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, 1998
                           Commission File No. 1-11182

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

          Delaware                                        11-287204
-----------------------------               ------------------------------------
(State or Other Jurisdiction                (I.R.S. Employer Identification No.)
of 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,  1998:
$3,599,313


     State the aggregate market value of the voting stock held by non-affiliates
of the  Registrant:  $2,214,564 at October 31, 1998 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, 1998:

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 1999 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....................................9

         6.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations...................11

         7.  Financial Statements..................................17

         8.  Changes in and Disagreements with Accountants on
             Accounting and Financial Disclosure...................17

PART III 9.  Directors, Executive Officers, Promoters and Control
             Persons; Compliance with Section 16 (a) of the
             Exchange Act..........................................18

         10. Executive Compensation................................18

         11. Security Ownership of Certain Beneficial Owners
             and Management........................................18

         12. Certain Relationships and Related Transactions........18

         13. Exhibits, List and Reports on Form 8-K................18

SIGNATURES   ......................................................19

EXHIBIT INDEX......................................................21

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



                                      -i-
<PAGE>

                                     PART I

ITEM 1.     BUSINESS.

GENERAL

     Bio-Imaging   Technologies,   Inc.   ("Bio-Imaging   Technologies"  or  the
"Company") is a pharmaceutical  contract service organization providing services
that   support  the   product   development   process  of  the   pharmaceutical,
biotechnology  and  medical  device  industries.   The  Company  specializes  in
assisting  its  clients  in the  design and  management  of the  medical-imaging
component of clinical trials.  The Company  provides  services which include the
processing  and analysis of medical  images and the  data-basing  and regulatory
submission of medical images, quantitative data and text.

     The Company  utilizes  proprietary  processes and software  applications in
providing its services to pharmaceutical  companies  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.  In addition,  the Company has developed specialized computer services
and software applications that enable independent radiologists and other medical
specialists  involved  in  clinical  trials to review  medical  image data in an
entirely digital format.

     The  Company  continues  to believe  that it is at an early stage of market
penetration  and is directing  its  marketing  and sales  efforts  towards those
clinical development areas that heavily depend upon medical imaging. These areas
include oncology,  central nervous system,  anti-inflammatory and cardiovascular
therapeutics and diagnostics.

     In February  1997, the Company  opened a European  facility in Leiden,  the
Netherlands  to provide  centralized  image  processing  services  for  European
clients.  The Company  manages its services for European based  clinical  trials
from this facility. The Company's European facility has the same capabilities as
the Company's U.S. headquarters.


     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.


                                      -1-
<PAGE>

BUSINESS SERVICES

     Core Laboratory Services

     Bio-Imaging   Technologies  is  a  leading   provider  of  medical  imaging
management  services for clinical  development  purposes.  The Company's imaging
core laboratory facilities in the U.S. and Europe provide centralized image data
collection,  processing,  analysis  and archival  services  for clinical  trials
conducted worldwide.  The facilities 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 these  facilities  from clinical  trial sites,
typically 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 facilities contain specialized hardware and
software for the  translation of digital data or the  digitization  of films, so
that  all  data can be  standardized,  regardless  of its  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  performs image analyses on its clients' data using  internally
developed or specially configured software.  The Company measures key indicators
of drug  efficacy in different  organs and disease  states.  The image  analysis
results  derived in its  facilities  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.

     Information Management Services

     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(TM)") systems offer numerous advantages over conventional
film-based medical image reading scenarios,  including  increased reading speed,
greater  standardization  of image reading,  and reduced error in the capture of
reader interpretations.

     Using the Company's CAMR(TM) systems,  independent  medical specialists can
review medical image data from clinical trials in a digital format. The CAMR(TM)
systems  can  display  all  modalities  of imaging  data,  regardless  of source
equipment.  In addition,  the systems 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
for  studies.  By using the CAMR(TM)  systems 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 also developed CAMR(TM) systems which are

                                      -2-
<PAGE>
located on the premises of the individual medical  specialists who are chosen by
the sponsor to perform the analysis of the medical image data.

     The  Company  has  developed  a   proprietary   image   database   software
application,  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) allows 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 results 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 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  technical  consulting in the evaluation of the sites
that may participate in clinical trials.  The Company also consults with clients
regarding  regulatory  issues  involved in the design,  execution,  analysis and
submission of imaging data of the trials.

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 leading international  pharmaceutical  companies and
biotechnology  companies  with  products  currently in the clinical  development
pipeline.

     Bio-Imaging  Technologies  focuses its marketing on the following stages of
clinical development:

     Phase II Clinical Trials

     Phase II clinical trials are generally  conducted over one to two years and
involve basic efficacy  (effectiveness)  and dose-range testing in approximately
50 to 400 patients  suffering  from the disease or condition  under study.  Such
trials help  determine the best effective  dose,  confirm that the drug works as
expected and provide additional safety data.

     Phase III Clinical Trials

     Phase III clinical  trials are generally  conducted over two to three years
and involve  efficacy and safety  studies in broader  populations of hundreds or
thousands of patients and many  investigational  sites  (hospitals and clinics).
Generally,  Phase III studies are intended to provide

                                      -3-
<PAGE>
additional  information  on drug  safety  and  efficacy,  an  evaluation  of the
risk-benefit  of the drug  and  information  for the  adequate  labeling  of the
product.

     Bio-Imaging  Technologies  focuses its marketing efforts on clinical trials
for the following classes of drugs:

     Cancer Therapeutics

     Many  pharmaceutical  companies are currently  developing new therapies 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  the extent of disease  and changes in tumor size
over time.

