SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  ------------

                                   FORM 10-KSB

                   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF

                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended September 30, 1997

                           Commission File No. 1-11182

                         BIO-IMAGING TECHNOLOGIES, INC.
                         ------------------------------
             (Exact Name of Registrant as Specified in Its Charter)


         Delaware                                      11-2872047
-------------------------------             ------------------------------------
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)


830 Bear Tavern Road, West Trenton, New Jersey                     08628-1020
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                            (Zip Code)


                                 (609) 883-2000
                         -------------------------------
                         (Registrant's Telephone Number,
                              Including Area Code)


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

  Title of each class                  Name of each exchange on which registered
  -------------------                  -----------------------------------------

Common Stock, $.00025 par                     Boston Stock Exchange
value per share


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

                                      None


<PAGE>


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

Yes:      X                  No:
       --------                    --------


      Check if there is no disclosure  of delinquent  filers in response to Item
405 of  Regulation  S-B  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  Registrant's  revenues  for fiscal year ended  September  30, 1997:
$5,544,693


      State  the   aggregate   market   value  of  the  voting   stock  held  by
non-affiliates  of the Registrant:  $6,015,775 at November 30, 1997 based on the
average bid and asked prices on that date.



      Indicate  the  number of shares  outstanding  of each of the  Registrant's
classes of common stock, as of November 30, 1997:

Class                                            Number of Shares
-----                                            ----------------

Common Stock, $.00025 par value                      7,773,878


      Transitional Small Business Disclosure Format

Yes:                         No:      X
       --------                    --------


      The following  documents  are  incorporated  by reference  into the Annual
Report on Form 10-KSB:  Portions of the Registrant's  definitive Proxy Statement
for its 1998 Annual Meeting of Stockholders  are  incorporated by reference into
Part III of this Report.


<PAGE>


                              TABLE OF CONTENTS
                              -----------------


         Item                                                     Page
         ----                                                     ----

PART I   1.  Business...............................................1

         2.  Properties.............................................9

         3.  Legal Proceedings......................................9

         4.  Submission of Matters to a Vote of Security Holders....9

PART II  5.  Market for the Company's Common Equity and Related
             Stockholder Matters...................................10

         6.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations...................12

         7.  Financial Statements..................................15

         8.  Changes in and Disagreements with Accountants on
             Accounting and Financial Disclosure...................15

PART III 9.  Directors, Executive Officers, Promoters and Control
             Persons; Compliance with Section 16 (a) of the
             Exchange Act..........................................16

         10. Executive Compensation................................16

         11. Security Ownership of Certain Beneficial Owners
             and Management........................................16

         12. Certain Relationships and Related Transactions........16

         13. Exhibits, List and Reports on Form 8-K................17

SIGNATURES.........................................................18

EXHIBIT INDEX......................................................20

FINANCIAL STATEMENTS..............................................F-1


                                      -i-


<PAGE>


                                    PART I


ITEM 1.     BUSINESS.


General
-------


      Bio-Imaging   Technologies,   Inc.  ("Bio-Imaging   Technologies"  or  the
"Company") is a biomedical  information  services  company that provides medical
image processing, digital image management and clinical data management services
and  software  applications  to the  pharmaceutical,  biotechnology  and medical
device  industries.  The Company  specializes  in the processing and analysis of
medical  images and in the  data-basing  and  regulatory  submission  of medical
images and related text,  quantitative data and document-based  information from
human clinical trials.

      The  Company  has  developed   proprietary   processes  and  software  for
conducting  clinical  studies in which medical  imaging  modalities  are used to
evaluate  the  efficacy  and  safety of  pharmaceuticals,  biologics  or medical
devices. The Company's digital image processing and computer analysis techniques
enable it to make highly  precise  measurements  and  biostatistical  inferences
about drug or device effects.  The resulting data enable the Company's  clients,
and their regulatory reviewers (primarily the U.S. Food and Drug Administration,
the "FDA") to evaluate product efficacy and safety. In addition, the Company has
developed  specialized  computer services and software  applications that enable
radiologists and other medical specialists involved in clinical trials to review
medical image data in an entirely digital format.

      The Company  believes  that it is at an early stage of market  penetration
and is  directing  its  marketing  and  sales  efforts  towards  those  clinical
development  areas that have the highest current  reliance upon medical imaging.
These areas  include  oncology,  central  nervous  system,  musculoskeletal  and
cardiovascular therapeutics and diagnostics.

      In  February  1997,  the  Company  opened  its  European  office  and core
laboratory  in Leiden,  the  Netherlands.  The Company  manages its services for
European based clinical trials from this  laboratory.  The information  services
offered by the  European  operations  encompass a full array of medical  imaging
core laboratory and digital management services.

      The  Company  was  incorporated  in  Delaware  in 1987 under the name Wise
Ventures, Inc. The Company's name was changed to Bio-Imaging Technologies,  Inc.
in 1991. The address of the Company's  principal  executive  offices is 830 Bear
Tavern Road,  West  Trenton,  New Jersey,  08628,  and its  telephone  number is
609-883-2000.


Business Areas
--------------

      Medical Imaging Core Laboratory Services
      ----------------------------------------

      Bio-Imaging  Technologies  is a leading  provider of medical  imaging core
laboratory services  exclusively for commercial clinical  development  purposes.
The Company's imaging core laboratory  facilities provide centralized image data
collection,  processing,  analysis  and 


                                      -1-
<PAGE>


archival  services for clinical  trials  conducted  worldwide.  The imaging core
laboratories  are  designed  for  high-volume  processing  of analog  (film) and
digital  image  data in a  secure  environment  that  complies  with  regulatory
guidelines for clinical data management.

      Imaging data are received by the core  laboratories  from  clinical  trial
sites,  typically  major  academic  or  community  hospitals.  The  Company  has
developed  procedures for data tracking and quality  control that it believes to
be of significant value to its clients.  The Company's core laboratories contain
specialized   hardware  and  software  for   translation   of  digital  data  or
digitization  of  films,  so that all data can be  standardized,  regardless  of
source.  The Company believes its ability to handle most commercially  available
image file  formats  is a valuable  technical  asset and  important  competitive
advantage in gaining new business for large global multi-center clinical trials.

      The  Company is able to perform  production-scale  image  analyses  on its
clients' data using internally developed or specially  configured software.  The
Company is able to measure key  indicators of drug efficacy in different  organs
and disease  states.  The image analysis  results derived in the core laboratory
are  transferred  to databases  that can be  transmitted  electronically  to the
Company's clients,  or integrated  directly into the Company's  Bio/ImageBase(R)
package for regulatory submission on the client's behalf.


      Image-Based Information Management Services
      -------------------------------------------

      The Company provides a variety of clinical information management services
enhanced by computer software  applications that are designed to accommodate the
unique  requirements  and  large  volume  of  medical  image  data.  Bio-Imaging
Technologies'  information  management  services focus on providing  specialized
solutions  for  improving  the  quality,  speed and  flexibility  of image  data
management for clinical trials.  The Company's  Computer Assisted Masked Reading
("CAMR") system offers numerous advantages over conventional  film-based medical
image   reading   systems,    including   increased   reading   speed,   greater
standardization  of image  reading,  and reduced  error in the capture of reader
interpretations.

      Using the Company's CAMR system,  medical  specialists  can review medical
image data from clinical trials in digital  format.  The CAMR system can display
all modalities of imaging data regardless of source equipment.  In addition, the
system can display either translated digital data or digitized films. Such image
reviews are often required during clinical trials to evaluate patients' response
to therapy,  or to determine if patients qualify to be entered into studies.  By
using the CAMR system to read and evaluate image data,  medical  specialists can
achieve  greater  reading  speed than is  possible  with film,  and can  perform
evaluations in a more objective, reproducible manner. The Company has three CAMR
systems at each of its  facilities.  The Company is also  developing the systems
and processes  that will allow remote CAMR systems to be located on the premises
of the individual medical specialists who are chosen to perform the analysis.


                                      -2-
<PAGE>


      The  Company  has  developed  a  proprietary   image   database   software
application,  called  Bio/ImageBase(R),  that enables the  Company's  clients to
submit their  medical  images and related  clinical data to the FDA in a digital
format.  Using data stored on CD-ROM disks,  Bio/ImageBase(R)  can allow clients
and their FDA medical  reviewers to review medical  images and related  clinical
data.  The  Company  believes  that  Bio/ImageBase(R)  offers the  potential  to
decrease  review  time and result in faster  regulatory  approvals  and  reduced
time-to-market for new drugs, biologics and medical devices.

      The  Company's  Bio/ImageBase(R)  software  has been  installed at several
client  sites and on certain  computer  systems at the FDA. The Company has been
using its Bio/ImageBase(R) software to submit medical images and related data to
the FDA since mid-1993.  In March 1996,  Bio/ImageBase(R) was cited in the FDA's
1996  Computer-Assisted  Product  License  Application  Guidance  Manual  as  an
acceptable database for submission of imaging data.


      Other Services
      --------------

      The Company  provides expert technical  consulting,  training and end-user
support services.  For clinical trial projects,  the Company's experts assist in
imaging  trials  design  and in the  evaluation  of  hospital  sites  that  will
participate  in studies.  The  Company  also  consults  with  clients  regarding
regulatory issues involved in the design, execution,  analysis and submission of
imaging trials.

      In October  1996,  the Company  established  two new business  units,  the
Marketing Information Services Division (the "MISD") and the Data Management and
Information Systems Division (the "DMISD").  The MISD focuses on development and
sales of medical  imaging-oriented,  laptop  computer-based  sales and marketing
support presentation  software and databases.  The DMISD will focus on providing
clinical  database  management  services and products.  Both business  units are
currently in the product  development phase. The Company has determined to focus
its  resources  on its core  business  areas while  continuing  to evaluate  the
marketability of these two new business units.



