------------  Additional    Retained
                                                              Par     Paid-In     Earnings
                                                Shares       Value    Capital     (Deficit)
                                               ---------     -----   ----------   ----------
<S>                                            <C>           <C>     <C>             <C>
Balances - January 1, 2001                     3,589,642     3,590   10,345,323       953,725

Common stock options issued as
  compensation                                        --        --      170,000            --

Exercise of stock options
  and warrants                                   899,087       899    6,893,409            --

Issuance of common stock
  for services                                     5,556         5       37,494            --

Common stock issued -
  Keystone acquisition                           178,035       178    2,574,264            --

Repurchase of common stock                        (2,000)       (2)     (25,530)           --

Proceeds from public offering                  2,000,000     2,000   32,498,000            --

Offering costs                                        --        --   (2,909,709)           --

Tax benefit from exercise
  of stock options                                    --        --      330,594            --

Note receivable - officer                             --        --           --            --

Net earnings                                          --        --           --     3,819,468
                                               ---------     -----   ----------   ----------

Balances - December 31, 2001                   6,670,320     6,670   49,913,845     4,773,193
Comprehensive earnings:
 Net earnings                                         --        --           --     7,868,238
 Foreign currency translation                         --        --           --            --
Total comprehensive earnings                          --        --           --            --
Common stock options
  issued as compensation                              --        --       35,417            --

Exercise of stock options
  and warrants                                   336,927       338    1,320,767            --

Common stock issued -
  Anapharm acquisition                           167,375       167    3,255,276            --

Common stock issued -
  NDS acquisition                                234,060       234    3,022,345            --

Repurchase of common stock                            --        --           --            --

Tax benefit resulting from
  exercise of stock options                           --        --      520,352            --

Repayment of note receivable -
  officer                                             --        --           --            --
                                               ---------     -----   ----------    ----------
Balances - December 31, 2002                   7,408,682     7,409   58,068,002    12,641,431

[RESTUB]
<CAPTION>

                                                            Accumulated
                                                  Note       Other
                                               Receivable Comprehensive    Common Stock
                                                 Office     Earnings      Held in Treasury      Total
                                                  ------     ------       ----------------    ----------
<S>                                                <C>      <C>                 <C>           <C>
Balances - January 1, 2001                              --       --                     --    11,302,638

Common stock options issued as
  compensation                                          --       --                     --       170,000

Exercise of stock options
  and warrants                                          --       --                     --     6,894,308

Issuance of common stock
  for services                                          --       --                     --        37,499

Common stock issued -
  Keystone acquisition                                  --       --                     --     2,574,442

Repurchase of common stock                              --       --                     --       (25,532)

Proceeds from public offering                           --       --                     --    32,500,000

Offering costs                                          --       --                     --    (2,909,709)

Tax benefit from exercise
  of stock options                                      --       --                     --       330,594

Note receivable - officer                          (62,500)      --                     --       (62,500)

Net earnings                                            --       --                     --     3,819,468
                                                   -------  -------                           ----------

Balances - December 31, 2001                       (62,500)      --                     --    54,631,208

Comprehensive earnings:
 Net earnings                                           --       --                     --     7,868,238
 Foreign currency translation                           --   18,332                     --        18,332
                                                                                              ----------
Total comprehensive earnings                            --       --                     --     7,886,570
Common stock options
  issued as compensation                                --       --                     --        35,417

Exercise of stock options
  and warrants                                          --       --                     --     1,321,105

Common stock issued -
  Anapharm acquisition                                  --       --                     --     3,255,443

Common stock issued -
  NDS acquisition                                       --       --                     --     3,022,579

Repurchase of common stock                              --       --             (2,176,484)   (2,176,484)

Tax benefit resulting from
  exercise of stock options                             --       --                     --       520,352

Repayment of note receivable -
  officer                                           62,500       --                     --        62,500


                                                   -------   ------             ----------    ----------
Balances - December 31, 2002                            --   18,332             (2,176,484)   68,558,690
</TABLE>


                                      F-5
<PAGE>

SFBC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
================================================================================

<TABLE>
<CAPTION>

                                                                                       2002               2001
                                                                                       ----               ----
<S>                                                                                 <C>                <C>
Cash flows from operating activities
    Net earnings                                                                    7,868,238          3,819,468
    Adjustments to reconcile net earnings to net cash provided by operating
    activities:
      Depreciation and amortization                                                 2,869,671            593,502
      Provision for bad debt                                                          387,236             48,439
      Noncash compensation - reduction of note receivable                             200,000                 --
      Common stock options issued as compensation                                      35,417            170,000
      Issuance of common stock for services                                                --             37,499
      Tax benefit resulting from exercise of stock options                            520,352            330,594
      Changes in assets and liabilities, net of acquisitions
        Accounts receivable                                                        (5,827,328)          (985,472)
        Income tax receivable                                                        (290,221)                --
        Prepaid expenses and other current assets                                  (2,011,931)            51,532
        Other assets                                                                  (42,168)          (397,714)
        Accounts payable                                                            1,415,242             88,906
        Accrued liabilities                                                           942,687           (122,856)
        Advance billings                                                            2,236,828           (107,304)
        Income taxes payable                                                       (1,550,228)           600,348
        Deferred income taxes                                                      (1,545,755)          (481,283)
                                                                                 ------------       ------------
Total adjustments                                                                  (2,660,198)          (173,809)
                                                                                 ------------       ------------
          Net cash provided by operating activities                                 5,208,040          3,645,659
                                                                                 ------------       ------------
Cash flows from investing activities
    Cash consideration - acquisitions, net of cash acquired                       (29,228,978)        (3,378,552)
    Purchase of property and equipment                                             (5,104,469)        (3,002,338)
    Purchase of long term investment - marketable securities                       (2,413,522)                --
    Loans to officers/stockholders                                                         --         (1,000,000)
    Repayment on loans to officers/stocholders                                         82,617             56,197
                                                                                 ------------       ------------
          Net cash used in investing activities                                   (36,664,352)        (7,324,693)
Cash flows from financing activities
    Principal payments on notes payable - purchase of assets                               --            (43,521)
    Principal payments on notes payable - stockholders                                (62,093)                --
    Principal payments on notes payable                                              (367,858)          (358,476)
    Repurchase of common stock                                                     (2,176,689)           (25,532)
    Proceeds from the issuance/exercise of warrants and common stock                1,321,309          6,831,808
    Net proceeds from secondary public offering                                            --         29,590,291
                                                                                 ------------       ------------
          Net cash (used in) provided by financing activities                      (1,285,331)        35,994,570
Net (decrease) increase in cash and cash equivalents                              (32,741,643)        32,315,536
Cash and cash equivalents at beginning of period                                   39,103,139          6,787,603
                                                                                 ------------       ------------
Cash and cash equivalents at end of period                                       $  6,361,496       $ 39,103,139
                                                                                 ============       ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-6
<PAGE>

SFBC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE TWELVE MONTH PERIODS ENDED DECEMBER 31, 2002 AND 2001
================================================================================

<TABLE>
<CAPTION>

                                                                                  2002            2001
                                                                                  ----            ----
<S>                                                                           <C>              <C>
Supplemental disclosures:
    Interest paid                                                             $   281,880      $   27,112
    Income taxes paid                                                         $ 2,921,103      $1,388,275
Supplemental disclosures of non-cash investing and finance activities:
    Fair value of net assets assumed in connection with
      acquisition of businesses                                               $14,943,000      $1,735,041
    Common stock issued in connection with acquisition of businesses          $ 6,278,023      $2,574,442
    Professional fees accrued in connection with acquisition of businesses    $    73,360      $       --
    Common stock options issued as compensation                               $    35,417      $  170,000
    Common stock issued for services                                          $        --      $   37,499
    Issuance of common stock for note receivable                              $        --      $   62,500
    Note receivable relieved in connection with acquisition of business       $        --      $  209,337
    Non cash compensation - reduction of note receivable                      $   200,000      $       --
</TABLE>

                             See accompanying notes.