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

     Central Nervous System Therapeutics

     Various  pharmaceutical   companies  are  currently  developing  drugs  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 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.

     Diagnostic Imaging Agents

     Bio-Imaging  Technologies  provides  its  services  to  clients  developing
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.

     Anti-Inflammatory Therapeutics

     Anti-inflammatory  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
services will increase as new classes of  biotechnology-derived  drugs enter and
progress through the clinical development pipeline.


                                      -4-
<PAGE>

     Cardiovascular Therapeutics

     Various  pharmaceutical  companies are currently  developing  drugs for the
diagnosis  and treatment of  cardiovascular  diseases and  conditions  which are
evaluated with the aid of medical imaging.  The Company provides its services to
clients  developing  diagnostic  agents for the detection and treatment of these
conditions.

MARKET TRENDS

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

     o   The FDA initiatives to streamline the regulatory  submission and review
         process which are being implemented  should have a beneficial impact on
         the Company. The FDA is investing in new information technology and has
         begun the  process of  formulating  and  disseminating  guidelines  for
         standardizing  the  submission of electronic  data,  including  medical
         images.   The  Company  expects  submission  of  image  data  to  be  a
         requirement in key therapeutic and diagnostic  areas for evaluating the
         effectiveness of a drug or imaging agent.

     o   Consolidation,  restructuring  and  downsizing  in  the  pharmaceutical
         industry in response to downward pressure on certain pharmaceutical and
         biotechnology   companies'   drug  prices  has  resulted  in  increased
         outsourcing of certain research and development activities.  Currently,
         over $4  billion  in  research  services  are  outsourced  to  contract
         clinical  research  organizations.  Industry  estimates place growth of
         outsourcing  between  20% to 30% per year for at least  the next  three
         years.

     o   Growth in  pharmaceutical  and  biotechnology  research and development
         spending is fairly non-cyclical. As a result, the Company believes that
         outsourcing of development activities should continue to remain steady.

     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.  In addition,  digital  technologies for data acquisition and
         management are rapidly penetrating the radiology community.

     o   As pharmaceutical and biotechnology  companies  increasingly attempt to
         expand  the  market  for new drugs by  conducting  clinical  trials and
         pursuing  regulatory  approval  in multiple  countries  simultaneously,
         contract  service  organizations  with an  international  presence  and
         expertise  will  continue  to  benefit.  The  Company  believes  it  is
         well-positioned to take advantage of these trends due to its U.S.
         and European operations.

                                      -5-
<PAGE>

     o   The Company also believes  that,  because its development  services are
         specialized,  it is often able to perform these  services with a higher
         level of expertise or specialization  more quickly and efficiently than
         a pharmaceutical or biotechnology company could perform internally.

INTELLECTUAL PROPERTY

     Proprietary  protection  for  the  Company's   computer-imaging   programs,
processes  and know-how is important to its business.  Bio-Imaging  Technologies
has developed  certain  technically  derived  procedures  and computer  software
applications  that are intended to increase the effectiveness and quality of its
services.  The  Company  relies  upon trade  secrets,  know-how  and  continuing
technological  innovation to develop and maintain its competitive position.  The
Company has obtained registered  trademark  protection for the  Bio/ImageBase(R)
and has claimed trademark protection for the CAMR(TM). Furthermore,  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. Although the Company's
intellectual property rights are important to the results of its operations, the
Company  believes that other factors such as  independence,  process  knowledge,
technical expertise and experience are more important,  and that, overall, these
technological capabilities offer significant benefits to its clients.

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  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 the  continued
acceptance by the FDA and other regulatory authorities which review the data and
analyses generated by the Company's services in the evaluation of the safety and
efficacy of new drugs and devices. 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

                                      -6-
<PAGE>

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 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  in March 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.

     In October 1998, the FDA released a draft guidance for industry relating to
how medical imaging should be defined, handled and evaluated in clinical trials.
The Company believes that the guidance  document comports with the methodologies
and  processes  utilized  by  the  Company  in  providing  medical   information
management services for its clients.

     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 sign of growth in the clinical trials-related medical imaging services
business,  the Company  continues to experience an increase in competition  from
commercial  competitors and academic research centers.  Over the past two years,
several  conventional  contract  research  organizations  have either started or
acquired  divisions  to address  the need for  medical  imaging  services  as it
relates to clinical trials. As competition increases,  Bio-Imaging  Technologies
will look to provide  value-added  services and  undertake  marketing  and sales
programs to differentiate  its services based on its expertise and experience in
specific  therapeutic  and diagnostic  areas,  its  technological  expertise and
regulatory and clinical development experience,  its quality performance and its
international  capabilities.  Competition in the Company's industry has resulted
in additional pressure being placed on price, service and quality.  Although the
Company  believes that it is well positioned  against its competitors due to its
experience  in  clinical  trials  and  regulatory   compliance  along  with  its
international presence, there can be no assurance that the Company's competitors
or clients  will not  provide or develop  services  similar or superior to those
provided 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

                                      -7-
<PAGE>

retain  qualified  personnel  and develop and preserve  proprietary  technology,
processes and know-how.

MARKETING AND SALES

     Bio-Imaging   Technologies   provides   and  markets  its  services  on  an
international basis primarily to pharmaceutical and biotechnology companies. The
Company's  sales and marketing  activities are performed by 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 are directed from both of the Company's  headquarters  in
New Jersey and Leiden,  The  Netherlands.  The  Company's  marketing  activities
include  exhibiting at major trade shows,  advertising in trade journals and the
sponsoring  of  industry   associations.   The  Company  continues  to  evaluate
appropriate  co-marketing activities and strategic alliances, in particular with
contract  research  organizations,  to  augment  its  own  business  development
efforts.