Target Markets
--------------

      The Company's primary target market includes pharmaceutical, biotechnology
and medical device companies whose clinical development pipelines include drugs,
biologics or devices that are typically  evaluated by medical  imaging  methods.
This target market includes the top 50 international pharmaceutical companies as
well as over 100 biotechnology companies with products currently in the clinical
development pipeline.

      Classes of drugs which fall  within  Bio-Imaging  Technologies'  marketing
focus include:


                                      -3-
<PAGE>


      Cancer Therapeutics
      -------------------

      Over  390  new  therapies  are  currently  under  development  by  various
pharmaceutical  companies for the treatment of cancer.  For solid tumor studies,
medical  imaging  modalities  are used to determine  the response of treated and
untreated  tumors.  These medical  images are  evaluated by medical  specialists
during the course of oncology  clinical  trials to determine not only the extent
of disease, but also changes in tumor size over time.

      In March 1996,  the FDA announced new  guidelines,  aimed at  accelerating
access to new drugs, for the review and approval of new cancer therapies.  These
new regulatory  guidelines  place greater  emphasis on shrinkage of tumors as an
early indicator of anti-tumor efficacy.  Bio-Imaging  Technologies believes that
these new FDA guidelines may continue to have a favorable impact on its business
as  pharmaceutical  and  biotechnology  companies may have an increased need for
specialized medical imaging services to conduct their oncology clinical trials.


      Central Nervous System Therapeutics
      -----------------------------------

      Currently,   there  are  over  240  drugs  in   development   by   various
pharmaceutical companies for treatment of diseases and conditions of the central
nervous  system,  most of which are evaluated  with the aid of medical  imaging.
Most later-stage clinical trials for these serious and costly conditions involve
the  subjective  or  objective  evaluation  of medical  image data.  The Company
believes that its central  nervous system  clinical trials business may increase
as more therapies progress through the research pipeline.

      Bio-Imaging  Technologies  has become a leader in medical imaging services
for the clinical evaluation of a new class of drugs, called neuroprotectants, to
treat ischemic stroke. Furthermore,  Bio-Imaging is among the first academic and
commercial research groups conducting stroke studies with new imaging technology
called functional magnetic resonance imaging ("MRI").


      Diagnostic Imaging Agents
      -------------------------

      Bio-Imaging  Technologies  has played an  important  role working with its
clients in the  development  of diagnostic  imaging agents which are designed to
diagnose disease  conditions more quickly and accurately in their development in
order  to  facilitate  earlier  and  more  accurate  treatment.   The  Company's
experience  in this  area  ranges  from new  diagnostics  for  gastrointestinal,
abdominal, breast and brain tumor imaging, to new diagnostics for cardiovascular
disease,  infectious disease,  peripheral vascular disease,  Alzheimer's Disease
and Parkinson's Disease.


      Musculoskeletal Therapeutics
      ----------------------------

     Musculoskeletal  clinical  trials,  such as those  focused on arthritis and
osteoporosis, include radiologic evaluation of the bones and joints to determine
drug efficacy.  The Company  believes that demand among drug  developers for its
digital  imaging  technology  and  services  will  increase  as new  classes  of
biotechnology-derived  drugs enter and progress through the clinical development
pipeline.


                                      -4-
<PAGE>


      Cardiovascular Therapeutics
      ---------------------------

      Currently,   there  are  over  180  drugs  in   development   by   various
pharmaceutical  companies  for the  diagnosis  and  treatment of  cardiovascular
diseases and conditions which are evaluated with the aid of medical imaging. The
Company's  services can play an important role in the development of new in vivo
diagnostic agents for the detection and treatment of these conditions.



Market Trends
-------------

      The Company believes that demand for its services and technologies  should
grow  because of a variety of  favorable  regulatory,  technological  and market
trends:

o     The  beneficial  impact of FDA  initiatives  to streamline  the regulatory
      submission  and review  process are  beginning to be realized.  The FDA is
      investing  in new  information  technology  and has begun the  process  of
      formulating  and  disseminating  guidelines  for  submission of electronic
      data,  including medical images.  The Company expects  submission of image
      data to be a requirement in key areas such as solid tumor oncology trials.

o     Restructuring and downsizing in the  pharmaceutical  industry has resulted
      in  increased   outsourcing  of  certain   research  and  data  management
      activities. Currently, over $4 billion in research services are outsourced
      to contract  clinical research  organizations  and universities.  Industry
      estimates place growth of outsourcing between 20% to 30% per year.

o     The pharmaceutical industry has identified information management as a key
      to competitive advantage, and is investing in new technology to solve data
      management  challenges.  Companies are  incorporating  digital images into
      their information  infrastructure  and need specialized  expertise for the
      unique requirements of digital image data.

o     Digital  technologies  for data  acquisition  and  management  are rapidly
      penetrating the radiology community.

o     New  classes  of drugs  to treat  conditions  traditionally  evaluated  by
      imaging are  entering or  progressing  through  the  clinical  development
      pipeline,   leading  to  increased   demand  for   medical imaging-related
      services.

o     The  biotechnology  drug development  pipeline is maturing.  Consequently,
      more   biologics  are  entering  or   progressing   through  the  clinical
      development   process,   leading  to  an  increased   demand  for  medical
      imaging-related research services.

o     An  increase  in the use of digital  medical  images in  clinical  trials,
      especially for important drug classes such as neurologic, muskuloskeletal,
      cardiovascular  and 


                                      -5-
<PAGE>


      oncologic   therapeutics   and  diagnostic   imaging  agents  may  require
      processing, analysis, data management and submission services.



Research and Development
------------------------

      The Company's research and development efforts are focused on a variety of
inter-related  services and  products  geared  toward the evolving  needs of the
clinical  development  marketplace.  Increases  in  microprocessor  speed,  data
storage  capacity  and  imaging  hardware  performance  are  driving the gradual
changeover  of  medical  imaging  from  film-based  to  digital  data.   Related
improvements in software performance,  network bandwidth and  telecommunications
technology have created  entirely new products and services for the transmission
of medical image data.  Bio-Imaging  Technologies  anticipates  that many of the
positive  changes  that  these new  imaging  technologies  are  bringing  to the
healthcare  system in general will have a particularly  important  impact on the
drug and medical  device  development  process.  This  impact may be  especially
important in the area of clinical information management.

      Drawing upon its core medical imaging technology and clinical  development
expertise,  Bio-Imaging  Technologies is developing  services and software tools
that will enable client  companies to manage,  integrate and evaluate their data
in more useful and  meaningful  ways. As a common theme  throughout its research
and development  efforts, the Company is drawing upon the power of computers and
medical  imaging to communicate  complex  clinical  information  visually.  As a
central  tenet of its  research and  development  efforts,  the Company  pursues
opportunities  that are strongly  related to its current  business and which are
clearly  supported  by  current  client  demand.   The  Company's  research  and
development  efforts  will  focus  on  broadening  its  information  management,
data-basing    and    networking     capabilities    for    the    linkage    of
clinical-trials-related medical images to other clinical data.



Patents, Trade Secrets and Licenses
-----------------------------------

      Proprietary  protection  for  the  Company's   computer-imaging  programs,
processes  and know-how is important to its  business.  The Company  relies upon
trade secrets,  know-how and continuing  technological innovation to develop and
maintain its competitive  position. To date the Company has sought trademark and
copyright  protection  for certain  computer  software  programs  and is seeking
patent  protection  for  its  other  proprietary  technology  where  applicable.
Bio-Imaging Technologies requires all employees,  consultants and contractors to
execute  confidential  disclosure  agreements  as a condition of  employment  or
engagement by the Company. There can be no assurance,  however, that the Company
can limit unauthorized or wrongful  disclosures of trade secret information.  In
addition,  to the extent the Company  relies on trade  secrets  and  know-how to
maintain its competitive  technological position, there can be no assurance that
others may not develop independently the same or similar techniques.


Government Regulation
---------------------

      The  research  and  development,  manufacture  and  marketing of drugs and
medical  devices are subject to  stringent  regulation  by the FDA in the United
States  and  by  comparable   authorities  


                                      -6-
<PAGE>

      in other  countries.  In addition,  regulations  imposed by other  federal
      agencies, as well as state and local authorities, may impact such research
      and development, manufacturing and marketing.

      The FDA has established  mandatory  procedures and safety  standards which
apply to the clinical testing,  manufacturing and marketing of drugs and medical
devices.  These procedures and safety standards include, among other things, the
completion of adequate and  well-controlled  human clinical  trials to establish
the safety and efficacy of the drug or device for its recommended  conditions or
use. The Company  advises its clients in the  execution  of clinical  trials and
other drug and device developmental tasks. The Company does not administer drugs
to or utilize medical devices on patients.

      The success of the Company's  business is dependent upon acceptance by the
FDA and  other  regulatory  authorities  which  review  the  data  and  analyses
generated by the Company's  imaging  techniques in the  evaluation of the safety
and  efficacy  of new  drugs  and  devices.  The FDA has  accepted  the data and
analyses  generated by the Company's  imaging  techniques  to date.  The FDA has
formal  guidelines  which  encourage  the use of "surrogate  measures,"  through
submission   of  digital   image  data,   for   evaluation  of  drugs  to  treat
life-threatening or debilitating conditions. There can be no assurance, however,
that the FDA or other  regulatory  authorities  will accept the data or analyses
generated by the Company in the future and, even assuming acceptance,  there can
be no assurance that the FDA or other  regulatory  authorities  will not require
the  application  of imaging  techniques  to numbers of  patients  and over time
periods  substantially  similar  to those  required  of  traditional  safety and
efficacy techniques.