                                      F-7
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2002 AND 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     SFBC International, Inc. and Subsidiaries (the "Company") is a contract
     research organization with locations in Miami, Florida, Charlotte, North
     Carolina, Fort Myers, Florida, Kennett Square and Philadelphia,
     Pennsylvania, and Quebec City, and Montreal, Canada. The Company provides
     clinical research, bioanalytical laboratory services and drug development
     services to pharmaceutical and biotechnology companies and manages clinical
     trials at multiple sites involving ophthalmology, dermatology and generic
     drug testing. Almost all of the Company's clients are entities based
     throughout the United States and Canada. A summary of the Company's
     significant accounting policies consistently applied in the preparation of
     the accompanying consolidated financial statements follows.

     The preparation of the Company's financial statements in conformity with
     accounting principles generally accepted in the United States of America
     requires management to make estimates and assumptions that affect the
     reported amounts of assets and liabilities at the date of the financial
     statements and revenues and expenses during the period. Future events and
     their effects cannot be determined with absolute certainty; therefore, the
     determination of estimates requires the exercise of judgment. Actual
     results inevitably will differ from those estimates, and such differences
     may be material to our financial statements. Management continually
     evaluates its estimates and assumptions, which are based on historical
     experience and other factors that are believed to be reasonable under the
     circumstances.

     Management believes that the following may involve a higher degree of
     judgment or complexity:

     Collectibility of Accounts Receivable
     -------------------------------------

     The Company's allowance for doubtful accounts and allowance for changes in
     contracts are based on management's estimates of the creditworthiness of
     its clients, analysis of subsequent changes in contracts, analysis of
     delinquent accounts, the payment histories of the accounts and management's
     judgment with respect to current economic conditions and, in the opinion of
     management, is believed to be an amount sufficient to respond to normal
     business conditions. Management sets reserves for customers based upon
     historical collection experience, and sets specific reserves for customers
     whose accounts have aged significantly beyond this historical collection
     experience. Should business conditions deteriorate or any major client
     default on its obligations to the Company, this allowance may need to be
     significantly increased, which would have a negative impact upon the
     Company's operations. (continued)

                                      F-8
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Collectibility of Accounts Receivable - Continued
     -------------------------------------------------

     The allowance for changes in contracts is an estimate established through
     reductions to net revenue while the allowance for doubtful accounts is an
     estimate established through charges to selling, general and administrative
     expenses.

     Revenue and Cost Recognition
     ----------------------------

     Revenues from contracts are generally recognized as services are performed
     on the percentage-of-completion method of accounting with performance
     generally assessed using output measures, such as units-of-work performed
     to date as compared to the total units-of-work contracted. Contracts may
     contain provisions for renegotiation in the event of cost overruns due to
     changes in the level of work scope. Renegotiated amounts are included in
     revenue when the work is performed and realization is assured. Provisions
     for losses to be incurred on contracts are recognized in full in the period
     in which it is determined that a loss will result from performance of the
     contractual arrangement.

     Direct costs include all direct costs related to contract performance.
     Costs are not deferred in anticipation of contracts being awarded, but
     instead are expensed as incurred. Changes in job performance and estimated
     profitability may result in revisions to costs and income and are
     recognized in the period in which the revisions are determined. Due to the
     inherent uncertainties in estimating costs, it is at least reasonably
     possible that the estimates used will change in the near term and the
     change could be material.

     Included in accounts receivable are unbilled amounts, which represent
     revenue recognized in excess of amounts billed. Advance billings represent
     amounts billed in excess of revenue recognized.

     Income Taxes
     ------------

     Significant management judgment is required in developing the Company's
     provision for income taxes, including the determination of foreign tax
     liabilities, deferred tax assets and liabilities and any valuation
     allowances that might be required against the deferred tax assets. The
     Company evaluates quarterly its ability to realize its deferred tax assets
     and adjusts the amount of its valuation allowance, if necessary. The
     Company operates within multiple taxing jurisdictions and is subject to
     audit in those jurisdictions. Because of the complex issues involved, any
     claims can require an extended period to resolve. In management's opinion,
     adequate provisions for income taxes have been made.
                                                                     (continued)

                                      F-9
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Impairment of Assets
     --------------------

     The Company reviews long-lived assets and certain identifiable intangibles
     held and used for possible impairment whenever events or changes in
     circumstances indicate that the carrying amount of an asset may not be
     recoverable. In evaluating the fair value and future benefits of its
     intangible assets, management performs an analysis of the anticipated
     undiscounted future net cash flows of the individual assets over the
     remaining amortization period. The Company recognizes an impairment loss if
     the carrying value of the asset exceeds the expected future cash flows.

     In 2002, the Company began to perform an annual test for impairment of
     goodwill. This test is performed by comparing, at the reporting unit level,
     the carrying value of goodwill to its fair value. The Company assesses fair
     value based upon its best estimate of the present value of future cash
     flows that it expects to generate by the reporting unit. The test performed
     for 2002 did not identify any instances of impairment. However, changes in
     expectations as to the present value of the reporting unit's future cash
     flows might impact subsequent year's assessments of impairment.

     OTHER ACCOUNTING POLICIES
     -------------------------

     Principles of Consolidation
     ---------------------------

     The consolidated financial statements include the accounts of SFBC
     International, Inc. and its wholly-owned subsidiaries. All significant
     intercompany balances and transactions have been eliminated in
     consolidation.

                                                                     (continued)

                                      F-10
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Cash and Cash Equivalents
     -------------------------

     The Company considers all highly liquid investments with a purchased
     maturity of three months or less to be cash equivalents. Cash balances at
     December 31, 2002 and 2001 include $1,183,249 and $0 respectively held in
     foreign banks by the Company's Canadian subsidiary.

     Investment in Marketable Securities
     -----------------------------------

     In 2002, the Company purchased certain debt securities. The Company
     classifies its investments in debt securities as available-for-sale in
     accordance with SFAS 115, "Accounting for Certain Investments in Debt and
     Equity Securities." Investments classified as available-for-sale are
     carried at fair value based on quoted market prices. The estimated fair
     value of securities for which there are no quoted market prices is based on
     similar types of securities that are traded in the market. The unrealized
     holding gain (loss) on available-for-sale securities is reported as a
     component of accumulated other comprehensive earnings, net of applicable
     deferred income taxes. As of December 31, 2001, the Company did not have
     any marketable securities. As of December 31, 2002 the unrealized gain on
     investments in marketable securities was insignificant.

     Cost is determined on an average cost per share basis for determining
     realized gains and losses. In 2002 and 2001, there were no realized gains
     or losses.
                                                                     (continued)

                                      F-11
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Property and Equipment
     ----------------------

     Property and equipment is recorded at cost. Expenditures for major
     betterments and additions are charged to the asset accounts while
     replacements, maintenance and repairs which do not improve or extend the
     lives of the respective assets are charged to expense as incurred.

     Depreciation

     Depreciation is computed using the straight-line method based upon the
     estimated useful lives of the assets. The range of useful lives is as
     follows:

              Furniture and fixtures                                    7 years
              Machinery and equipment                               5 - 7 years
              Leasehold improvements         Shorter of remaining life of asset
                                                 or remaining term of the lease

     Goodwill and Intangible Assets
     ------------------------------

     Goodwill is stated at cost. Prior to January 1, 2002, goodwill was
     amortized on a straight-line basis over 10 years. Accumulated amortization
     of goodwill as of December 31, 2002 and 2001 is $181,000. Other intangible
     assets are stated at cost and are amortized on a straight-line basis over
     terms ranging from .75 - 5 years. The Company completes an assessment of
     impairment of intangible assets whenever factors, events or changes in
     circumstances indicate the carrying amount of the intangible assets to be
     held and used may not be recoverable. Assessment of impairment is based on
     the expected undiscounted cash flows of the assets. If an asset is
     determined to be impaired, an impairment loss is recognized to the extent
     the carrying amount of the impaired asset exceeds fair value.