SIGNIFICANT CLIENTS

     During  fiscal 1998,  two clients,  including  one  European-based  client,
accounted for  approximately  50% of the  Company's  project  revenues.  The one
European-based  client represented  approximately 26% of such revenues while the
other client represented approximately 24% of such revenues. 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, 1998,  the Company had 35 employees,  three of whom are
officers of the Company.

     Of the Company's  employees as of September  30, 1998,  six were engaged in
sales and marketing,  24 were engaged in client  related  projects and five were
engaged in administration and management.  A significant number of the Company's
management  and   professional   employees   have  prior  industry   experience.
Bio-Imaging  Technologies  believes  that it has been  successful  in attracting
skilled and experienced  personnel,  however,  competition for such personnel is
intensifying.  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  officers.   See  "Item  10.  Executive
Compensation."  Bio-Imaging  Technologies considers relations with its employees
to be good.


                                      -8-
<PAGE>
ITEM 2.     PROPERTIES.

     The Company leases  approximately 9,100 square feet of office space in West
Trenton, New Jersey. The lease expires November 30, 1999 and provides for a base
rent of  approximately  $9,800 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  $7,200 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.

     The Company is not a party to any material legal proceedings.

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

     None.


                                     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,
1996  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, 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
          December 31, 1997                  1.844       0.50
          March 31, 1998                     0.781       0.531
          June 30, 1998                      1.938       0.50
          September 30, 1998                 1.00        0.438

                                      -9-
<PAGE>

     On August 25, 1998, the Company received  notification from Nasdaq that the
Company's  Common Stock was trading below the minimum bid price  requirement  of
$1.00 required for continued listing on the Nasdaq SmallCap Market. As a result,
the Company  had until  November  25,  1998 for its Common  Stock to trade at or
above the minimum  requirement  for at least  10-consecutive  trade  days.  This
notification  was based on review of the Company's  Common Stock trading history
with respect to the closing bid for the previous thirty  consecutive  trade days
from the  date of  notification.  The  Company's  Common  Stock  did not  regain
compliance  before  November 25,  1998.  Therefore,  on November  23, 1998,  the
Company  requested  a hearing,  by written  submission,  from Nasdaq and further
requested  a stay of any  termination  proceeding  pending  the  outcome of such
hearing. On December 8, 1998, Nasdaq notified the Company that such hearing will
be held on January  14, 1999 and that the  delisting  action  referenced  in the
August 25, 1998  letter  from Nasdaq has been stayed  until such time the Nasdaq
Hearing  Panel renders its decision.  There can be no assurance,  however,  that
Nasdaq  will grant the  Company's  request for  continued  listing on the Nasdaq
SmallCap Market or that the Company will be able to maintain compliance with the
Nasdaq requirements for continued listing in the future.

     In the event that Company's  Common Stock ceases to be listed on the Nasdaq
SmallCap Market, the Company believes that its Common Stock would continue to be
quoted and traded in either the OTC  Bulletin  Board or on the  over-the-counter
market. However, the Company believes that the marketability of its Common Stock
would be  negatively  impacted if moved to either the OTC Bulletin  Board or the
over-the-counter market. A decrease in the marketability of the Company's Common
Stock may cause a decline in the Company's stock price. The Company is currently
exploring possible courses of actions and evaluating alternatives to comply with
Nasdaq's new continued listing requirements. There can be no assurance, however,
that pursuing  available  alternatives  will result in the  Company's  continued
listing with the Nasdaq SmallCap Market.

     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, 1996
as reported on the BSE.


          Quarter                                Common
           Ended                                  Stock
           -----                                  -----

                                             High        Low
                                             ----        ---

          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
          December 31, 1997                  1.719       0.3125
          March 31, 1998                     0.75        0.375
          June 30, 1998                      1.625       0.375
          September 30, 1998                 1.00        0.375


                                      -10-
<PAGE>
     As of October 31, 1998, the approximate  number of holders of record of the
Common Stock was 113 and the  approximate  number of  beneficial  holders of the
Common Stock was 1,375.

     The Company has 416,667 shares of Series A Preferred  Stock (the "Preferred
Stock")  outstanding.  The Preferred  Stock provides for (i) voting rights on an
as-converted to Common Stock basis, with standard protective provisions;  (ii) a
liquidation  preference of $1.20 per share; (iii)  anti-dilution  protection and
price protection  provisions;  (iv) cumulative dividends of $0.096 per share per
annum,  payable out of funds legally  available for the payment of dividends and
only upon declaration of dividends by the Board of Directors of the Company; and
(v) registration rights with respect to the shares of Common Stock issuable upon
conversion  of the  Preferred  Stock.  Dividends  are  payable in cash or in the
Company's Common Stock at the Company's discretion.

     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. The Company expects that any earnings which the Company
may realize and which are not paid as dividends  to holders of  Preferred  Stock
will be retained to finance the growth of the Company.


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

OVERVIEW

     Bio-Imaging  Technologies is a pharmaceutical contract service organization
providing  services  that  support  the  product   development  process  of  the
pharmaceutical,   biotechnology  and  medical  device  industries.  The  Company
specializes  in  assisting  its  clients  in the design  and  management  of the
medical-imaging  component of clinical  trials.  The Company  provides  services
which include the processing and analysis of medical images and the  data-basing
and regulatory submission of medical images, quantitative data and text.