     Recent  changes  in the FDA's  policy  for the  evaluation  of  therapeutic
oncology  agents  can  have a  positive  impact  on the time to  market  of such
therapeutics.  According to the guidelines announced on March 29, 1996, approval
times for new cancer  therapies can be shortened if evidence of tumor  shrinkage
is  verifiable  and  demonstrable  through  the  use  of  objective  measurement
techniques.  These  guidelines place much greater reliance on the use of medical
image data to demonstrate objective tumor shrinkage. In addition, in March 1997,
the  FDA  announced  new  guidelines   aimed  at  accelerating  all  therapeutic
categories through the use of surrogate markers such as imaging  endpoints.  The
Company  believes  the  FDA's  initiatives  to  streamline  and  accelerate  the
submission and review process of therapeutic  agents may have a favorable impact
on the Company's business.

      The Company believes that its ability to achieve continued and sustainable
growth will be materially  dependent  upon,  among other factors,  the continued
stringent  enforcement  of the  comprehensive  regulatory  framework  by various
government agencies. Any significant change in these regulatory  requirements or
the enforcement  thereof,  especially  relaxation of standards,  could adversely
affect the Company's prospects.



Competition
-----------

      As a  favorable  sign of growth  in the  clinical  trials-related  medical
imaging services  business,  the Company  continues to experience an increase in
competition  from  academic  research  centers and new  commercial  competitors.
During the past year, major  conventional  contract research  organizations have
either  started or acquired  divisions  to address the need for


                                      -7-
<PAGE>


medical imaging services as it relates to clinical trials. Academically-oriented
imaging  laboratories   continue  as  the  Company's  primary  competition.   As
competition  increases,  Bio-Imaging will add value-added services and undertake
marketing and sales  programs to  differentiate  its services  based on clinical
trial experience,  therapeutic experience and imaging experience. Competition in
the  Company's  industry has  resulted in  additional  pressure  being placed on
price, service, quality, professional reputation and technology. There can be no
assurance that the Company's competitors or clients will not develop and utilize
technology  similar  or  superior  to that  utilized  by the  Company.  Any such
competition  could have a material adverse impact on the Company.  The Company's
competitive  position  also  depends  upon its  ability  to  attract  and retain
qualified personnel and develop and preserve proprietary  technology,  processes
and know-how.  As part of its overall  strategy,  Bio-Imaging  Technologies will
monitor  competitive   developments  and  will  evaluate  appropriate  defensive
mechanisms.



Marketing and Sales
-------------------

      Bio-Imaging  Technologies  markets  and sells its  services  and  software
products  directly to its target market through its staff.  At the present time,
the Company  believes that the  complexity of its  technology  and  applications
requires the use of a dedicated sales force.  The Company's  Marketing and Sales
consists of a Senior V.P. of Marketing and Sales, a Director of Client Technical
Services,  three Regional Managers of Client Technical  Services,  a Director of
Clinical Services, Europe and a Manager, Business Development.

      The  Company's  selling  efforts are focused on North  America and Western
Europe. Sales efforts currently are directed from the Company's  headquarters in
New  Jersey.  The  Company  began a  European-based  sales  effort  in 1997  and
anticipates  adding to its sales force during 1998. In 1998, the Company expects
to launch other business  development  initiatives targeted at potential clients
in its major service areas. The Company will evaluate  appropriate  co-marketing
activities to augment its own business development efforts.



Significant Clients
-------------------

      During  fiscal 1997,  two clients,  including one  European-based  client,
accounted for approximately 47% of the Company's  consolidated  project revenue.
The one  European-based  client  represented  approximately  34% of such revenue
while the other client  represented  approximately  13% of such  revenue.  These
contracts  are  terminable  by the  Company's  clients  at any  time and for any
reason.  Loss of any of these  clients or a reduction  in  services  provided to
these clients would have a material  adverse  effect on the Company's  business,
financial condition and results of operations.



Employees
---------

      As of September 30, 1997, the Company had 34 full-time  employees,  six of
whom are officers of the Company, and four part-time employees.

      Of the Company's  full-time  employees as of September 30, 1997,  six were
engaged in sales and marketing,  22 were engaged in client related  projects and
in-house research and


                                      -8-
<PAGE>


development and six were engaged in administration and management. A significant
number of the Company's  management  and  professional  employees have had prior
experience  within the clinical  research,  drug development and  pharmaceutical
industries.  Bio-Imaging  Technologies  believes that it has been  successful in
attracting  skilled and  experienced  personnel;  however,  competition for such
personnel  is  intensifying.  None of the  Company's  employees  are  covered by
collective  bargaining  agreements and the Company has  experienced low turnover
among  its   employees.   All  of  the   Company's   employees  are  covered  by
confidentiality  and  non-competition  agreements.  The Company  cannot  provide
assurances as to the enforceability of such agreements. Bio-Imaging Technologies
has entered into an employment contract with one of its key officers.  See "Item
10. Executive  Compensation."  Bio-Imaging Technologies considers relations with
its employees to be good.

      The Company had several  management  changes during 1997.  Richard S. Mink
resigned as Senior Vice President and General Manager of the MISD in April 1997.
In addition,  in April 1997, the Company  appointed  Anthony P. Nowicki,  Senior
Vice  President and General  Manager of the DMISD,  to manage the MISD. On April
21, 1997,  Andrew Reiter was elected to Vice President and Managing  Director of
the Company's European operations. On June 18, 1997, Donald W. Lohin was elected
Chairman of the Board and Dr. James J. Conklin was named Chairman  Emeritus.  On
August 11, 1997, Mark L. Weinstein was elected to Senior Vice  President,  Sales
and Marketing.



ITEM 2.  PROPERTIES.
--------------------

      The Company leases approximately 9,100 square feet of office space in West
Trenton, New Jersey. The lease expires November 30, 1998 and provides for a base
rent of  approximately  $9,400 per month  through  that date.  The Company  also
leases   approximately  4,000  square  feet  of  office  space  in  Leiden,  the
Netherlands. The lease expires February 14, 2000 and provides for a base rent of
approximately  $4,700 per month with an annual inflation  increase.  The Company
believes  that  these  facilities  will  be  adequate  for  its  needs  for  the
foreseeable future, but continuously evaluates its property needs.



ITEM 3.  LEGAL PROCEEDINGS.
---------------------------

      There is no material litigation pending to which the Company is a party or
to which any of its property is subject.



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

      None.


                                      -9-
<PAGE>


                                   PART II


ITEM 5.  MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
--------------------------------------------------------------------------------

      Since  June 18,  1992,  the  Common  Stock has been  traded on the  Nasdaq
SmallCap Market under the symbol BITI.

      The following  table sets forth the high and low sales bid  quotations for
the Common Stock for each of the quarters  since the quarter ended  December 31,
1995  as  reported  on the  Nasdaq  SmallCap  Market.  Such  quotations  reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.


Quarter                              Common
 Ended                               Stock
 -----                               ------
                                High        Low
                                ----        ---
December 31, 1995............   0.875       0.50
March 31, 1996...............   0.875       0.50
June 30, 1996................   1.75        0.50
September 30, 1996...........   1.313       0.938
December 31, 1996............   1.625       1.0625
March 31, 1997...............   2.125       1.25
June 30, 1997................   1.5625      1.0625
September 30, 1997...........   1.875       1.0625


                                      -10-
<PAGE>


      Since June 18,  1992,  the Common Stock also has been listed on the Boston
Stock Exchange ("BSE") under the symbol BIT.

      The following table sets forth the high ask and low bid quotations for the
Common Stock for each of the quarters  since the quarter ended December 31, 1995
as reported on the BSE.


Quarter                                Common
 Ended                                 Stock
 -----                                 ------
                                High        Low
                                ----        ---
December 31, 1995............   1.125       0.50
March 31, 1996...............   0.875       0.50
June 30, 1996................   1.688       0.50
September 30, 1996...........   1.438       0.813
December 31, 1996............   1.875       0.9375
March 31, 1997...............   2.375       1.25
June 30, 1997................   1.75        1.0625
September 30, 1997...........   1.875       1.00


      As of November 30, 1997,  the  approximate  number of holders of record of
the Common Stock was 103 and the approximate number of beneficial holders of the
Common Stock was
1,024.

     The Company has neither  paid nor  declared  dividends  on its Common Stock
since its  inception  and does not plan to pay  dividends on its Common Stock in
the  foreseeable  future.  Any  earnings  which the Company may realize  will be
retained to finance the growth of the Company. However, the Company's issued and
outstanding  shares of Series A Preferred Stock (the "Preferred  Stock") provide
the holders thereof to certain  dividends  rights.  Such holders are entitled to
receive cumulative dividends, in an annual amount per share equal to 8.0% of the
preferential  amount,  as defined in the Company's  certificate  of  designation
(currently the preferential amount is $1.20 and the annual dividend per share of
outstanding  Preferred Stock is $0.096).  Such preferential amount may from time
to time be adjusted in certain circumstances. In November 1996, the Company paid
to the  holders of its  Preferred  Stock an  aggregate  amount of $21,222  which
amount represented accrued cumulative dividends for the period from December 21,
1995 through and including  June 30, 1996. In January 1997,  the Company paid to
the holders of its Preferred  Stock an aggregate  amount of $20,000 which amount
represented  accrued  cumulative  dividends  for the  period  from  July 1, 1996
through and including  December 31, 1996. In September 1997, the Company paid to
the holders of its Preferred  Stock an aggregate  amount of $20,000 which amount
represented  accrued  cumulative  dividends  for the period from January 1, 1997
through and including June 30, 1997.


                                      -11-
<PAGE>


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


Results of Operations
---------------------

      The Company attributes its improved  performance for fiscal 1997 primarily
to the increase in project  revenue.  The Company  believes  that demand for its
services  and  technologies  will  continue  to  grow  as  the  use  of  digital
technologies for data acquisition and management  increases in the radiology and
drug  development  communities.  In  addition,  the United  States Food and Drug
Administration  is  gaining  experience  with  electronic   submissions  and  is
continuing to develop guidelines for computerized  submission of data, including
medical  images.  Furthermore,  the increased use of digital  medical  images in
clinical  trials,  especially  for important drug classes such as neurologic and
oncologic  therapeutics  and  diagnostic  image agents,  should  generate  large
amounts of image data that will require  processing,  analysis,  data management
and submission services. There can be no assurance, however, that demand for the
Company's  services and  technologies  will experience  continued or sustainable
growth or that additional revenue  generating  opportunities will be realized by
the Company.