     In June 2001, the Financial Accounting Standards Board approved the
     issuance of SFAS 142, "Goodwill and Other Intangible Assets", which
     establishes new accounting and reporting requirements for goodwill and
     other intangible assets. The new standard requires that all intangible
     assets acquired that are obtained through contractual or legal right, or
     are capable of being separately sold, transferred, licensed, rented or
     exchanged must be recognized as an asset apart from goodwill. Goodwill and
     intangibles with indefinite lives are no longer amortized, but are subject
     to an annual assessment for impairment by applying a fair value based test.

     The Company applied the provisions of SFAS 142 beginning on January 1,
     2002. The Company has completed a transitional fair value based impairment
     test on its goodwill as of January 1, 2002. This test was performed by an
     independent valuation firm and the test indicated that the fair value of
     the goodwill is equivalent to or greater than the recorded value as of
     January 1, 2002, therefore, no adjustment has been made to the carrying
     value of the goodwill in the Company's financial statements.

     As of December 31, 2002, the Company has total consolidated goodwill, net
     of accumulated amortization of $30,151,148, which includes $15,171,513 of
     goodwill related to the Anapharm acquisition on March 18, 2002 and
     $9,295,945 of goodwill related to the New Drug Services acquisition on
     September 6, 2002. (continued)

                                      F-12
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Goodwill and Intangible Assets - Continued
     ------------------------------

     In connection with adopting SFAS 142, the Company also reassessed the
     useful lives and the classifications of its identifiable intangible assets
     and determined that they continue to be appropriate. The carrying amount of
     goodwill is as follows:



                  Goodwill, net of accumulated amortization at
                    December 31, 2001                               $ 4,483,690
                      Impairment adjustment                                  --
                      Addition resulting from acquisitions           24,467,458
                      Contingent consideration related to 2000
                        acquisition                                   1,200,000
                                                                    -----------

                  Balance,  net of accumulated amortization at
                    December 31, 2002                               $30,151,148
                                                                    ===========

       The components of the Company's intangible assets subject to amortization
are approximately as follows:

<TABLE>
<CAPTION>
                                                     December 31, 2002                  December 31, 2001
                              Weighted      -------------------------------     ------------------------------
                               Average          Gross                                Gross
                                  Life         Carrying       Accumulated          Carrying      Accumulated
                                (Years)         Amount        Amortization          Amount       Amortization
                              ----------    --------------    -------------     -------------    -------------
<S>                               <C>       <C>               <C>               <C>              <C>

         Methodologies            3.5       $    1,721,000    $    (377,000)    $     150,000    $     (11,000)
         Employment
           Agreement                5              590,000         (162,000)          590,000          (44,000)
         Subject Database           4              900,000         (169,000)               --               --
         Customer backlog         .75              290,000         (130,000)               --               --
                                            --------------    -------------     -------------    -------------

                                            $    3,501,000    $    (838,000)    $     740,000    $     (55,000)
                                            ==============    =============     =============    =============
</TABLE>

                                                                     (continued)

                                      F-13
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Goodwill and Intangible Assets - Continued
     ------------------------------

     Amortization expense for intangible assets during the year ended December
     31, 2002 was approximately $ 783,000. The following table provides
     information regarding estimated amortization expense for each of the
     following years ended December 31:

                  2003                               $     987,000
                  2004                                     826,000
                  2005                                     725,000
                  2006                                     125,000
                                                     -------------
                                                     $   2,663,000
                                                     =============

     As of December 31, 2002, all intangible assets were subject to amortization
expense.

     The following table adjusts earnings and earnings per share for the
adoption of SFAS 142:

                                              Year Ended December 31,
                                             -------------------------
                                                2002           2001
                                             ----------     ----------

        Reported net earnings                $7,868,238     $3,819,468
            Add:  Goodwill amortization,
              net of tax                             --         81,000
                                             ----------     ----------
            Adjusted net earnings            $7,868,238     $3,900,468
        Basic earnings per share:
            Reported net earnings            $     1.12     $     0.94
            Add:  Goodwill amortization,
              net of tax                     $       --     $     0.02
                                             ----------     ----------
            Adjusted net earnings            $     1.12     $     0.96
        Diluted earnings per share:
            Reported net earnings            $     1.05     $     0.81
            Add:  Goodwill amortization,
              net of tax                     $       --     $     0.01
                                             ----------     ----------
            Adjusted net earnings            $     1.05     $     0.82

                                                                     (continued)

                                      F-14
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Concentration of Credit Risk
     ----------------------------

     Financial instruments that potentially subject the Company to credit risk
     consist principally of cash and cash equivalents and trade receivables. The
     Company, from time to time, maintains cash balances with financial
     institutions in amounts that exceed federally insured limits. The Company
     performs services and extends credit based on an evaluation of the
     customers' financial condition without requiring collateral. Exposure to
     losses on receivables is expected to vary by client due to the financial
     condition of each client. The Company monitors exposure to credit losses
     and maintains allowances for anticipated losses considered necessary under
     the circumstances.

     Income Taxes
     ------------

     The Company accounts for income taxes under the liability method according
     to Statement of Financial Accounting Standards No. 109. Deferred tax assets
     and liabilities are recognized for future tax consequences attributable to
     differences between the financial statements carrying amounts of existing
     assets and liabilities and their respective tax bases. Deferred tax assets
     and liabilities are measured using enacted tax rates expected to apply to
     taxable income in the years in which those temporary differences are
     expected to be recovered or settled. The Company provides a valuation
     allowance against its deferred tax assets when it believes that it is more
     likely than not that the asset will not be realized.

     Reclassifications
     -----------------

     Certain prior year balances have been reclassified to conform to the
     current year presentation.

     Fair Value of Financial Instruments
     -----------------------------------

     Financial instruments consist primarily of cash and cash equivalents,
     marketable securities, accounts receivable, notes receivable, accounts
     payable, and notes payable. At December 31, 2002 and 2001, the fair value
     of these instruments approximates the carrying amount of these items due to
     the short-term maturities of these instruments.
                                                                     (continued)

                                      F-15
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Net Earnings Per Share
     ----------------------

     The Company applies Statement of Financial Accounting Standards No. 128,
     "Earnings Per Share" which requires dual presentation of net earnings per
     share; Basic and Diluted. Basic earnings per share is computed using the
     weighted average number of common shares outstanding during the period.
     Diluted earnings per share is computed using the weighted average number of
     common shares outstanding during the period adjusted for the dilutive
     effect of common stock equivalents. Included in diluted shares are common
     stock equivalents relating to stock options with a dilutive effect of
     443,708 and 665,899 shares of common stock for the years ended December
     2002 and 2001, respectively.

     Common stock equivalents representing stock options to purchase 312,400 and
     264,500 shares of the Company's common stock with exercise prices ranging
     from $21.15 to $25.80 and $15.40 to $17.05, outstanding as of December 31,
     2002 and 2001, respectively, were not included in the computation of
     diluted earnings per share because the options' exercise prices were
     greater than the annual average market price of the Company's common stock
     during this year and thus their inclusion would be anti-dilutive.

     On July 17, 2002, the Company announced a common stock buyback plan of up
     to 750,000 shares. As of December 31, 2002, the Company had purchased
     204,300 shares in various open market purchases at an average price of
     approximately $10.65 per share, or a total expenditure of $2,176,484. These
     shares are presented as common stock held in treasury at December 31, 2002
     and were retired in February 2003. The Company has not made any additional
     treasury share purchases since December 31, 2002. The Company may continue
     to purchase its shares, or may discontinue the buyback at any time
     depending on the selling price of the Company's common stock, the viability
     of potential acquisition targets, and the Company's cash flows from
     operations and on hand cash balances.