     The Company's sales cycle (the period from the  presentation by the Company
to a  potential  client to the  engagement  of the  Company  by such  client) is
approximately nine months. In addition, the contracts under which the Company is
engaged to perform  services  typically  cover a period of 12-24  months and the
volume and type of services  performed by the Company  generally vary during the
course of a project.  In an effort to obtain  additional  contracts and generate
additional  revenue,  the Company has increased its sales and marketing  efforts
during the past fiscal year. As of September 30, 1998, the Company believes that
the results of these efforts have not yet been fully  realized given the lengthy
sales  cycle and the nature and timing of the  services  to be  provided  by the
Company on current and prospective contracts. Although the Company's client base
increased  from 22 clients in fiscal  1997 to 25  clients  in fiscal  1998,  the
revenue generated from such client base remains highly concentrated. Two clients
comprised

                                      -11-
<PAGE>

approximately 50% of the Company's project revenue during fiscal 1998. Of the 25
clients in fiscal 1998, 13 are new clients.

     Despite  lower  project  revenue  for fiscal  1998 as compared to the prior
year, the Company  believes that demand for its services and  technologies  will
grow  during  the  longer  term  as the use of  digital  technologies  for  data
acquisition  and  management  increases in the  radiology  and drug  development
communities.  The  Company  also  believes  that there is a growing  recognition
within  the  bio-pharmaceutical  industry  regarding  the use of an  independent
centralized core laboratory for analysis of medical imaging data that is derived
from clinical trials and the rigorous  regulatory  requirements  relating to the
submission  of  this  data.  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,  generate large amounts of
image  data  that  will  require  processing,   analysis,  data  management  and
submission services. Due to several factors,  including,  without limitation, an
increase in competition, there can be no assurance that demand for the Company's
services and  technologies  will grow,  or sustain  growth,  or that  additional
revenue generating opportunities will be realized by the Company.


RESULTS OF OPERATIONS

     The Company  experienced a loss for fiscal 1998 as a result of insufficient
project revenue to support the  infrastructure  of the Company and non-recurring
charges of $597,000  consisting of (i) costs of $320,000 associated with a proxy
contest and related  litigation and (ii) restructuring and severance expenses of
$277,000  related to the  elimination of two former  business  divisions and the
resignation in December 1997 of a former executive officer.

     In February  1998,  the Company and a shareholder  group engaged in a proxy
contest in an effort to,  among other  things,  elect  members of the  Company's
Board of Directors at the Annual  Meeting of  Stockholders  held on February 27,
1998. In  connection  with such proxy  contest and the related  litigation,  the
Company expended $320,000 in fiscal 1998.

     During  fiscal  1998,  the Company  recorded  restructuring  and  severance
expenses of $277,000. This amount consists of restructuring expenses of $105,000
and severance expenses of $172,000.

     In December  1997,  the Company  terminated  two  business  divisions,  the
Marketing Information Services Division (the "MISD") and the Data Management and
Information  Systems  Division (the "DMISD"),  which were established in October
1996.  These divisions did not meet the Company's  expectations  and the Company
believed that its  resources  were better  focused on its core  clinical  trials
service business.  The Company incurred  restructuring  charges of approximately
$105,000  which  consisted of (i) $38,000 of severance  costs paid to the former
Senior Vice President and General  Manager of the MISD and (ii) $67,000  related
to the write-off of assets and costs associated with the termination of the MISD
and DMISD. Each of these

                                      -12-
<PAGE>
charges has been reflected in non-recurring charges for fiscal 1998. The Company
believes that the restructuring  will not have an impact on the Company's future
results of operations, liquidity and sources and uses of capital resources.

     In a separate  matter,  two executive  officers of the Company  resigned in
December  1997.  The Company  entered into a separation  agreement with one such
former  executive  officer.  The  Company  agreed to pay such  former  executive
officer  $127,000 in connection with the separation  agreement.  The Company has
not  entered,  and does not expect to enter,  into an  agreement  with the other
executive  officer  who  resigned  in  December  1997.  As  a  result  of  these
resignations, the Company recorded severance expenses of approximately $172,000.
Such expenses have been reflected in non-recurring charges for fiscal 1998.

     Certain  matters   discussed  in  the  Form  10-KSB  are   "forward-looking
statements" intended to qualify for the safe harbors from liability  established
by the Private  Securities  Litigation  Reform Act of 1995. In  particular,  the
Company's  statements  regarding  the  demand  for the  Company's  services  and
technologies,  growing  recognition for the use of independent  centralized core
laboratories,  trends  toward the  outsourcing  of imaging  services in clinical
trials  and  increased  use of digital  medical  images in  clinical  trials are
examples of such  forward-looking  statements.  The  forward-looking  statements
include risks and  uncertainties,  including,  but not limited to, the timing of
projects  due to the  variability  in size,  scope  and  duration  of  projects,
regulatory   delays,   clinical  study  results  which  lead  to  reductions  or
cancellations  of  projects,  and  other  factors,  including  general  economic
conditions and regulatory  developments,  not within the Company's control.  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.  The forward-looking statements are made only as of the date
of this filing and the Company  undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.