      Certain  statements  included  in  the  Form  10-KSB,  including,  without
limitation,  statements  regarding the anticipated growth in the markets for the
Company's  services,  the  continuation  of the trends  favoring  outsourcing of
biomedical  information  technology services by pharmaceutical and biotechnology
companies and trends  favoring the use of such  information  technologies by the
United  States  Food and Drug  Administration,  the  anticipated  growth  of the
Company's business,  the information  concerning existing client contracts,  the
timing of the  development  and  implementation  of the  Company's  new  service
offerings and the  utilization  of such services by the Company's  clients,  and
trends in future operating  performance,  are forward-looking  statements within
the meaning of Section 21E of the  Securities  Exchange Act of 1934, as amended.
The factors  discussed  herein and expressed  from time to time in the Company's
filings with the Securities and Exchange  Commission  could cause actual results
and  developments to be materially  different from those expressed in or implied
by such statements.


      Years Ended September 30, 1997 and 1996
      ---------------------------------------

     Total project  revenue for the years ended  September 30, 1997 and 1996 was
approximately   $5,545,000  and   $3,657,000,   respectively,   an  increase  of
approximately $1,888,000 or 52%. Project revenue in fiscal 1997 was derived from
22 clients and revenue in fiscal 1996 was derived  from 20 clients.  Revenue for
the year ended  September  30, 1997 was higher  than  revenue for the year ended
September 30, 1996  primarily as a result of revenue  generated by the Company's
one  European-based  client and to a lesser extent new projects that the Company
was engaged to perform work.  The  Company's  scope of work in both fiscal years
included  medical imaging core laboratory  services and image-based  information
management  services.  In  addition,  especially  during  the third  and  fourth
quarters  of fiscal  1997,  the  Company  completed  a higher  volume of work on
several  projects which  encompassed  high revenue tasks within the  image-based
information management services. The Company generated approximately $1,888,000,
or 34%, of project revenue for the year ended September 30, 1997


                                      -12-
<PAGE>


from the one  European-based  client.  Revenue for the year ended  September 30,
1996 included a one-time  recognition  by the Company of $192,000 in revenue and
earnings  resulting  from  the  termination  by the  Company  of a  co-marketing
agreement with Covance Inc.

      Project costs of approximately  $1,938,000 during the year ended September
30, 1997 were  comprised of  professional  salaries  and benefits and  allocated
overhead.  Project  costs for fiscal  1996 were  approximately  $1,284,000.  The
increase during the year ended September 30, 1997, of approximately $654,000, or
51%, from fiscal 1996, resulted primarily from the increase in resources applied
by the Company to perform the increased  scope of projects for which the Company
was engaged to perform work,  including the Company's European clinical services
laboratory.

     The gross margin  percentages during the years ended September 30, 1997 and
1996 were 65%.  Without the revenue and gross profit from the termination of the
co-marketing  agreement  referred to above, the gross margin  percentage was 65%
and 63% for the year ended  September 30, 1997 and the year ended  September 30,
1996,  respectively.  Such increase is attributable  primarily to an increase in
efficiency  related to the  performance  of  project-related  activities and the
increased mix of  information  management  services which yielded higher margins
partially offset by reduced pricing for certain services.

      General and administrative  expenses for the year ended September 30, 1997
and the year ended  September  30,  1996  consisted  primarily  of  professional
salaries  and  benefits,   depreciation  and   amortization,   professional  and
consulting  services,   office  rent  and  corporate   insurance.   General  and
administrative  expenses  were  approximately  $1,789,000  for  the  year  ended
September 30, 1997 and approximately $1,259,000 for the year ended September 30,
1996.  The  increase  for the year ended  September  30,  1997 of  approximately
$530,000 or 42%, from the corresponding  fiscal 1996 period,  resulted primarily
from expenses  incurred in support of  operational  growth of the Company and in
connection with the establishment and initial  operations of the MISD, the DMISD
and the Company's  European  clinical services  laboratory.  As of September 30,
1997, the operations of the MISD and DMISD had not realized any revenue.

      Sales and marketing  expenses of  approximately  $834,000  during the year
ended  September 30, 1997 were  comprised of direct sales and  marketing  costs,
professional  salaries and benefits and allocated overhead.  Sales and marketing
expenses for fiscal 1996 were  approximately  $624,000.  The increase during the
year ended September 30, 1997, of  approximately  $210,000,  or 34%, from fiscal
1996,  resulted primarily from the increase in personnel and resources dedicated
to sales and marketing efforts.

      Research and development expenses during the year ended September 30, 1997
and 1996,  were  approximately  $246,000  and  $134,000,  respectively.  In each
period, research and development expenses consisted of professional salaries and
benefits and overhead charged to research and development projects. The increase
in such  expenses  during the year ended  September  30,  1997 of  approximately
$112,000,  or 84%,  from fiscal  1996,  resulted  primarily  from an increase in
resources  dedicated  to  research  and  development   projects.   Research  and


                                      -13-
<PAGE>


development expenses in fiscal 1997 and 1996 focused on the design and coding of
image display and image analysis software required to increase the efficiency of
the  Company's  imaging  laboratory  operations.  In  addition,  in fiscal 1997,
research  and  development  expenses  also  included  developmental  work on the
product line for the MISD  business  unit.  There was  approximately  $43,000 of
capitalized  computer software development costs in the year ended September 30,
1997 and  approximately  $100,000 of computer  software  development  costs were
capitalized in the year ended  September 30, 1996.  Such costs were  capitalized
after  technological  feasibility had been  demonstrated in accordance with FASB
Statement No. 86. Such  capitalized  amounts are amortized  commencing  with the
product  introduction on a straight-line  basis utilizing the estimated economic
useful life of the product. The Company may capitalize certain development costs
in the future, as appropriate.

      The Company's total operating  expenses were  approximately  $4,807,000 in
fiscal  1997 and  $3,300,000  in  fiscal  1996,  an  increase  of  approximately
$1,507,000 or 46%. Total operating expenses during the years ended September 30,
1997 and 1996 consisted primarily of general and administrative  expenses, sales
and marketing expenses, project costs, and research and development expenses.

      Net  interest  income  of  approximately  $53,000  during  the year  ended
September 30, 1997,  resulted from interest  earned on cash balances,  offset in
part  by  interest   expense   incurred  in  conjunction  with  equipment  lease
obligations.  The  Company  earned  greater  interest  income in the year  ended
September 30, 1997 than in the year ended  September 30, 1996 due to higher cash
balances. Net interest income was approximately $25,000 in fiscal 1996.

      The  Company's  net  income  for the year  ended  September  30,  1997 was
approximately  $791,000  while  the  Company  had net  income  of  approximately
$382,000 in fiscal  1996.  The  Company's  net income for fiscal  1997  resulted
primarily  from  increased  revenue in the Company's  clinical  trials  services
business,  including  revenue  generated  from its  European  clinical  services
laboratory and from continued  efforts to improve  operating  efficiencies.  The
Company's net income for fiscal 1996  resulted  primarily  from  project-related
services  performed by the Company and the recognition of revenue by the Company
resulting  from the  termination  by the Company of the  co-marketing  agreement
referred to above.


Liquidity and Capital Resources
-------------------------------

     At  September  30,  1997,  the  Company  had cash and cash  equivalents  of
approximately $2,368,000. On June 18, 1997, GKN Securities Corp. ("GKN") and its
designees exercised  underwriter's purchase options ("UPOs") to purchase 630,000
shares of Common  Stock at an exercise  price of $1.00 per share,  after  giving
effect to certain  anti-dilution  provisions of the UPOs.  The Company  received
aggregate net proceeds of approximately $600,000 as a result of such exercise of
the UPOs.  On  September  25,  1997,  Investment  Partners of America  exercised
833,334 warrants at $.63 per share, after giving effect to certain anti-dilution
provisions  of the  warrants.  The Company  received  aggregate  net proceeds of
approximately $525,000 as a result of such exercise of the warrants.


                                      -14-
<PAGE>


     In November 1996, the Company paid to the holders of its Preferred Stock an
aggregate  amount  of  $21,222  which  amount  represented   accrued  cumulative
dividends for the period from  December 21, 1995 through and including  June 30,
1996. In January 1997, the Company paid to the holders of its Preferred Stock an
aggregate  amount  of  $20,000  which  amount  represented   accrued  cumulative
dividends  for the period from July 1, 1996 through and  including  December 31,
1996. In September  1997, the Company paid to the holders of its Preferred Stock
an aggregate  amount of $20,000  which  amount  represented  accrued  cumulative
dividends  for the period from  January 1, 1997 through and  including  June 30,
1997.

     Working capital at September 30, 1997 was approximately $2,848,000.

      The  Company  had,  as  of  September  30,  1997,  invested  approximately
$3,853,000  in  capital  and  leasehold  improvements,  of  which  approximately
$565,000  had  been  funded  through  capital  leases.   The  Company  currently
anticipates that capital  expenditures for the next fiscal year will approximate
$750,000.  These  expenditures  represent  additional  upgrades in the Company's
networking,  data storage and core  laboratory  capabilities  along with similar
capital requirements for its European operations.

      The Company  anticipates  that its cash as at  September  30, 1997 will be
sufficient to fund working capital needs and capital requirements through fiscal
1998.


Existing Contracts
------------------

     During  fiscal 1997,  the Company  signed  approximately  $6,158,000 in new
project  contracts.  As of November  30,  1997,  the  Company  had entered  into
contracts  with 14  companies  to provide  services in the  aggregate  amount of
approximately  $7,550,000  through  February,  1999, of which services valued at
approximately  $2,730,000 remain to be completed.  Such contracts are subject to
termination  by the  Company or its  clients at any time or for any reason  and,
therefore,  revenue  generated  by the  Company  may not meet  initial  contract
values.