     Stock Compensation
     ------------------

     The Company accounts for stock options issued to non-employees, under
     Statement of Financial Accounting Standards No. 123, "Accounting for Stock
     Based Compensation." The Company's issuance of employee stock options is
     accounted for using the intrinsic value method under APB 25.
                                                                     (continued)

                                      F-16
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Stock Compensation - Continued
     ------------------

     Statement of Financial Accounting Standards No. 123 "Accounting for
     Stock-based Compensation," ("SFAS No. 123") requires the Company to provide
     pro forma information regarding net earnings and earnings per common share
     as if compensation cost for the Company's stock options had been
     determined in accordance with the fair value based method prescribed in
     SFAS No. 123. The fair value of the options granted in 2002 and 2001 were
     estimated by using the Black-Scholes pricing model with the following
     assumptions: (i) expected life of the options of 5 years, (ii) expected
     volatility in the market price of the Company's common stock of 75% for
     2002 and 60% for 2001, (iii) no expected dividends, and (iv) a risk free
     interest rate of 3% in 2002 and 5% in 2001.

     Under the accounting provisions of SFAS No. 123, the Company's net
     earnings, basic earnings per share and diluted earnings per share for the
     year ended December 31, 2002 would have been approximately $5,719,000, $.81
     and $.76, respectively.

     Under the accounting provisions of SFAS No. 123, the Company's net
     earnings, basic earnings per share and diluted earnings per share for the
     year ended December 31, 2001 would have been approximately $2,826,000, $.69
     and $.60, respectively.

     Segment Reporting
     -----------------

     The Company has considered its operations and has determined that it
     operates in a single operating segment for purposes of presenting financial
     information and evaluating performance. As such, the accompanying financial
     statements present information in a format that is consistent with the
     financial information used by management for internal use.

     Advertising Expenses
     --------------------

     Advertising costs are expensed as incurred and are included in selling,
     general, and administrative expenses. Total advertising costs in 2002 and
     2001 were insignificant.
                                                                     (continued)

                                      F-17
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Comprehensive Earnings
     ----------------------

     Comprehensive earnings is defined as the change in equity of a business
     enterprise during a period from transactions and other events and
     circumstances from non-owner sources, including foreign currency
     translation adjustments and unrealized gains and losses on derivatives
     designated as cash flow hedges. The Company presents accumulated other
     comprehensive earnings net of taxes in its consolidated statement of
     changes in stockholders' equity.

     Foreign Currency Translation
     ----------------------------

     For subsidiaries where the local currency is the functional currency,
     assets and liabilities are translated into United States dollars at the
     exchange rate in effect at the end of the year. Revenues and expenses of
     these subsidiaries are translated at the average exchange rate during the
     year. The aggregate effect of translating the financial statements of these
     foreign subsidiaries is included in a separate component of stockholders'
     equity entitled "Accumulated Other Comprehensive Earnings." In 2002 and
     2001, the Company had losses from foreign currency transactions of $123,264
     and $0 respectively.

     Volume Rebates
     --------------

     The Company accrues for volume rebates offered to clients at the time of
     sale and the provisions are periodically adjusted to reflect actual
     experiences. Volume rebates are presented on the statement of earnings as a
     reduction in revenue.

     New Accounting Pronouncements
     -----------------------------

     In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
     Associated with Exit or Disposal Activities. ("SFAS 146"). SFAS 146
     applies to costs associated with an exit activity (including restructuring)
     or with a disposal of long-lived assets. Those activities can include
     eliminating or reducing product lines, terminating employees and contracts
     and relocating plant facilities or personnel. SFAS 146 is effective
     prospectively for exit or disposal activities initiated after December 31,
     2002, with earlier adoption encouraged. The Company does not believe the
     adoption of this standard will have a material impact on the financial
     statements.

                                                                     (continued)

                                      F-18
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     New Accounting Pronouncements - Continued
     -----------------------------

     In December 2002, the FASB issued Statement No. 148, "Accounting for
     Stock-Based Compensation-Transition and Disclosure", ("SFAS 148") an
     amendment of FASB Statement No. 123. SFAS 148 amends FASB Statement No.
     123, "Accounting for Stock-Based Compensation", to provide alternative
     methods of transition for an entity that voluntarily changes to the fair
     value based method of accounting for stock-based employee compensation and
     to require prominent disclosures about the effects on reported net income
     of an entity's accounting policy decisions with respect to stock-based
     employee compensation. SFAS 148 also amends APB Opinion No. 28, "Interim
     Financial Reporting," to require disclosures about those effects in interim
     financial information. The Company currently accounts for its stock-based
     compensation awards to employees and directors under the accounting
     prescribed by Accounting Principles Board Opinion No. 25 and provides the
     disclosures required by SFAS No. 123. The Company currently intends to
     continue to account for its stock-based compensation awards to employees
     and directors under the accounting prescribed by Accounting Principles
     Board Opinion No. 25 and adopted the additional disclosure provisions of
     SFAS 148 in December 2002.

     In November 2002, the FASB issued Interpretation 45 (FIN 45), Guarantor's
     Accounting and Disclosure Requirements for Guarantees, Including Indirect
     Guarantees of Indebtedness of Others. For a guarantee subject to FASB
     Interpretation 45, a guarantor is required to:

     o        measure and recognize the fair value of the guarantee at
              inception (for many guarantees, fair value will be determined
              using a present value method); and

     o        provide new disclosures regarding the nature of any
              guarantees, the maximum potential amount of future guarantee
              payments, the current carrying amount of the guarantee
              liability, and the nature of any recourse provisions or assets
              held as collateral that could be liquidated and allow the
              guarantor to recover all or a portion of its payments in the
              event guarantee payments are required.

     The disclosure requirements of this Interpretation are effective for
     financial statements for fiscal years ending after December 15, 2002 and
     did not have a material effect on the Company's financial statements. The
     initial recognition and measurement provisions are effective prospectively
     for guarantees issued or modified on or after January 1, 2003, which should
     not have a material effect on the Company's financial statements.

                                      F-19
<PAGE>

NOTE B - MAJOR CUSTOMERS

     No customer represented more than 10% of consolidated net revenue in 2002.
     In 2001, there was one customer that represented 17% of consolidated net
     revenue.

     There were no individual accounts receivable balances in excess of 10% of
     consolidated accounts receivable at December 31, 2002. The following table
     reflects information relating to two clients which accounted for more than
     10% of total accounts receivable at December 31, 2001.

                                                2001
                                                ----
                                                        % of
                                                       Accounts
                                       Amount        Receivable, net
                                    ----------       ---------------
         Customer A                 $1,320,037            13%
         Customer B                  1,181,537            11%

NOTE C - ACCOUNTS RECEIVABLE

     Accounts receivable consisted of the following at December 31, 2002 and
2001:

                                                 2002               2001
                                              -----------        -----------

           Accounts receivable - billed       $12,695,343        $8,438,678
           Accounts receivable - unbilled       9,802,354         2,403,678
           Less allowance for changes in
             contracts                           (154,024)         (128,138)
           Less allowance for doubtful
             accounts                            (589,895)         (260,489)
                                              -----------        -----------

                                              $21,753,778        $10,453,729
                                              ===========        ===========

                                                                     (continued)

                                      F-20
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001

NOTE C - ACCOUNTS RECEIVABLE - Continued

     The activity in the allowance for changes in contracts and allowance for
     doubtful accounts during the years ended December 31, 2002 and 2001 was as
     follows:

                                             Allowance for       Allowance for
                                              Changes in           Doubtful
                                               Contracts           Accounts
                                            ---------------      -------------

            Balance - January 1, 2001       $       218,603     $       126,550
                Acquisitions                             --              85,500
                2001 provision                       35,397              48,439
                2001 reductions                    (125,862)                 --
                                            ---------------     ---------------

            Balance - December 31, 2001             128,138             260,489
                Acquisitions                             --             147,373
                2002 provision                       25,886             387,236
                2002 reductions                          --            (205,203)
                                            ---------------     ---------------

            Balance - December 31, 2002     $       154,024     $       589,895
                                            ===============     ===============

     Accounts receivable are billed when certain milestones defined in customer
     contracts are achieved. All unbilled accounts receivable are expected to be
     billed and collected within one year. Advance billings at December 31, 2002
     and 2001 amounted to $3,802,754 and $1,483,216, respectively.