     Fiscal Years Ended September 30, 1998 and 1997
     ----------------------------------------------

     Project  revenues  for 1998  and 1997  were  approximately  $3,599,000  and
$5,545,000,  respectively,  a decrease  of  approximately  $1,946,000  or 35.1%.
Project  revenues in 1998 were derived from 25 clients and revenues in 1997 were
derived from 22 clients.  The decrease in project revenues is primarily a result
of a decrease in work performed by the Company on existing contracts,  including
work for one European  client,  during 1998 as compared to 1997.  The  Company's
scope of work in both fiscal years included  primarily core laboratory  services
and information management services.

     Cost of revenues for 1998 and 1997 were comprised of professional  salaries
and  benefits  and  allocated  overhead.  Cost of  revenues  were  approximately
$2,026,000  for 1998 and  approximately  $1,938,000  for 1997,  an  increase  of
approximately  $88,000, or 4.5%. Cost of revenues increased slightly,  despite a
decrease in project revenues,  as the cost of professional salaries and benefits
and  allocated  overhead  expenses  increased  in 1998.  The Company  maintained
comparable staffing levels throughout both years.

                                      -13-
<PAGE>

     The difference  between project revenues and cost of revenues may fluctuate
as a percentage to project  revenues  based on the  utilization of staff and the
mix of services  provided by the  Company to its clients  during the  comparable
periods.

     General and administrative  expenses for 1998 and 1997 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  $1,531,000 for 1998 and
approximately  $1,789,000  for 1997.  The  decrease for 1998,  of  approximately
$258,000  or  14.4%  from  1997,  resulted  primarily  from the  elimination  of
expenditures  in support of the former MISD and DMISD  divisions  and  personnel
costs associated with former  executive  officers who resigned in December 1997.
Such  personnel  costs are  independent of the  expenditures  that supported the
former MISD and DMISD  divisions.  The  decrease  in general and  administrative
expenses is partially offset by a full twelve months of expenses incurred during
1998 by the Company's  European  facility which commenced  operations during the
second quarter of 1997.

     Sales and  marketing  expenses  for 1998 and 1997 were  comprised of direct
sales and  marketing  costs,  professional  salaries and benefits and  allocated
overhead.  Sales and marketing expenses were  approximately  $1,004,000 for 1998
and approximately  $834,000 for 1997. The increase during 1998, of approximately
$170,000 or 20.4% from 1997,  resulted  primarily from the increase in personnel
and resources  dedicated to sales and marketing  activities in the United States
and in Europe.

     Research  and   development   expenses  for  1998  and  1997  consisted  of
professional  salaries  and  benefits  and  overhead  charged  to  research  and
development  projects.  Research and  development  expenses  were  approximately
$255,000  during 1998 and  approximately  $246,000 for 1997. The increase during
1998, of  approximately  $9,000 or 3.7% from 1997,  resulted  primarily  from an
increase in resources dedicated to research and development  projects.  Research
and development expenses for 1998 and 1997 primarily focused on the formulation,
design and testing of product and process alternatives. Research and development
projects  during 1997 also included  developmental  work on the product line for
the MISD business  unit. The Company  terminated  such business unit in December
1997.

     Total costs and expenses  during 1998 and 1997 consisted  primarily of cost
of revenues,  general and administrative  expenses, sales and marketing expenses
and research and  development  expenses.  The  Company's  cost and expenses were
approximately  $4,816,000 (excluding  non-recurring charges of $597,000) in 1998
and  approximately  $4,807,000 in 1997.  Such slight  increase of  approximately
$9,000  or 0.2% is due  primarily  to an  increase  in the  Company's  sales and
marketing efforts offset,  for the most part, by the elimination of expenditures
in support of the former MISD and DMISD divisions and personnel costs associated
with former  executive  officers who resigned in December  1997.  Such personnel
costs are  independent  of the  expenditures  that supported the former MISD and
DMISD divisions.

     Net interest income,  of approximately  $88,000 during 1998,  resulted from
interest earned on cash balances offset in part by interest  expense incurred in
conjunction  with  equipment  lease

                                      -14-
<PAGE>

obligations. The Company earned greater interest income in 1998 than in 1997 due
to higher cash balances being  maintained  during 1998. Net interest  income was
approximately $53,000 in 1997.

     The  Company's  net loss for 1998 was  approximately  $1,726,000  while the
Company had net income of  approximately  $791,000 for 1997.  The  Company's net
loss for 1998 was  attributable  primarily to  insufficient  project  revenue to
support the  infrastructure  of the Company along with $597,000 of non-recurring
expenses.

LIQUIDITY AND CAPITAL RESOURCES

     At  September  30,  1998,  the  Company  had cash and cash  equivalents  of
approximately   $1,527,000.   Working   capital  at   September   30,  1998  was
approximately $1,263,000.

     Net cash used in operating activities for 1998 was approximately  $340,000.
Such use of cash  reflects  the net loss for 1998 and  changes in certain of the
Company's  operating assets and liabilities.  Accounts  receivable  decreased by
approximately $543,000 for 1998 as a result of the reduction in project revenues
during the year.  Deferred  revenue  increased  by  approximately  $108,000 as a
result of an increase in advance  payments that the Company  received related to
signed  contracts at September 30, 1998. In addition,  other assets decreased by
approximately  $12,000 due primarily to the write-off of assets  associated with
organizational costs for the Company's foreign subsidiary and the termination of
the MISD  division.  There  can be no  assurance  that the  Company's  operating
results will return to  profitability  in the future or that the continuation of
such trends will not adversely affect the Company's  future liquidity  requiring
the need for the Company to raise additional capital.

     As of September 30, 1998 all of the Company's project contracts,  including
contracts with  international  clients,  have been  denominated in United States
Dollar.