ITEM 7.  FINANCIAL STATEMENTS.
------------------------------

      The financial  statements  required to be filed  pursuant to this Item 7
are  included in this Annual  Report on Form 10-KSB.  A list of the  financial
statements  filed herewith is found at "Item 13.  Exhibits,  List, and Reports
on Form 8-K."



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

      None.


                                      -15-
<PAGE>


                                   PART III


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

      The information relating to the Company's directors, nominees for election
as directors and executive  officers under the headings  "Election of Directors"
and "Executive  Officers" in the Company's  definitive  proxy  statement for the
1998 Annual Meeting of Stockholders is incorporated  herein by reference to such
proxy statement.



ITEM 10. EXECUTIVE COMPENSATION.
--------------------------------

      The discussion under the heading "Executive Compensation" in the Company's
definitive  proxy  statement  for the 1998  Annual  Meeting of  Stockholders  is
incorporated herein by reference to such proxy statement.



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
------------------------------------------------------------------------

      The discussion under the heading "Security Ownership of Certain Beneficial
Owners and Management" in the Company's  definitive proxy statement for the 1998
Annual Meeting of Stockholders is incorporated herein by reference to such proxy
statement.



ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------------------------------------------------------

      The  discussion  under the  heading  "Certain  Relationships  and  Related
Transactions"  in the Company's  definitive  proxy statement for the 1998 Annual
Meeting  of  Stockholders  is  incorporated  herein by  reference  to such proxy
statement.


                                      -16-
<PAGE>



ITEM 13.  EXHIBITS, LIST, AND REPORTS ON FORM 8-K.
--------------------------------------------------

(a)   (1)   Financial Statements.


            Reference is made to the Index to Financial Statements on Page F-1.


(a)   (2)   Financial Statement Schedules.


            None.


(a)   (3)   Exhibits.


            Reference is made to the Index to Exhibits on Page 20.


      (b)   Reports on Form 8-K.


            On July 3, 1997, the Company filed a report on Form 8-K relating the
      exercise by GKN  Securities  Corp. and certain of its designees of options
      to purchase 630,000 shares of Common Stock of the Company.


            On October 8, 1997,  the Company filed a report on Form 8-K relating
      the exercise by  Investment  Partners of America,  L.P. and certain of its
      designees  of warrants to purchase  833,334  shares of Common Stock of the
      Company.


                                      -17-
<PAGE>


                                   SIGNATURES
                                   ----------


     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its  behalf  by the  undersigned,  thereunto  duly  authorized  this 18th day of
December, 1997.


                                          BIO-IMAGING TECHNOLOGIES, INC.



                                          By: /s/Donald W. Lohin
                                          --------------------------------
                                          Donald W. Lohin, Chairman of the
                                          Board, President and Chief
                                          Executive Officer


                                      -18-
<PAGE>


      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Signature                            Title                         Date
---------                            -----                         ----


/s/Donald W. Lohin              Chairman of the Board,         December 18, 1997
---------------------------     President and Chief
Donald W. Lohin                 Executive Officer and Director
                                (principal executive
                                officer)


/s/James J. Conklin, M.D.       Chairman Emeritus,             December 18, 1997
---------------------------     Chief Scientific Officer
James J. Conklin, M.D.          and Director


/s/Robert J. Phillips           Vice President and Chief       December 18, 1997
---------------------------     Financial Officer
Robert J. Phillips              (principal financial and
                                accounting officer)


/s/Jeffrey H. Berg, Ph.D.       Director                       December 18, 1997
---------------------------
Jeffrey H. Berg, Ph.D.


/s/Harris Koffer, Pharm.D.      Director                       December 18, 1997
---------------------------
Harris Koffer, Pharm.D.


                                Director
---------------------------
Charles C. Harwood, Jr.


/s/Jeffrey S. Hurwitz, Esq.     Director                       December 18, 1997
---------------------------
Jeffrey S. Hurwitz, Esq.


/s/James A. Taylor, Ph.D.       Director                       December 18, 1997
---------------------------
James A. Taylor, Ph.D.


                                      -19-
<PAGE>


                                  EXHIBIT INDEX
                                  -------------


Exhibit
 No.                                Description of Exhibit
-------                             ----------------------

3.1          Restated Certificate of Incorporation of the Company. (Incorporated
             by reference to Exhibit 3.1 to the Company's Registration Statement
             on Form S-1 (File Number  33-47471) which became  effective on June
             18, 1992.) (Amendments  incorporated by reference to Exhibit 3.1 to
             the  Company's  Annual  Report  on Form  10-K  for the  year  ended
             September  30, 1993 and to Exhibit 3.1 to the  Company's  Quarterly
             Report on Form 10-QSB for the quarter ended March 31, 1995.)

3.2          By-Laws of the Company.  (Incorporated  by reference to Exhibit 3.2
             to the  Company's  Registration  Statement on Form S-1 (File Number
             33-47471) which became effective on June 18, 1992.)

4.1          Specimen Common Stock  Certificate.  (Incorporated  by reference to
             Exhibit 4.1 to the  Company's  Registration  Statement  on Form S-1
             (File Number 33-47471) which became effective on June 18, 1992.)

4.2          Registration Agreement dated October 13, 1994 between the Company  
             and Corning  Pharmaceuticals  Services  Inc.,  now Covance,  Inc.  
             ("Covance")  (Incorporated  by  reference  to Exhibit  4.1 to the  
             Company's Current Report on Form 8-K dated October 13, 1994.)

4.3          Form of Warrant dated October 13, 1994 between the Company and     
             Covance.(Incorporated by reference to Exhibit 4.2 to the Company's 
             Current Report on Form 8-K dated October 13, 1994.)

4.4          Purchase  Agreement for Units of  Convertible  Preferred  Stock and
             Warrants  dated  December 8, 1995  between  Investment  Partners of
             America,  L.P., as Purchaser,  and the Company,  including material
             exhibits   (including  the   Certificate  of  Designation  for  the
             Convertible Preferred Stock). (Incorporated by reference to Exhibit
             4.1 to the Company's  Current Report on Form 8-K dated December 22,
             1995.)

10.1         Lease   between   Mountain   View  Office  Park  and  the  Company.
             (Incorporated  by reference  to (i) Exhibit  10.1 to the  Company's
             Registration  Statement  on Form S-1 (File Number  33-47471)  which
             became  effective  on  June  18,  1992,  (ii)  Exhibit  10.1 to the
             Company's  Annual  Report on Form 10-K for the  fiscal  year  ended
             September  30, 1992,  (iii)  Exhibit 10.1 to the  Company's  Annual
             Report on Form 10-KSB for the fiscal year ended September 30, 1994,
             and (iv) Exhibit 10.1 to the Company's Annual Report on Form 10-KSB
             for the fiscal year ended September 30, 1995), as amended effective
             September 5, 1996 (Incorporated by Reference to Exhibit 10.1 to the
             Company's Annual Report on Form 10-KSB for the fiscal  year  ended 
             September 30, 1996).


                                      -20-
<PAGE>


Exhibit
 No.                                Description of Exhibit
-------                             ----------------------

10.2*        1991 Stock Option Plan.  (Incorporated by reference to Exhibit 10.6
             to the  Company's  Registration  Statement on Form S-1 (File Number
             33-47471) which became effective on June 18, 1992.)

10.3*        401(k)  Plan.  (Incorporated  by  reference  to Exhibit 10.7 to the
             Company's Registration Statement on Form S-1 (File Number 33-47471)
             which became effective on June 18, 1992.)

10.4         Amended and  Restated  Exclusive  License  Agreement  between the  
             Company  and Loats  Associates,  Inc.  ("LAI")  (Incorporated  by  
             reference to Exhibit 10.8 to the Company's Registration Statement  
             on Form S-1 (File Number 33-47471) which became effective on June  
             18, 1992.) See Exhibit 10.15 for Amendment to License Agreement.

10.5         Form of Employee's Invention Assignment,  Confidential  Information
             and  Non-Competition  Agreement.   (Incorporated  by  reference  to
             Exhibit 10.9 to the  Company's  Annual  Report on Form 10-K for the
             fiscal year ended September 30, 1992.)

10.6         Amendment  dated June 21, 1994 to the Amended and Restated  License
             Agreement  between LAI and the Company.  (Incorporated by reference
             to Exhibit 10.2 to the  Company's  Quarterly  Report on Form 10-QSB
             for the quarter ended June 30, 1994.)

10.7         Voting  Agreement  dated October 13, 1994 between the Company,  Dr.
             James J. Conklin and Covance.(Incorporated  by reference to Exhibit
             10.1 to the Company's  Current Report on Form 8-K dated October 13,
             1994.)

10.8         Stock Purchase Agreement dated October 13, 1994 between the Company
             and Covance. (Incorporated by reference  to  Exhibit  10.2  to  the
             Company's Current Report on Form 8-K dated October 13, 1994.)

10.9         Master  Lease  Agreement  dated  April 25,  1994 by and between the
             Company and Wasco Funding Corp. and schedules  thereto dated May 9,
             1995 and August 31,  1995.  (Incorporated  by  reference to Exhibit
             10.24 to the Company's  Annual Report on Form 10-KSB for the fiscal
             year ended September 30, 1995.)

10.10*       Employment    Agreement   including   Invention    Assignment   and
             Confidential  Information  Agreement dated January 30, 1996, by and
             between the Company and Donald W. Lohin. (Incorporated by reference
             to Exhibit 10.1 to the  Company's  Quarterly  Report on Form 10-QSB
             for the quarter ended March 31, 1996.)


                                      -21-
<PAGE>


Exhibit
 No.                                Description of Exhibit
-------                             ----------------------

10.11        Consulting  Agreement  by and between  the  Company and  Investment
             Partners   Capital  &  Management   Corp.   dated  June  26,  1996.
             (Incorporated  by  reference  to  Exhibit  10.1  to  the  Company's
             Quarterly  Report on Form  10-QSB  for the  quarter  ended June 30,
             1996.)