NOTE D - LOANS RECEIVABLE FROM OFFICERS/STOCKHOLDERS

     In March 2003, the Company's Chairman prepaid a loan and accrued interest
     amounting to $94,918 originally incurred in 1998. This loan is included in
     Loans receivable from officers/stockholders on the Consolidated Balance
     Sheet as of December 31, 2002. The balance on this loan as of December 31,
     2001 was $108,509, which was reflected as a current asset in the
     Consolidated Balance Sheet.

     In connection with the acquisition of KeyStone Analytical Laboratories,
     Inc. (KAL) (See Note K, the Company entered into a five-year employment
     agreement with the former president of KAL. The agreement provides for,
     among other things, a loan of $1,000,000 repayable in equal installments of
     $200,000 plus interest of 4.45% per annum on each August 20 commencing in
     2002, which is secured by a portion of the common stock issued to him.
     Provided that the employee serves on a full-time basis, as defined, the
     Company will annually

                                                                     (continued)

                                      F-21
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE D - LOANS RECEIVABLE FROM OFFICERS/STOCKHOLDERS - Continued

     forgive $200,000 of the outstanding principal balance and accrued interest
     until the note is fully satisfied. In that regard, the Company is
     amortizing the note and accrued interest receivable to salaries expense
     over a five-year period. Since the former president of KAL was employed on
     August 20, 2002 (and continues to be employed) the first $200,000 of the
     note along with the accrued interest on the first $200,000 was forgiven in
     August 2002. Accordingly, $200,000 of this loan balance is reflected as a
     current asset as of December 31, 2002. The remaining current portion of
     loans receivable from stockholders as of December 31, 2002, represents a
     loan totaling $33,905. This loan, which bears interest at an interest rate
     of 9%, is supported by a promissory note and is due and payable in full on
     September 1, 2003.

     During 2001, one of the Company's executive officers exercised employee
     stock options. In lieu of paying cash of $62,500, the employee issued the
     Company a demand promissory note for $62,500, which was non-interest
     bearing and due on demand. The $62,500 note receivable is classified as a
     component of stockholders' equity in the December 31, 2001 balance sheet.
     This $62,500 was repaid in full on May 10, 2002.

     Interest income from related parties in 2002 and 2001 was $23,769 and
     $7,949 respectively.

NOTE E - PROPERTY AND EQUIPMENT

     Property and equipment consisted of the following at December 31, 2002 and
2001:

                                                    2002                2001
                                             ---------------     ---------------

             Furniture and fixtures          $     1,383,720     $       306,911
             Leasehold improvements                4,850,827             875,888
             Machinery and equipment              13,279,318           3,560,400
                                             ---------------     ---------------
                                                  19,513,865           4,743,199
             Less accumulated depreciation         2,901,286             814,615
                                             ---------------     ---------------

                                             $    16,612,579     $     3,928,584
                                             ===============     ===============

     Depreciation of property and equipment for the years ended December 31,
     2002 and 2001 amounted to $2,086,274 and $438,264, respectively. Of these
     amounts, $1,247,573 and $312,237 of depreciation is reflected as a
     component of direct costs in the statements of earnings and the
     remaining depreciation is reflected in selling, general, and administrative
     expenses in the statements of earnings.

                                      F-22
<PAGE>
                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001



NOTE F - ACCRUED LIABILITIES

     Accrued liabilities consisted of the following at December 31, 2002 and
2001:

                                                2002                2001
                                         ---------------     ---------------

           Contingent consideration      $     1,200,000     $            --
           Salaries and benefits                 861,213             543,405
           Professional fees                     175,870             102,609
           Deferred rent                         158,717              45,406
           Other                                 645,287             627,310
                                         ---------------     ---------------

                                         $     3,041,087     $     1,318,730
                                         ===============     ===============

NOTE G - DEBT AND CAPITAL LEASES

     Credit Facility
     ---------------

     On September 16, 2002, the Company entered into a $10 million Revolving
     Credit and Security Agreement with Wachovia Bank National Association. The
     interest rate on this Credit Facility is LIBOR based and variable. As of
     December 31, 2002, our average interest rate on the entire Credit Facility
     was 3.5 %. This Credit Facility enables the Company to borrow for general
     working capital purposes and for the purpose of financing acquisitions of
     companies in related industries. This Credit Facility is secured by
     substantially all of the Company's assets. As of December 31, 2002, the
     Company has not borrowed on this credit facility. Under the credit facility
     arrangement, the Company must comply with certain restrictive covenants
     requiring the Company to maintain certain leverage and debt service
     coverage ratios, as well as minimum liquidity.

     Capital Leases Obligations and Notes Payable
     --------------------------------------------

     Capital Lease Obligations and Notes Payable consisted of the following at
     December 31, 2002 and 2001:

                                                  2002                2001
                                           ---------------     ---------------

              Capital lease obligations    $     4,148,187     $            --
              Notes payable - other                     --               8,738
                                           ---------------     ---------------
                                                 4,148,187               8,738
              Less current portion               1,361,231               7,490
                                           ---------------     ---------------

              Long-term portion            $     2,786,956     $         1,248
                                           ===============     ===============

                                                                     (continued)

                                      F-23
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE G - DEBT AND CAPITAL LEASES - Continued

     Capital Leases Obligations and Notes Payable - Continued
     --------------------------------------------
     The Company leases a substantial portion of its scientific equipment under
     capital lease arrangements from the Royal Bank of Canada. As of December
     31, 2002, the Company had 17 leases varying in length between 30 and 54
     months at a current average combined lease rate of approximately 7.9%. The
     latest maturity date on the final lease is December 2007.

                                                       December 31
                                                  2002                2001
                                           ---------------     ---------------

        Equipment                          $     7,351,561     $           -0-
        Less: Accumulated Depreciation          (2,766,227)                -0-
                                           ---------------     ---------------
                                           $     4,585,334     $           -0-
                                           ===============     ============ =


     The following is a schedule of future minimum lease payments under capital
     lease obligations as of December 31, 2002:

                                                                    Amount
                                                              ---------------

                  2003                                        $   1,762,149
                  2004                                            1,304,288
                  2005                                              757,283
                  2006                                              480,818
                  2007                                              317,616
                                                               ------------

                  Total minimum lease payments                    4,622,154

                  Less:  Amount representing interest              (473,967)
                                                              -------------

                  Present value of minimum lease payments         4,148,187

                  Less:  Current portion                         (1,361,231)
                                                              -------------

                  Long-term obligation under capital leases   $   2,786,956
                                                              =============

                                      F-24
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE H - COMMITMENTS

     Leases

     The Company leases its office facilities and certain equipment under
     non-cancelable operating leases. The approximate future minimum annual
     combined lease payments for both equipment and facilities leases for years
     subsequent to December 31, 2002 are as follows:

                          2003                        $      3,195,385
                          2004                               3,001,845
                          2005                               2,155,410
                          2006                               1,571,691
                          2007                               1,096,513
                          Thereafter                         4,852,186
                                                      ----------------
                                                      $     15,873,030
                                                      ================

     Total rent expense for the years ended December 31, 2002 and 2001 was
     approximately $2,067,000 and $923,000, respectively.