     For the year ended September 30, 1998, the Company  invested  approximately
$377,000  in  capital  and  leasehold   improvements.   The  Company   currently
anticipates that capital  expenditures for the next fiscal year will approximate
$200,000.  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.

     In March 1998,  the Company paid to the holders of its  Preferred  Stock an
aggregate  amount  of  $20,285  which  amount  represented   accrued  cumulative
dividends  for the period from July 1, 1997 through and  including  December 31,
1997 and interest of $285 from  January 1, 1998 through the date of payment.  In
July 1998,  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, 1998 through and including June 30, 1998.

     The  Company  anticipates  that its cash as at  September  30, 1998 will be
sufficient to fund working capital needs and capital requirements through fiscal
1999.

                                      -15-
<PAGE>
NEW ACCOUNTING REQUIREMENTS

     In June 1997,  Statement of Financial Accounting Standards ("SFAS") No. 131
"Disclosures about Segments of an Enterprise and Related Information" was issued
by the  Financial  Accounting  Standards  Board  ("FASB") and is  effective  for
periods  beginning  after  December  15,  1997.  In June  1997  SFAS  No.  130 -
"Reporting  Comprehensive  Income" was issued by the FASB and is  effective  for
periods  beginning after December 15, 1997. These standards  increase  financial
reporting  disclosures  and  will  have no  impact  on the  Company's  financial
position or results of operations. In March 1998, Statement of Position No. 98-1
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal  Use"  was  issued  by  the  American  Institute  of  Certified  Public
Accountants and is effective for periods  beginning after December 15, 1998. The
Company has not  determined  the impact,  if any,  the  adoption of Statement of
Position No. 98-1 will have on the financial position or results of operations.

EXISTING CONTRACTS

     During  fiscal 1998,  the Company  signed  approximately  $4,829,000 in new
project  contracts.  As of  September  30,  1998,  the Company had entered  into
agreements  with 16 companies  to provide  services in the  aggregate  amount of
approximately  $7,012,000  through  August  2000,  of which  services  valued at
approximately  $5,039,000 remain to be completed.  Such contracts are subject to
termination  by the  Company or its  clients at any time or for any  reason.  In
addition,  client's  clinical trials or other projects are subject to timing and
scope changes.  Therefore, future revenue generated by the Company may not equal
initial contract values.

YEAR 2000 COMPLIANCE

     Historically,  certain computer programs have been written using two digits
rather  than four to define  the  applicable  year,  which  could  result in the
computer  recognizing  a date using "00" as the year 1900  rather  than the year
2000. This, in turn,  could result in major system failures or  miscalculations,
and is  generally  referred  to as the "Year  2000  Problem".  The  Company  has
assessed  its state of  readiness  with  respect to the Year 2000  Problem.  The
Company's management  information systems department has reviewed and tested the
Company's  internal  business  systems  for Year 2000  compliance.  The  Company
believes  that,  based on the results of such review and testing,  the Company's
internal  business  systems,  including  its  computer  systems,  are Year  2000
compliant.  The Company does not  anticipate  any material  future  expenditures
relating to the Year 2000  compliance of its internal  systems.  There can be no
assurance,  however,  that the Year 2000 Problem will not  adversely  affect the
Company's business, financial condition, results of operations or cash flows.

     In addition,  the Company  receives  imaging data derived from the computer
systems  of its  clients,  which  data or  software  may or may not be Year 2000
compliant. Although the Company is currently taking steps to address the impact,
if any, of the Year 2000 Problem relating to the data received from its clients,
failure of such computer  systems to properly  address the Year

                                      -16-
<PAGE>
2000 Problem may adversely affect the Company's business,  financial  condition,
results of operations or cash flows.

     The  Year  2000   disclosures   discussed   above  are  based  on  numerous
expectations  which are subject to  uncertainties.  Certain risk  factors  which
could have a material adverse effect on the Company's  results of operations and
financial condition include but are not limited to: failure to identify critical
systems  which will  experience  failures,  errors in the  remediation  efforts,
inability to obtain new  replacements  for  non-compliant  systems or equipment,
general  economic  downturn  relating to Year 2000  failures in the U.S.  and in
other  countries,  failures in global banking  systems and capital  markets,  or
extended  failures by public and private  utility  companies or common  carriers
supplying services to the Company.

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.

     On January 12, 1998,  the Company  selected  Arthur  Andersen LLP to act as
independent  accountants  for the  Company  and  informed  the  prior  auditors,
Goldstein,  Golub, Kessler & Company,  P.C., of its decision. In connection with
its audits for each of the two years in the period ended  September 30, 1997 and
thereafter,  there were no disagreements  with the prior auditors on any matters
of accounting  principles  or  practices,  financial  statement  disclosure,  or
auditing  scope or  procedures.  The prior  auditors'  report  on the  Company's
financial statements for each of the two years in the period ended September 30,
1997 contained no adverse  opinion or disclaimer of opinion and was not modified
or qualified as to  uncertainty,  audit scope,  or  accounting  principles.  The
decision to change  accountants  was  approved by the Board of  Directors of the
Company.  The prior auditors have furnished the Company with a letter  addressed
to the Securities and Exchange Commission stating their agreement with the above
statements.



                                      -17-
<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
1999 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 1999  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 1999
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 1999 Annual
Meeting  of  Stockholders  is  incorporated  herein by  reference  to such proxy
statement.

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 21.

     (b)       Reports on Form 8-K.


            None.


                                      -18-
<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, 1998.