10.12        Purchase  Agreement for Units of  Convertible  Preferred  Stock and
             Warrants  dated  December 8, 1995  between  Investment  Partners of
             America,  L.P.,  as Purchaser and the Company,  including  material
             exhibits.   (Incorporated  by  reference  to  Exhibit  4.1  to  the
             Company's Current Report on Form 8-K dated December 22, 1995.)

10.13        Master Clinical  Services  Agreement between the Company and Bracco
             S.p.A. dated January 1, 1997. (Incorporated by reference to Exhibit
             10.1 to the  Company's  Quarterly  Report  on Form  10-QSB  for the
             quarter ended June 30, 1997.)

21.1         List of Subsidiaries of Registrant.

23.1         Consent of Goldstein Golub Kessler & Company, P.C.

27.1         Financial Data Schedule for the year ended September 30, 1997.


----------
*     A management  contract or compensatory plan or arrangement  required to be
      filed as an exhibit pursuant to Item 13(a) of Form 10-KSB.


      (b)   Financial Statement Schedules

            None


                                      -22-
<PAGE>


                                 Bio-Imaging Technologies, Inc. and Subsidiaries


                                                                        CONTENTS
--------------------------------------------------------------------------------


Independent Auditor's Report                                                F-2 

Consolidated Financial Statements:

Balance Sheet                                                               F-3 
Statement of Operations                                                     F-4 
Statement of Stockholders' Equity                                           F-5 
Statement of Cash Flows                                                     F-6 
Notes to Consolidated Financial Statements                            F-7 - F-15

















                                       F-1

<PAGE>


INDEPENDENT AUDITOR'S REPORT



To the Board of Directors
Bio-Imaging Technologies, Inc.


We have audited the  accompanying  consolidated  balance  sheets of  Bio-Imaging
Technologies,  Inc. and  Subsidiaries as of September 30, 1997 and 1996, and the
related consolidated  statements of operations,  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  generally   accepted  auditing
standards.  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 consolidated  financial statements referred to above present
fairly,  in  all  material  respects,  the  financial  position  of  Bio-Imaging
Technologies,  Inc. and  Subsidiaries as of September 30, 1997 and 1996, and the
results  of their  operations  and their  cash flows for the years then ended in
conformity with generally accepted accounting principles.

GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
New York, New York

October 9, 1997


                                       F-2

<PAGE>
<TABLE>
<CAPTION>


                                                       Bio-Imaging Technologies, Inc. and Subsidiaries


CONSOLIDATED BALANCE SHEET


September 30,                                                                 1997            1996
------------------------------------------------------------------------------------------------------

ASSETS

Current Assets:
<S>                                                                       <C>             <C>        
Cash and cash equivalents (Note 1) ...................................    $ 2,367,658     $ 1,377,633
Restricted cash (Note 3) .............................................           --            60,000
Accounts receivable, net of allowance for doubtful accounts of $20,000
   and $60,000 in 1997 and 1996, respectively (Notes 1 and 6) ........      1,214,052         879,183
Prepaid expenses and other current assets ............................         88,518          12,460
------------------------------------------------------------------------------------------------------
Total current assets .................................................      3,670,228       2,329,276
Property and Equipment, net (Notes 1, 2 and 3) .......................      1,669,678       1,198,943
Deferred Income Tax Asset, net of valuation allowance of $1,800,000
   and $2,100,000 in 1997 and 1996, respectively (Note 7) ............           --              --
Other Assets .........................................................         67,076           5,852
------------------------------------------------------------------------------------------------------
Total Assets .........................................................    $ 5,406,982     $ 3,534,071
======================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Deferred revenue (Note 1) ............................................    $   414,360     $   635,562
Accounts payable .....................................................         81,832          74,180
Accrued expenses and other current liabilities .......................        239,351         268,000
Current maturities of long-term debt (Note 3) ........................         87,084          91,382
------------------------------------------------------------------------------------------------------
Total current liabilities ............................................        822,627       1,069,124
Long-term Debt (Note 3) ..............................................         12,794          99,878
------------------------------------------------------------------------------------------------------
Total liabilities ....................................................        835,421       1,169,002
------------------------------------------------------------------------------------------------------
Commitments (Note 5)
Stockholders' Equity (Note 4):
Preferred stock - $.00025 par value; authorized 3,000,000
   shares, issued 416,667 shares ($500,000 liquidation preference) ...            104             104
Common stock - $.00025 par value; authorized 18,000,000 shares,
   issued and outstanding 7,753,878 and 5,968,550 shares in 1997
   and 1996, respectively ............................................          1,939           1,493
Additional paid-in capital ...........................................      9,215,603       7,739,688
Accumulated deficit ..................................................     (4,646,085)     (5,376,216)
------------------------------------------------------------------------------------------------------
Stockholders' equity .................................................      4,571,561       2,365,069
------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity ...........................    $ 5,406,982     $ 3,534,071
======================================================================================================
</TABLE>



See Notes to Consolidated Financial Statements


                                                  F-3

<PAGE>


                             Bio-Imaging Technologies, Inc. and Subsidiaries


CONSOLIDATED STATEMENT OF OPERATIONS


Year ended September 30,                            1997            1996
----------------------------------------------------------------------------

Project revenue (Notes 1, 6 and 8) ...........  $ 5,544,693     $ 3,657,320

Project costs ................................    1,937,872       1,284,180
----------------------------------------------------------------------------

Gross profit .................................    3,606,821       2,373,140

General and administrative expenses ..........    1,788,548       1,258,556

Sales and marketing expenses .................      834,092         623,512

Research and development expenses ............      246,240         133,766
----------------------------------------------------------------------------

Income from operations .......................      737,941         357,306

Interest income ..............................       68,232          48,514

Interest expense (Note 3) ....................      (14,820)        (23,696)
----------------------------------------------------------------------------

Net income ...................................      791,353         382,124

Dividends on preferred stock (Note 4) ........       40,000          31,038
----------------------------------------------------------------------------

Net income applicable to common stock ........  $   751,353     $   351,086
============================================================================

Net income per common share (Note 1) .........  $       .10     $       .06
============================================================================

Weighted average number of common and common
   equivalent shares outstanding (Note 1) ....    7,590,484       6,183,735
============================================================================



See Notes to Consolidated Financial Statements


                                       F-4

<PAGE>
<TABLE>
<CAPTION>


                                                                                    Bio-Imaging Technologies, Inc. and Subsidiaries


CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY


                                                                                          Additional
                                   Preferred      Stock              Common Stock          Paid-in       Accumulated   Stockholders'
                                    Shares        Amount           Shares    Amount        Capital        Deficit         Equity
-----------------------------------------------------------------------------------------------------------------------------------

<S>                                   <C>       <C>             <C>         <C>           <C>           <C>            <C>        
Balance at
September 30, 1995 ............          --         --          5,889,350   $  1,473      $ 7,217,129   $(5,758,340)   $ 1,460,262

Issuance of preferred stock
through private placement
transaction (Note 4) ..........       416,667   $    104             --         --            433,229          --          433,333

Stock options exercised
(Note 4) ......................          --         --             14,200          4           14,446          --           14,450

Issuance of common stock to
employees' savings plan
(Note 5) ......................          --         --             65,000         16           74,884          --           74,900

Net income ....................          --         --               --         --               --         382,124        382,124

-----------------------------------------------------------------------------------------------------------------------------------

Balance at
September 30, 1996 ............       416,667        104        5,968,550      1,493        7,739,688    (5,376,216)     2,365,069

Stock options exercised
(Note 4) ......................          --         --            245,275         61          283,099          --          283,160

Warrants exercised (Note 4) ...          --         --          1,463,334        366        1,124,634          --        1,125,000

Issuance of common stock to
employees' savings plan
(Note 5) ......................          --         --             76,719         19           68,182          --           68,201

Dividends on preferred stock ..          --         --               --         --               --         (61,222)       (61,222)

Net income ....................          --         --               --         --               --         791,353        791,353

-----------------------------------------------------------------------------------------------------------------------------------

Balance at September
30, 1997 ......................       416,667   $    104        7,753,878   $  1,939      $ 9,215,603   $(4,646,085)   $ 4,571,561

===================================================================================================================================
</TABLE>



See Notes to Consolidated Financial Statements


                                                                F-5

<PAGE>
<TABLE>
<CAPTION>


                                                        Bio-Imaging Technologies, Inc. and Subsidiaries


CONSOLIDATED STATEMENT OF CASH FLOWS


Year ended September 30,                                                        1997            1996
-------------------------------------------------------------------------------------------------------
<S>                                                                         <C>            <C>        
Cash flows from operating activities:
Net income ..............................................................   $   791,353    $   382,124
Adjustments to reconcile net income to net cash
provided by operating activities:
  Depreciation and amortization .........................................       651,775        533,773
  (Reduction of) provision for losses on accounts receivable ............       (40,000)        35,000
  Stock contribution to employees' savings plan (Note 5) ................        68,201         74,900
  Changes in operating assets and liabilities:
    Increase in accounts receivable .....................................      (294,869)      (416,317)
    (Increase) decrease in prepaid expenses and other current assets ....       (76,058)        28,005
    (Increase) decrease in other assets .................................       (61,224)         2,335
    Decrease in deferred revenue ........................................      (221,202)       (19,271)
    Increase (decrease) in accounts payable .............................         7,652        (11,204)
    (Decrease) increase in accrued expenses and other current liabilities       (28,649)       143,562
-------------------------------------------------------------------------------------------------------
Net cash provided by operating activities ...............................       796,979        752,907
-------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
  Purchases of property and equipment ...................................    (1,122,510)      (400,353)
  Decrease in restricted cash ...........................................        60,000         60,000
-------------------------------------------------------------------------------------------------------
Net cash used in investing activities ...................................    (1,062,510)      (340,353)
-------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
  Repayment of loan payable .............................................          --          (86,852)
  Payments under equipment lease obligations ............................       (91,382)      (100,536)
  Dividends paid to preferred stockholders ..............................       (61,222)          --
  Net proceeds from private placement of preferred stock (Note 4) .......          --          433,333
  Proceeds from exercise of stock options ...............................       283,160         14,450
  Proceeds from exercise of warrants ....................................     1,125,000           --
-------------------------------------------------------------------------------------------------------
Net cash provided by financing activities ...............................     1,255,556        260,395
-------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents ...............................       990,025        672,949
Cash and cash equivalents at beginning of year ..........................     1,377,633        704,684
-------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year ................................   $ 2,367,658    $ 1,377,633
=======================================================================================================