     Employment Agreements
     ---------------------

     The Company has entered into employment agreements with several of its
     executive officers for periods ranging from one to five years. The
     agreements provide the employees with an annual salary, bonus, and the
     grant of stock options. Additionally, the agreements also provide the
     employees with an option to terminate their agreement and receive lump sum
     payments, as defined in the respective agreements, if there is a change in
     control of the Company. Change of control is defined in the employment
     agreements.

NOTE I - INCOME TAXES

     Income taxes for the years ended December 31, 2002 and 2001 consisted of
the following:

                                               2002                2001
                                        ---------------     ---------------
                  Current:
                      Federal           $     2,740,000     $     2,449,466
                      Foreign                         -                   -
                      State                     315,125             307,931

                  Deferred                     (613,560)           (481,283)
                                        ---------------     ---------------

                                        $     2,441,565     $     2,276,114
                                        ===============     ===============

                                                                     (continued)

                                      F-25
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE I - INCOME TAXES - Continued

     The components of the net deferred income tax assets (liabilities) at
     December 31, 2002 and 2001 are as follows:

     Deferred Tax Liability - Current
     ----------------------
                                                    2002             2001
                                              ---------------   ---------------

           Accounts receivable                $       183,856   $       183,095
           Accrued expenses                            34,762            70,899
                                              ---------------   ---------------

             Total current assets                   218,618           253,994

           Net temporary differences due
             to conversion to accrual basis
             from cash basis                         (303,926)         (476,707)
                                              ---------------   ---------------

             Net current liability            $       (85,308)  $      (222,713)
                                              ===============   ===============

     Deferred Tax Liability - Long Term

                                                    2002             2001
                                              ---------------   ---------------

           Research and Development
            Tax Credits Carryforward          $     4,824,247   $            --
           Common Stock options issued as
             compensation                                  --           161,794

           Deferred rent                               59,286            17,806
                                              ---------------   ---------------

             Total noncurrent assets                4,883,533           179,600

           Net temporary differences due
             to conversion to accrual basis
             from cash basis                         (172,781)         (303,926)
           Depreciation and amortization            2,614,782)         (109,276)
           Deferred tax liability,
             research and development credits      (1,812,305)               --
                                              ---------------   ---------------s

             Total noncurrent liabilities          (4,599,868)         (413,202)
                                              ---------------   ---------------

             Net noncurrent asset (liability) $       283,665   $    (233,602)
                                              ===============   ===============

                                                                     (continued)

                                      F-26
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE I - INCOME TAXES - Continued

     The major elements contributing to the difference between income taxes and
     the amount computed by applying the federal statutory tax rate of 34% to
     earnings before income taxes for the years ended December 31, 2002 and 2001
     are approximately as follows:

                                                     2002              2001
                                              ---------------   ---------------

             Income taxes statutory rate      $     3,505,000   $     2,072,000
             State income taxes                       365,000           221,000
             Permanent differences and
               other                                  105,000           (17,000)
             Research and development
                 Tax Credits                       (1,533,000)               --
                                              ---------------   ---------------

                                              $     2,442,000   $     2,276,000
                                              ===============   ===============

     The tax benefits resulting from disqualifying dispositions of shares of
     common stock acquired pursuant to incentive stock options and the exercise
     of non-qualified stock options have been recorded as additions to paid-in
     capital in the amounts of $520,352 and $330,594 in 2002 and 2001,
     respectively.

     At December 31, 2002, the Company had foreign tax credit carryforwards
     from the government of Canada for incurring research and development
     expenses of approximately $4,824,200. The tax credits expire as follows:
     2010 - $129,400, 2011 - $2,410,400, and 2012 - $2,284,400. The Company has
     not established a valuation allowance against the tax credits carryforward
     as the Company believes that it is more likely than not that the benefits
     will be realized prior to expiration.

NOTE J - EQUITY

     Secondary Public Offering
     -------------------------

     In December 2001, the Company completed a secondary public offering of
     2,000,000 shares of common stock at $16.25 per share. As part of the
     offering, certain executive officers of the Company also sold 350,000
     shares of their common stock. Total proceeds received by the Company, net
     of offering expenses (which includes $341,250 of commissions paid on behalf
     of the executive officers), were $29,590,291.
                                                                     (continued)

                                      F-27
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE J - EQUITY - Continued

     Stock Based Compensation
     ------------------------

     In June 1999, the Company established a Stock Option Plan (the "Plan")
     which provides for the Company to issue incentive stock options and
     non-qualified stock options to employees, directors and outside consultants
     of the Company. The total number of shares of the Company's common stock
     originally reserved under the Plan was 700,000, however, in 2001, the
     number of shares of common stock reserved under the Plan was increased to
     1,200,000. In June 2002, the Company's Stockholders approved and ratified
     an additional increase of 500,000 shares of common stock under the Plan,
     bringing the total number of shares reserved under the Plan to 1,700,000.
     The issuance and form of the options shall be at the discretion of the
     Company's board of directors, except that the exercise price may not be
     less than the fair market value at the time of grant. Generally, the
     options vest over a three year period and expire in ten years or three
     months after separation of service, whichever occurs earlier.

     The Company has elected to follow Accounting Principles Board Opinion No.
     25 "Accounting for Stock Issued to Employees" ("APB 25") in accounting for
     its employee stock options. Under APB 25, because the exercise price of a
     certain employee's stock options issued prior to the establishment of the
     Plan was less than the market price of the underlying stock on the date of
     grant, compensation expense of $35,417 and $170,000 was recognized in both
     2002 and 2001, respectively.

     A summary of the Company's stock option activity, and related information
     for the years ended December 31, 2002 and 2001 is as follows:

<TABLE>
<CAPTION>
                                                       2002                                2001
                                        ---------------------------------    ---------------------------------
                                           Weighted -                           Weighted -
                                           Number of          Average           Number of         Average
                                            Options        Exercise Price        Options       Exercise Price
                                            -------        --------------        -------       --------------
<S>                                         <C>             <C>                    <C>           <C>
         Outstanding at beginning
           of year                          1,064,334       $     10.29            605,000       $      4.88
              Granted                         649,400             16.38            544,500             15.02
              Exercised                      (306,335)             5.87            (74,166)             1.50
              Forfeited                      (135,383)             6.60            (11,000)             6.00
                                        -------------                        -------------

         Outstanding at end of year         1,272,016       $     13.34          1,064,334       $     10.29

         Exercisable at end of year           746,381       $     11.91            659,495       $      9.03
</TABLE>
                                                                     (continued)

                                      F-28
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE J - EQUITY - Continued

     Stock Based Compensation
     ------------------------

     The weighted-average fair value of options granted during 2002 and 2001,
     was $10.23 per option and $8.69 per option, respectively.

     The following information applies to options outstanding at December 31,
     2002:

<TABLE>
<CAPTION>
                                               Options Outstanding                   Options Exercisable
                                    --------------------------------------------   ---------------------------
                                                     Weighted -
                                                      Average       Weighted -                     Weighted -
                                                    Remaining        Average                        Average
             Range of                              Contractual      Exercise                       Exercise
         Exercise Prices                Shares         Life          Price           Shares          Price
         ---------------            -----------   -------------   --------------   -----------   -------------
<S>                                     <C>            <C>           <C>               <C>         <C>
         $ 4.56 - $ 6.60                308,366        4.56          $  6.30           280,531     $   6.32
         $ 7.50 - $10.55                365,917        8.86          $  9.37           161,218     $   8.63
         $12.00 - $17.15                285,333        7.92          $ 15.86           172,166     $  15.27
         $19.15 - $25.80                312,400        9.06          $ 22.65           132,466     $  23.34
                                    -----------                                    -----------

                                      1,272,016                                        746,381
                                    ===========                                    ===========
</TABLE>

     As part of the Company's initial public offering in October 2000, the
     Company issued to its underwriter warrants to purchase 62,500 shares of the
     Company's common stock at $15.76 per share. The warrants expire in October
     2005.