                                          BIO-IMAGING TECHNOLOGIES, INC. 



                                          By: /s/Mark L. Weinstein
                                              ----------------------------------
                                          Mark L. Weinstein, President and Chief
                                          Executive Officer


                                      -19-
<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/Mark L. Weinstein          President and Chief              December 18, 1998
------------------------
Mark L. Weinstein             Executive Officer and Director
                              (principal executive
                              officer)

/s/Robert J. Phillips         Vice President and Chief         December 18, 1998
------------------------
Robert J. Phillips            Financial Officer
                              (principal financial and
                              accounting officer)

/s/Jeffrey H. Berg, Ph.D      Director                         December 18, 1998
------------------------
Jeffrey H. Berg, Ph.D.

/s/Marc Berger                Director                         December 18, 1998
------------------------
Marc Berger

/s/David E. Nowicki, DMD      Director                         December 18, 1998
------------------------
David E. Nowicki, DMD

/s/James A. Taylor, Ph.D.     Director                         December 18, 1998
------------------------
James A. Taylor, Ph.D.


                                      -20-
<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             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,  (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)  (v) as  amended
                effective  June 22, 1998  (Incorporated  by Reference to Exhibit
                10.1 to the  Company's  Annual  Report  on Form  10-KSB  for the
                fiscal year ended September 30, 1998).

                                      -21-
<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            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.)

10.5            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.)

10.6            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.)

10.7*           Employment   Agreement   including   Invention   Assignment  and
                Confidential  Information Agreement dated April 15, 1998, by and
                between  the  Company and Mark L.  Weinstein.  (Incorporated  by
                reference to Exhibit 10.1 to the Company's  Quarterly  Report on
                Form 10-QSB for the quarter ended June 30, 1998.)

10.8            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.)

16              Letter re: Change in Certifying  Accountants.  (Incorporated  by
                reference to  Exhibit 16 to the Company's Current Report on Form
                8-K dated January 12, 1998.)

21              List of Subsidiaries of Registrant.  (Incorporated  by reference
                to Exhibit 21.1 to the  Company's  Annual  Report on Form 10-KSB
                for the fiscal year ended September 30, 1997.)

23.1            Consent of Arthur Andersen LLP.


                                      -22-
<PAGE>

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

23.2            Consent of Goldstein Golub Kessler LLP.

27              Financial Data Schedule for the year ended September 30, 1998.

-----------------------
*     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.


                                      -23-
<PAGE>



                                 Bio-Imaging Technologies, Inc. and Subsidiaries


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

Report of Independent Public Accountants - Fiscal 1998                  F-2
Report of Independent Public Accountants - Fiscal 1997                  F-3

Consolidated Financial Statements:

Balance Sheets                                                          F-4
Statements of Operations                                                F-5
Statements of Stockholders' Equity                                      F-6
Statements of Cash Flows                                                F-7
Notes to Consolidated Financial Statements                        F-8 - F-18



                                       F-1
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



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


We have  audited the  accompanying  consolidated  balance  sheet of  Bio-Imaging
Technologies, Inc. (a Delaware corporation) and subsidiaries as of September 30,
1998,  and the related  consolidated  statements  of  operations,  stockholders'
equity and cash flows for the year 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 audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion,  the 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, 1998, and the results of their  operations
and their  cash  flows  for the year then  ended in  conformity  with  generally
accepted accounting principles.




Arthur Andersen LLP

Princeton, New Jersey
October 23, 1998



                                      F-2
<PAGE>


INDEPENDENT AUDITOR'S REPORT



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

We have  audited the  accompanying  consolidated  balance  sheet of  Bio-Imaging
Technologies,  Inc. and  Subsidiaries  as of September 30, 1997, and the related
consolidated statements of operations,  stockholders' equity, and cash flows for
the year 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 audit.

We conducted our audit 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 audit provides 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 the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.

GOLDSTEIN GOLUB KESSLER LLP
New York, New York

October 9, 1997



                                      F-3
<PAGE>


                                 Bio-Imaging Technologies, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

September 30,                                            1998            1997
--------------------------------------------------------------------------------

ASSETS

Current Assets:
Cash and cash equivalents                            $1,527,330      $2,367,658
Accounts receivable, net of allowance for
doubtful accounts of $65,000 and $20,000 in 1998
and 1997, respectively                                  626,376       1,214,052
Prepaid expenses and other current assets                84,747          88,518
--------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                  2,238,453       3,670,228
Property and equipment, net                           1,543,434       1,669,678
Other assets                                             32,235          67,076
--------------------------------------------------------------------------------
TOTAL ASSETS                                         $3,814,122      $5,406,982
================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Deferred revenue                                     $  522,605      $  414,360
Accounts payable                                        142,071          81,832
Accrued expenses and other current liabilities          261,063         239,351
Current maturities of long-term debt                     49,956          87,084
--------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                               975,695         822,627
Long-term debt                                           26,808          12,794
--------------------------------------------------------------------------------
TOTAL LIABILITIES                                     1,002,503         835,421
--------------------------------------------------------------------------------
Stockholders' Equity:
Convertible cumulative 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 
   7,773,878 and 7,753,878 shares in 1998
   and 1997, respectively                                 1,944           1,939
Additional paid-in capital                            9,231,497       9,215,603
Accumulated deficit                                  (6,421,926)     (4,646,085)
--------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY                                  2,811,619       4,571,561
--------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $3,814,122      $5,406,982
================================================================================




      The accompanying notes are an integral part of these balance sheets.