Supplemental disclosure of cash flow information:
  Cash paid during the year for interest ................................   $    14,820    $    23,696
=======================================================================================================

Supplemental schedule of noncash investing
and financing activities:
  Equipment purchased under capital lease obligations ...................   $      --      $    59,381
=======================================================================================================
</TABLE>



See Notes to Consolidated Financial Statements

                                                  F-6

<PAGE>


Bio-Imaging Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements


1.  PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------

The  accompanying  consolidated  financial  statements  include the  accounts of
Bio-Imaging Technologies, Inc. ("BIT") and its wholly owned subsidiaries, Oxford
Bio-Imaging   Research,   Inc.  and   Bio-Imaging   Technologies   Holding  B.V.
(collectively  the "Company").  All significant  intercompany  transactions  and
balances have been eliminated.

During 1997,  Bio-Imaging  Technologies  Holding B.V.  was  incorporated  in the
Netherlands as a holding  company for its wholly owned  subsidiary,  Bio-Imaging
Technologies, B.V. ("BIT B.V.").

The Company is a biomedical  information  technology  and service  company which
provides  medical image  processing,  digital image and clinical data management
services and  software  applications  to the  biotechnology  and  pharmaceutical
industries located in the United States and Europe.  The Company  specializes in
the  processing  and  analysis of medical  images,  and in the  data-basing  and
regulatory  submission of medical images,  related text,  quantitative  data and
document-based information obtained from clinical trials.

Project  revenue is recognized when services are performed and the related costs
are incurred.  Deferred  revenue is recorded when cash is received  prior to the
performance of services.  Unbilled receivables are billed upon the completion of
milestones  as  defined  in  specific  contracts.  Accounts  receivable  include
approximately  $644,000 and $647,000 of unbilled  receivables  at September  30,
1997 and 1996, respectively.

The  Company   capitalizes   software   development  costs  after  technological
feasibility  has been determined and ceases  capitalization  at such time as the
end product is available for general release to the public. The establishment of
technological  feasibility  and the  ongoing  assessment  of  recoverability  of
capitalized  software   development  costs  require  considerable   judgment  by
management with respect to certain external factors  including,  but not limited
to, anticipated future revenue,  estimated economic life and changes in software
and hardware  technologies.  At September 30, 1997,  management has estimated an
economic  useful  life  of  30  months  and  is  amortizing  these  costs  on  a
straight-line  basis  over this  period.  The  amortization  period is  reviewed
annually by management.

Depreciation  of property and  equipment  is provided  for by the  straight-line
method over the estimated useful lives of the respective assets. Amortization of
leasehold improvements is provided for over the related lease term.


                                       F-7

<PAGE>


Bio-Imaging Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements


Net income per common share is calculated based upon the weighted average number
of common shares and dilutive  common  equivalent  shares  outstanding.  For the
years ended  September 30, 1997 and 1996, the weighted  average number of common
and common equivalent shares amounted to 7,590,484 and 6,183,735,  respectively.
In March 1997,  the Financial  Accounting  Standards  Board issued SFAS No. 128,
Earnings Per Share ("SFAS 128"),  which is effective  for  financial  statements
with fiscal years ending after  December 15, 1997. Pro forma Earnings per Common
Share computed in accordance with SFAS 128 are as follows:


Year ended September 30,                  1997        1996
-----------------------------------------------------------
Basic earnings per share..............   $ .12       $ .06
Diluted earnings per share ...........   $ .10       $ .06


The  Company   maintains   substantially  all  of  its  cash  in  one  financial
institution.  To the extent that such cash exceeds the maximum  insurance level,
it is uninsured.

The Company has defined cash  equivalents as highly liquid  investments  with an
original maturity of three months or less.

The  consolidated  financial  statements  have been prepared in conformity  with
generally accepted  accounting  principles which require the use of estimates by
management.

For  comparability,   certain  1996  amounts  have  been   reclassified,   where
appropriate, to conform to the financial statement presentation used in 1997.

In June  1997,  Financial  Accounting  Standards  Board  issued  SFAS  No.  130,
Reporting  Comprehensive Income ("SFAS 130") and SFAS No. 131, Disclosures about
Segments  of an  Enterprise  and Related  Information  ("SFAS  131"),  which are
effective for financial  statements  with fiscal years  beginning after December
15, 1997. Management has not determined the effect, if any, the adoption of SFAS
130 and SFAS 131 will have on its financial position or results of operations.


                                       F-8

<PAGE>


Bio-Imaging Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements


2.  PROPERTY AND EQUIPMENT
--------------------------

Property and equipment, at cost, consists of the following:


                                                                   Estimated
September 30,                            1997          1996       Useful Life
-----------------------------------------------------------------------------
Imaging equipment................   $ 2,975,461   $ 2,026,010         5 years
Equipment under capital leases...       565,319       565,319         5 years
Furniture and fixtures...........       227,877       131,471         7 years
Leasehold improvements...........        84,060        50,843   Term of lease
Computer software costs..........       143,436       100,000       30 months
-----------------------------------------------------------------------------
                                      3,996,153     2,873,643
Less accumulated depreciation
and amortization.................    (2,326,475)   (1,674,700)
=============================================================================
                                    $ 1,669,678   $ 1,198,943
=============================================================================


Accumulated  depreciation  related to equipment  acquired  under capital  leases
amounted to approximately  $401,000 and $288,000 at September 30, 1997 and 1996,
respectively.

Accumulated   amortization  related  to  computer  software  costs  amounted  to
approximately $59,000 and $17,000 at September 30, 1997 and 1996, respectively.


3.  LONG-TERM DEBT
------------------

Long-term  debt consists of equipment  lease  obligations.  The equipment  lease
obligations are payable in monthly  installments  ranging from $1,691 to $5,277,
including  interest at rates  ranging from 8.78% to 10.46%,  through April 1999.
The debt is collateralized  by the related  equipment.  During 1997,  additional
collateral  consisting of a certificate of deposit,  bearing  interest at 5.13%,
was released by the lessor.

Aggregate maturities of long-term debt at September 30, 1997 are as follows:


Year ending September 30,
------------------------------------------------------
              1998.......................   $  87,084
              1999.......................      12,794
======================================================
                                            $  99,878
======================================================


                                       F-9

<PAGE>


Bio-Imaging Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements


4.  STOCKHOLDERS' EQUITY
------------------------

In June 1992, the Company  completed a public  offering of 1,000,000 units at $5
per unit.  Each  unit  consisted  of one  share of common  stock and one Class G
warrant  entitling  the  holder to  purchase  one  share of  common  stock at an
exercise  price of $5.50.  The warrants  expired  during June 1996.  The Company
received  approximately  $3,736,000 after deducting  underwriting  discounts and
expenses of the offering of approximately $1,264,000.

In  addition,  in  June  1992,  the  Company  issued  purchase  options  to  the
underwriter of the Company's public offering.  The purchase options entitled the
holders to purchase,  in  aggregate,  100,000  units of the  Company.  Each unit
consisted of one share of common stock of the Company and one Class G redeemable
common stock purchase warrant.  The purchase options were initially  exercisable
at $7.00 per unit and  contained  certain  anti-dilution  provisions.  After the
effect of these provisions, the Company was obligated to issue 699,999 shares of
common stock upon the exercise of these units at an adjusted  price of $1.00 per
share. On June 18, 1997,  630,000 of these units were exercised with the balance
of the units  expiring on that date.  Upon such exercise,  the Company  received
gross proceeds of $630,000.

In  December  1991  and  June  1992,  the  Company's   Board  of  Directors  and
stockholders,   respectively,   approved   the   adoption  of  the   Bio-Imaging
Technologies,  Inc.  Stock  Option Plan.  In January 1995 and 1997,  the Company
amended  this plan to provide  for the  granting  of  options to key  employees,
directors and  consultants  to purchase an aggregate of not more than  1,800,000
and 2,400,000 shares,  respectively,  of the Company's common stock. Each option
is exercisable  into one share of common stock.  Options granted pursuant to the
plan,  to be  granted  at prices  not less than fair value at the date of grant,
consist of qualified incentive stock options, as defined in the Internal Revenue
Code, and nonqualified options.


                                      F-10

<PAGE>


Bio-Imaging Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements


The following table summarizes the transactions  pursuant to the Company's stock
option plan for the two-year period ended September 30, 1997:


                                             Number of      Weighted Average
                                              Options        Exercise Price
------------------------------------------------------------------------------
Unexercised options outstanding at
September 30, 1995.........................   1,194,500           $  1.90
Options granted............................     406,500              0.69
Options canceled...........................     (85,300)             1.08
Options exercised..........................     (14,200)             1.02
------------------------------------------------------------------------------
Unexercised options outstanding at
September 30, 1996.........................   1,501,500              1.63
Options granted............................     529,000              1.29
Options canceled...........................    (300,225)             2.56
Options exercised..........................    (245,275)             1.15
==============================================================================
Unexercised options outstanding at
September 30, 1997.........................   1,485,000           $  1.40
==============================================================================


Approximately  943,000 and 1,192,000  options are  exercisable  at September 30,
1997 and 1996,  respectively,  at a weighted average exercise price of $1.58 and
$1.85, respectively.