     In 2002, certain officers of the Company surrendered options to purchase
     50,000 shares of the Company's common stock at an exercise price of $25.30
     per share.

     Stock Buyback Program
     ---------------------

     On July 17, 2002, the Company announced a common stock buyback plan of up
     to 750,000 shares. This stock buyback program superceded the Company's
     previous buyback plan of to 500,000 shares approved in 2001. (For the ended
     year December 31, 2001 and through 2002 until the enactment of the new
     buyback plan only 2,000 shares were repurchased).

     As of December 31, 2002, the Company had purchased 204,300 shares in
     various open market purchases at an average price of approximately $10.65
     per share, or a total expenditure of $2,176,484. These shares are presented
     as common stock held in treasury at December 31, 2002 and were retired in
     February 2003. The Company has not made any additional treasury share
     purchases since December 31, 2002. The Company may continue to purchase its
     shares, or may discontinue the buyback at any time depending on the selling
     price of the Company's common stock, the viability of potential acquisition
     targets, and the Company's cash flows from operations and on hand cash
     balances.

                                      F-29
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE K - BUSINESS COMBINATIONS

       Anapharm, Inc.
       --------------

       On March 18, 2002, the Company acquired 100% of the capital stock of
       Anapharm, Inc. (Anapharm), which was the largest privately held Canadian
       provider of drug development services. The acquisition was strategically
       important as it enabled the Company to strengthen its capabilities to
       provide Phase I clinical trials and bioanalytical laboratory services.

       The Company acquired 100% of the issued and outstanding stock of Anapharm
       for approximately $30.9 million which represents $26.8 million in cash,
       the issuance of 167,375 shares of common stock, which were valued at $3.3
       million dollars based on the market value of the Company's common stock
       and other transaction related costs. Anapharm executives, who were also
       Anapharm stockholders, received all of the issued common stock.
       Additionally, key Anapharm employees received stock options to purchase
       110,000 shares of SFBC common stock exercisable at $23.97 per share. The
       acquisition was accounted for as a purchase in accordance with SFAS 141
       and accordingly, the purchase price was allocated based on the estimated
       fair market values of the assets and liabilities acquired. Goodwill of
       approximately $15.2 million is attributable to the general reputation of
       the business and the collective experience of the management and
       employees. The results of operations of Anapharm from March 18, 2002
       through December 31, 2002 are included in the accompanying statement of
       earnings for the year ended December 31, 2002. The following table
       summarizes the fair values of the assets acquired and liabilities assumed
       at the date of acquisition:

                 Current assets                            $    10,357,000
                 Property, plant, and equipment                  9,468,000
                 Other assets                                    1,065,000
                 Deferred income taxes                             681,000
                 Intangible assets                               2,470,000
                 Goodwill                                       15,172,000
                                                           ---------------

                           Total assets acquired                39,213,000
                                                           ---------------

                 Current liabilities                            (5,051,000)
                 Capital lease obligations                      (3,234,000)
                                                           ----------------

                           Total liabilities assumed            (8,285,000)
                                                           ---------------

                           Net assets acquired             $    30,928,000
                                                           ===============

                                                                     (continued)

                                      F-30
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE K - BUSINESS COMBINATIONS - Continued

       Of the $2,470,000 of acquired intangible assets, $1,570,000 was assigned
       to methodologies and $900,000 was assigned to the subject database. Both
       of these intangible assets are subject to amortization. The methodologies
       have been assigned a useful life of 3.5 years and the subject database
       has been assigned a useful life of 4 years.

       The goodwill of $15.2 million is not deductible for tax purposes.

       New Drug Services, Inc.
       ----------------------

       On September 6, 2002, the Company acquired New Drug Services, Inc.
       ("NDS"), located in Kennett Square, Pennsylvania. NDS provides early
       clinical drug development, biostatistical, data management and FDA
       regulatory and new drug submission services to the pharmaceutical and
       biotechnology industries. The acquisition was strategically important as
       it enabled the Company to increase market share in the early clinical
       drug development market and expects to reduce costs through economies of
       scale. The Company purchased substantially all of the assets and assumed
       all of the operating liabilities of NDS.

       The purchase price of $11.2 million consisted of $8 million in cash paid
       at the closing, the issuance of 234,060 shares of the Company's common
       stock valued at $3 million based on the market value of the common stock
       and $205,000 of transaction related costs. The shares of stock were
       originally placed in escrow and the release of these shares from escrow
       was contingent upon the combined achievement by NDS (pre-acquisition) and
       NDS (post-acquisition) of certain conditions based upon earnings before
       the deduction of interest, taxes, depreciation and amortization for 2002.
       As of December 31, 2002, NDS met these conditions and accordingly, the
       shares were released from escrow. Additionally, under the terms of the
       asset purchase agreement, NDS will have the opportunity to achieve
       additional earn-out payments aggregating up to $8 million contingent on
       NDS meeting annual pre-tax income targets over the next three, 12- month
       periods beginning on October 1, 2002. Of this $8 million potential
       earn-out, $6 million is to be paid in cash and the remaining $2 million
       will be paid through the issuance of the Company's common stock. Any
       future contingent consideration will be accounted for as additional
       goodwill.

       The acquisition was accounted for as a purchase in accordance with SFAS
       141 and accordingly, the purchase price was allocated based on the
       estimated fair market values of the assets and liabilities acquired.
       Goodwill of approximately $9.3 million is attributable to the general
       reputation of the business and the collective experience of the
       management and employees. The results of operations of NDS from September
       6, 2002 through December 31, 2002 are included in the accompanying
       statement of earnings for the year ended December 31, 2002.

                                                                     (continued)

                                      F-31
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE K - BUSINESS COMBINATIONS - Continued

       New Drug Services, Inc. - Continued
       -----------------------

       The following table summarizes the fair values of the assets acquired and
       liabilities assumed at the date of acquisition:

             Current assets                              $     3,107,000
             Property, plant, and equipment                      209,000
             Other assets                                         45,000
             Intangible assets                                   290,000
             Goodwill                                          9,296,000
                                                         ---------------

                      Total assets acquired                   12,947,000
                                                         ---------------

             Current liabilities                              (1,704,000)
                                                         ---------------

                      Total liabilities assumed               (1,704,000)
                                                         ---------------

                      Net assets acquired                $    11,243,000
                                                         ===============

       The $290,000 of acquired intangible assets represents customer contracts
       which is subject to amortization using a useful life of nine months.

       The goodwill of $9.3 million is deductible for tax purposes.

     Unaudited Pro Forma Results
     ---------------------------

     Unaudited pro forma results of operations after giving effect to certain
     adjustments resulting from the 2002 acquisitions were as follows for the
     years ended December 31, 2002 and 2001 as if the business combinations had
     occurred at the beginning of each period presented.

                                                  2002                2001
                                           ---------------     ---------------
                                                       (Unaudited)

           Net revenue                     $    73,929,634     $    63,601,027
           Net earnings                    $     8,879,718     $     6,151,894
           Earnings per share - basic      $          1.26     $           .94
           Earnings per share - diluted    $          1.19     $           .85

                                                                     (continued)

                                      F-32
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE K - BUSINESS COMBINATIONS - Continued

     The pro forma data is provided for information purposes only and does not
     purport to be indicative of results which actually would have been obtained
     if the combinations had been effected at the beginning of each period
     presented, or of those results which may be obtained in the future.

     KeyStone Analytical Laboratories
     --------------------------------

     On August 20, 2001, the Company acquired KeyStone Analytical Laboratories,
     Inc. (KAL), located in Philadelphia, Pennsylvania. KAL provides complete
     bioanalytical laboratory services for the testing and analysis of
     pharmaceutical products. The acquisition was strategically important as it
     enabled the Company to enter the analytical services market. KAL's
     stockholders received approximately $2,906,000 in cash and 178,035 shares
     of the Company's common stock, valued at $2,575,000.