The Company has elected,  in  accordance  with the  provisions  of SFAS No. 123,
Accounting  for  Stock-Based  Compensation  ("SFAS  123"),  to apply the current
accounting  rules  under APB  Opinion  No. 25,  Accounting  for Stock  Issued to
Employees,  and related interpretations in accounting for its stock options and,
accordingly,  has presented the disclosure-only  information as required by SFAS
123. If the Company had elected to recognize compensation cost based on the fair
value of  options  granted  at the grant  date as  prescribed  by SFAS 123,  the
Company's net income  (loss) and earnings  (loss) per common stock for the years
ended  September  30,  1997 and 1996  would  approximate  the pro forma  amounts
indicated in the following table:


<TABLE>
<CAPTION>

Year ended September 30,                                          1997           1996
----------------------------------------------------------------------------------------
<S>                                                             <C>          <C>
Net income applicable to common stock - as reported..........   $ 751,353    $  351,086
Net income  (loss)  applicable to common stock - pro forma...   $ 176,635    $ (246,361)
Net income per common share - as reported....................   $    0.10    $     0.06
Net income (loss) per common share - pro forma...............   $    0.02    $    (0.04)

(No tax effect given to pro forma data.)
</TABLE>


                                      F-11

<PAGE>


Bio-Imaging Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements


At  September  30,  1997,  by range of  exercise  prices,  the  number of shares
represented  by  outstanding  options and warrants with their  weighted  average
exercise price and weighted average  remaining  contractual  life, in years, and
the number of shares represented by exercisable  options and warrants with their
weighted average exercise price are as follows:


                                                 Weighted Average
--------------------------------------------------------------------------------
                     Outstanding                         Exercisable
  Exercise Price      Shares         Price      Life       Shares       Price
--------------------------------------------------------------------------------
 $ 0.63 - $ 1.44      1,971,095     $ 0.90       5.4      1,429,293     $ 0.83
 $ 4.13 - $ 4.69        152,000       4.60       4.7        152,000       4.60


The weighted average fair value of options and warrants granted in 1997 and 1996
were  $1.09 and $0.46  respectively.  The fair value of each  option  granted is
estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions:


Grants for the year ended September 30,        1997           1996
-------------------------------------------------------------------
Risk-free interest rate.....................    5.5%           6.0%
Expected dividend yield.....................    0.0%           0.0%
Expected volatility.........................   1.09           1.08
Expected life...............................   6.00           6.00

On  October  13,  1994,   the  Company  and  Covance  Inc.,   formerly   Corning
Pharmaceutical  Services,  Inc., consummated the purchase by Covance Inc. of (i)
2,355,000 shares of the Company's common stock, $.00025 par value (ii) a warrant
to purchase  250,000  shares of common stock with an initial  exercise  price of
$1.25 per share and (iii) a warrant to purchase  250,000  shares of common stock
with an  initial  price of $1.50 per share  (the  "Warrants")  for an  aggregate
purchase  price of $1,819,500.  The Warrants  expire on October 13, 1998 and are
subject  to  adjustment  to  protect  against  dilution  in the event of certain
transactions. The exercise price of the Warrants is subject to price adjustment,
as defined.  After the effect of the  anti-dilution  provisions,  the Company is
obligated  to issue  571,428  shares of common  stock upon the exercise of these
warrants at an adjusted exercise price of $.63.

In November 1994, the Company issued to Loats Associates,  Inc. 50,000 shares of
the  Company's  common stock which have certain  piggyback  registration  rights
pursuant to the terms of a license  agreement.  No expense was  incurred  and no
payments were made to the licensor in 1997 and 1996.


                                      F-12

<PAGE>


Bio-Imaging Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements


On December 14, 1995,  the Company  reserved  3,850,000  shares of the Company's
common stock for issuance upon conversion of the Preferred Stock and exercise of
the warrants issued to Investment Partners of America, L.P. ("IPA") (see below).

On  December  21,  1995,  IPA  purchased  (i)  416,667  shares of the  Company's
preferred  stock,  (ii) one five year warrant to purchase  416,667 shares of the
Company's common stock at an initial exercise price of $1.50 per share and (iii)
one five year warrant to purchase  416,667 shares of the Company's  common stock
at an initial exercise price of $2.50 per share for an aggregate  purchase price
of $500,000  pursuant to a purchase  agreement dated December 8, 1995 ("Purchase
Agreement").  Costs associated with this  transaction  amounted to approximately
$67,000  and reduced  paid-in  capital at the  transaction  date.  The  Purchase
Agreement provided for a minimum investment of $750,000 and a maximum investment
of $1,500,000  from IPA. On September 25, 1997, IPA exercised  these warrants at
an adjusted  exercise  price of $.63,  after giving effect to the  anti-dilution
provisions. As a result, the Company received gross proceeds of $525,000.

On June 26, 1996,  the Company and IPA  terminated  the Purchase  Agreement.  In
conjunction  with this  termination,  the Company  issued to IPA, one  five-year
warrant to purchase  66,667 shares of the  Company's  common stock at an initial
exercise price of $1.05 per share, the fair market value of the Company's common
stock at date of  issuance.  Additionally,  the Company  entered into a two-year
consulting  agreement with Investment  Partners Capital and Management  Corp., a
related  investment  entity of IPA, for a nonrefundable fee of $30,000 which has
been  expensed by the Company as of September  30, 1996.  The exercise  price of
this warrant issued to IPA is subject to adjustment to protect against  dilution
in the event of certain  transactions  and has  certain  piggyback  registration
rights.  As of September 30, 1997, the adjusted exercise price of the warrant is
$.63.

The 8% convertible  cumulative  preferred stock is convertible into common stock
of the Company on a  one-for-one  share basis  subject to  adjustment to protect
against dilution in the event of certain  transactions.  Conversion may occur in
whole or in part during the first five-year  period from the date of issuance at
the option of the holder.  The Company may require a full conversion at any time
after  five  years  from date of  issuance.  The  preferred  stock  has  certain
piggyback registration rights.

The Company is required to pay  semiannual  dividends on preferred  stock at the
rate  of $.10  per  share  per  annum,  and as when  declared  by the  Board  of
Directors.  Dividends are payable in cash or in the Company's  common stock.  At
September  30, 1997,  preferred  dividends in arrears  aggregated  approximately
$10,000 or $.02 per share of the preferred stock.


                                      F-13

<PAGE>


Bio-Imaging Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements


The preferred  stockholders are entitled to vote on all matters submitted to the
vote of the common  stockholders  and are  included in  determining  quorums and
voting results.


5.  COMMITMENTS
---------------

The  Company  has  entered  into  noncancelable   operating  leases  for  office
facilities which expire through February 2000.

Future minimum  aggregate  rental payments on the  noncancelable  portion of the
lease are as follows:


Year ending September 30,
          1998.............................   $ 170,000
          1999.............................      75,000
          2000.............................      21,000
-------------------------------------------------------
                                              $ 266,000
=======================================================


Rent expense  charged to operations  for the years ended  September 30, 1997 and
1996 amounted to approximately $210,000 and $139,000, respectively.

On December 17, 1991, the Company  adopted the  Bio-Imaging  Technologies,  Inc.
Employees' Savings Plan (the "401(k) Plan"), a defined  contribution plan with a
cash or  deferred  arrangement.  Under the terms of the  401(k)  Plan,  eligible
employees may elect to reduce their annual compensation up to 15%, subject to an
annual limit prescribed by the Internal  Revenue Service.  During June 1997, the
401(k) Plan was amended to limit discretionary Company matching contributions to
cash. Previously, the Company could make discretionary matching contributions in
cash or common stock.

The Company  made  matching  contributions  to the account of the 401(k) Plan of
76,719 and 65,000 shares of its common stock during September 1997 and September
1996, respectively. These shares were newly issued shares previously reserved in
November 1994.

The  Company's  matching  contributions  to the 401(k)  Plan for the years ended
September  30, 1997 and 1996  amounted  to  approximately  $81,000 and  $75,000,
respectively.


                                      F-14

<PAGE>


Bio-Imaging Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements


The Company has an employment contract with an officer which expires January 30,
1998. The amount due under this contract is approximately $58,000. Additionally,
the contract  provides for the granting of options to purchase 250,000 shares of
the Company's common stock at fair market value at the date of grant. Options to
purchase 50,000 shares of the Company's  common stock vested  immediately,  with
the balance vesting in equal amounts over five years from the date of grant.


6.  MAJOR CUSTOMERS
-------------------

At September 30, 1997, two customers  accounted for approximately 45% and 16% of
accounts receivable.

At September 30, 1996, four customers  accounted for approximately 32%, 25%, 12%
and 11% of accounts receivable.

For the  year  ended  September  30,  1997,  revenue  from two  major  customers
accounted for approximately 34% and 13% of project revenue.

For the year ended  September  30,  1996,  revenue  from three  major  customers
accounted for approximately 22%, 18% and 12% of project revenue.


7.  INCOME TAXES
----------------

The Company has net operating loss  carryforwards  of  approximately  $4,500,000
which expire in various years through  2011.  The deferred  income tax assets at
September 30, 1997 and 1996  represent the tax effect of the net operating  loss
carryforwards.  Due to the  uncertainty  regarding the ultimate amount of income
tax  benefits  to be derived  from the net  operating  loss  carryforwards,  the
Company has recorded valuation allowances against the entire deferred tax asset.


8.  FOREIGN OPERATIONS
----------------------

For the year ended September 30, 1997, the Company recognized  approximately 38%
of project revenue from foreign customers.

BIT B.V.  maintains an office in the  Netherlands.  For the year ended September
30, 1997, BIT B.V.  recognized  approximately  $679,000 of project  revenue from
services  provided to unaffiliated  customers.  For the year ended September 30,
1997, net income from operations was approximately $10,000.

At September 30, 1997,  identifiable  operating assets of BIT B.V.  approximated
$545,000.


                                      F-15