     In connection with this acquisition, the Company entered into a five-year
     employment agreement with the former president of KAL. The agreement
     provides for, among other things, a loan of $1,000,000 repayable in equal
     installments of $200,000 plus interest on each August 20 commencing in
     2002, which is secured by a portion of the common stock issued to the
     employee. Provided that the employee serves on a full-time basis, as
     defined, the Company will annually forgive $200,000 of the outstanding
     principal balance and accrued interest until the note is fully satisfied.
     In that regard, the Company is amortizing the note and accrued interest
     receivable to salaries expense over a five-year period.

     The acquisition was accounted for as a purchase in accordance with SFAS 141
     and accordingly, the purchase price was allocated based on the estimated
     fair market values of the assets and liabilities obtained. Goodwill of
     approximately $3,312,000 is attributable to the general reputation of the
     business in the communities it serves and the collective experience of the
     management and other employees.

     ClinSites/LeeCoast Research Center
     ----------------------------------

     In early 2001, the Company purchased substantially all the assets and
     certain liabilities of ClinSites/LeeCoast Research Center, Inc. The
     purchase price was $600,000, less the amount by which the operating
     liabilities exceeded the operating assets.

                                                                     (continued)

                                      F-33
<PAGE>

                    SFBC INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           DECEMBER 31, 2002 AND 2001


NOTE K - BUSINESS COMBINATIONS - Continued

     ClinSites/LeeCoast Research Center - Continued
     ----------------------------------

     The acquisition was accounted for as a purchase and accordingly, the
     purchase price was allocated to the net assets acquired based on their
     estimated fair market values. Goodwill of approximately $627,000 is
     attributable to the general reputation of the business in the communities
     it serves and the collective experience of the management and other
     employees.

     Pharmaceutical Development Associates
     -------------------------------------

     On March 15, 2000, the Company acquired substantially all the assets and
     certain liabilities of Pharmaceutical Development Associates, Inc. (PDA), a
     clinical research organization located in North Carolina (now operating as
     SFBC Charlotte). The aggregate purchase price was $600,000 with possible
     contingent consideration of up to $1,200,000 based on the adjusted net
     income of the acquired entity, as defined, and additional possible
     contingent consideration based on a percentage of revenue from a specific
     customer. As of December 31, 2002, the acquired entity met the adjusted net
     income requirement, and accordingly, the Company accrued for the additional
     $1,200,000 of contingent consideration, which resulted in an increase of
     goodwill of $1,200,000. The Company has the option to pay this amount in
     stock or cash.

NOTE L - GEOGRAPHIC INFORMATION

     The Company's international operations are conducted primarily in Canada.
     The following table sets forth the composition of the Company's revenues by
     country for the years ended December 31, 2002 and 2001 as well as the
     location of the Company's property and equipment as of December 31, 2002
     and 2001:

                                                 2002                  2001
                                              ------------          ------------
United States                                 $ 39,947,937          $ 31,470,528

Canada                                          24,992,713                    --
                                              ------------          ------------
                                                64,940,650            31,470,528

Eliminations                                      (200,603)                   --
                                              ------------          ------------
Consolidated net revenue                      $ 64,740,047          $ 31,470,528


Property and equipment, net
---------------------------

United States                                 $  5,428,089          $  3,928,584

Canada                                          11,184,490                    --
                                              ------------          ------------
                                              $ 16,612,579          $  3,928,584

     Intercompany sales are billed at negotiated prices established by the
     Company. All United States revenues are derived from sales to unaffiliated
     customers. Geographic area of sales is based primarily on the location from
     where the client is located.

NOTE M - SUBSEQUENT EVENT

     On March 26, 2003, the Company acquired all of the common stock of SynFine
     Research, Inc., an Ontario corporation that provides synthesized research
     compounds used by bioanalytical laboratories. The total purchase price of
     the acquisition was $1.4 million, which was paid in cash. Due to the
     insignificance of this acquisition, further disclosure under SFAS 141 is
     not considered necessary.

                                      F-34
<PAGE>


                                  CERTIFICATION



         I, Arnold Hantman, certify pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 that:

         1.       I have reviewed this report on Form 10-KSB of SFBC
                  International, Inc.

         2.       Based on my knowledge, this report does not contain any untrue
                  statement of a material fact or omit to state a material fact
                  necessary to make the statements made, in light of the
                  circumstances under which such statements were made, not
                  misleading with respect to the period covered by this report.

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this report, fairly present
                  in all material respects the financial condition, results of
                  operations and cash flows of the registrant as of, and for,
                  the periods presented in this report.

         4.       The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and have:

                  a)       designed such disclosure controls and procedures to
                           ensure that material information relating to the
                           registrant, including its consolidated subsidiaries,
                           is made know to us by others within those entities,
                           particularly during the period in which this report
                           is being prepared;

                  b)       evaluated the effectiveness of the registrant's
                           disclosure controls and procedures as of a date
                           within 90 days prior to the filing date of this
                           report (the "Evaluation Date"); and

                  c)       presented in this report our conclusions about the
                           effectiveness of the disclosure controls and
                           procedures based on our evaluation as of the
                           Evaluation Date.

         5.       The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of registrant's
                  board of directors (or persons performing the equivalent
                  function);

                  a)       all significant deficiencies in the design or
                           operation of internal controls which could adversely
                           affect the registrant's ability to record, process
                           summarize and report financial data and have
                           identified for the registrant's auditors any material
                           weaknesses in internal controls; and

                  b)       any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal controls.

         6.       The registrant's other certifying officer and I have indicated
                  in this report whether or not there were significant changes
                  in internal controls or in other factors that could
                  significantly affect internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date or our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.


DATED:  March 31, 2002                               /s/ Arnold Hantman
                                                     ------------------
                                                     Chief Executive Officer
<PAGE>

                                  CERTIFICATION



         I, David Natan, certify pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 that:

         1.       I have reviewed this report on Form 10-KSB of SFBC
                  International, Inc.

         2.       Based on my knowledge, this report does not contain any untrue
                  statement of a material fact or omit to state a material fact
                  necessary to make the statements made, in light of the
                  circumstances under which such statements were made, not
                  misleading with respect to the period covered by this report.

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this report, fairly present
                  in all material respects the financial condition, results of
                  operations and cash flows of the registrant as of, and for,
                  the periods presented in this report.

         4.       The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and have:

                    a)   designed such disclosure controls and procedures to
                         ensure that material information relating to the
                         registrant, including its consolidated subsidiaries, is
                         made know to us by others within those entities,
                         particularly during the period in which this report is
                         being prepared;

                    b)   evaluated the effectiveness of the registrant's
                         disclosure controls and procedures as of a date within
                         90 days prior to the filing date of this report (the
                         "Evaluation Date"); and

                    c)   presented in this report our conclusions about the
                         effectiveness of the disclosure controls and procedures
                         based on our evaluation as of the Evaluation Date.

         5.       The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of registrant's
                  board of directors (or persons performing the equivalent
                  function);

                    a)   all significant deficiencies in the design or operation
                         of internal controls which could adversely affect the
                         registrant's ability to record, process summarize and
                         report financial data and have identified for the
                         registrant's auditors any material weaknesses in
                         internal controls; and

                    b)   any fraud, whether or not material, that involves
                         management or other employees who have a significant
                         role in the registrant's internal controls.

         6.       The registrant's other certifying officer and I have indicated
                  in this report whether or not there were significant changes
                  in internal controls or in other factors that could
                  significantly affect internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date or our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.


DATED:  March 31, 2002                               /s/ David Natan
                                                     ---------------
                                                     Chief Financial Officer