                                      F-4
<PAGE>


                                 Bio-Imaging Technologies, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED SEPTEMBER 30,                                 1998              1997
--------------------------------------------------------------------------------

Project revenues                                    $ 3,599,313      $5,544,693
--------------------------------------------------------------------------------

Cost and expenses:

       Cost of revenues                               2,025,868       1,937,872

       General and administrative expenses            1,531,380       1,788,548

       Sales and marketing expenses                   1,003,523         834,092

       Research and development expenses                255,321         246,240

       Non-recurring charges                            597,000               -
--------------------------------------------------------------------------------
           Total cost and expenses                    5,413,092       4,806,752
--------------------------------------------------------------------------------

(Loss) income from operations                        (1,813,779)        737,941

Interest income, net                                     88,223          53,412
--------------------------------------------------------------------------------

Net (loss) income                                    (1,725,556)        791,353

Dividends on preferred stock                             50,285          40,000
--------------------------------------------------------------------------------

Net (loss) income applicable to common stock        $(1,775,841)     $  751,353
================================================================================

Basic (loss) earnings per common share              $     (0.23)     $     0.12
================================================================================

Weighted average number of common shares              7,772,230       6,327,605
================================================================================

Diluted (loss) earnings per common share            $     (0.23)     $     0.10
================================================================================

Weighted average number of common and dilutive
  common equivalent shares                            7,772,230       8,328,243
================================================================================




        The accompanying notes are an integral part of these statements.

                                      F-5
<PAGE>


                                 Bio-Imaging Technologies, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                                                ADDITIONAL
                                PREFERRED STOCK             COMMON STOCK          PAID-IN        ACCUMULATED     STOCKHOLDERS'
                              SHARES       AMOUNT      SHARES        AMOUNT       CAPITAL          DEFICIT          EQUITY
------------------------------------------------------------------------------------------------------------------------------
<S>       <C> <C>             <C>          <C>        <C>             <C>        <C>             <C>               <C>       
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             -          -        245,275           61        283,099                -          283,160

Warrants exercised                  -          -      1,463,334          366      1,124,634                -        1,125,000

Issuance of common stock
to employees'savings plan           -          -         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

Stock options exercised             -          -         20,000            5         15,894                -           15,899

Dividends on preferred
stock                               -          -              -            -              -          (50,285)         (50,285)

Net loss                            -          -              -            -              -       (1,725,556)      (1,725,556)

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

Balance at
September 30, 1998            416,667      $ 104      7,773,878       $1,944     $9,231,497      $(6,421,926)      $2,811,619
==============================================================================================================================
</TABLE>



        The accompanying notes are an integral part of these statements.


                                      F-6
<PAGE>


                                 Bio-Imaging Technologies, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

YEAR ENDED SEPTEMBER 30,                                                             1998             1997
-----------------------------------------------------------------------------------------------------------
<S>                                                                           <C>               <C>      
Cash flows from operating activities:
Net (loss) income                                                            $ (1,725,556)    $   791,353
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
  Depreciation and amortization                                                   559,301         651,775
  Provision for (reduction of) losses on accounts receivable                       45,000         (40,000)
  Stock contribution to employees' savings plan                                         -          68,201
  Write-off of assets                                                              52,154               -
  Changes in operating assets and liabilities:
    Decrease (increase) in accounts receivable                                    542,676        (294,869)
    Increase in prepaid expenses and other current assets                          (5,977)        (76,058)
    Decrease (increase) in other assets                                            12,435         (61,224)
    Increase (decrease) in deferred revenue                                       108,245        (221,202)
    Increase in accounts payable                                                   60,239           7,652
    Increase (decrease) in accrued expenses and other current liabilities          11,711         (28,649)
-----------------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                              (339,772)        796,979
-----------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
  Purchases of property and equipment                                            (377,462)     (1,122,510)
  Decrease in restricted cash                                                           -          60,000
-----------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                                            (377,462)     (1,062,510)
-----------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
  Payments under equipment lease obligations                                      (98,708)        (91,382)
  Dividends paid to preferred stockholders                                        (40,285)        (61,222)
  Proceeds from exercise of stock options                                          15,899         283,160
  Proceeds from exercise of warrants                                                    -       1,125,000
-----------------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                              (123,094)      1,255,556
-----------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents                             (840,328)        990,025
Cash and cash equivalents at beginning of year                                  2,367,658       1,377,633
-----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                                     $  1,527,330     $ 2,367,658
===========================================================================================================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the year for interest                                     $      3,775     $    14,820
===========================================================================================================

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
  Equipment purchased under capital lease obligations                        $     75,595     $         -

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

        The accompanying notes are an integral part of these statements.


                                      F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 Bio-Imaging Technologies, Inc. and Subsidiaries

1.  PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS
Bio-Imaging   Technologies,   Inc.  and   Subsidiaries   (the  "Company")  is  a
pharmaceutical contract service organization providing services that support the
product  development  process of the  pharmaceutical,  biotechnology and medical
device  industries.  The Company  specializes  in  assisting  its clients in the
design and management of the  medical-imaging  component of clinical trials. The
Company  provides  services which include the processing and analysis of medical
images  and in the  data-basing  and  regulatory  submission  of  these  images,
quantitative data and related text.

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

USE OF ESTIMATES
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS
The  Company   maintains   substantially  all  of  its  cash  in  one  financial
institution.   The  Company  has  defined  cash  equivalents  as  highly  liquid
investments with an original maturity at the time of purchase of three months or
less.

REVENUE RECOGNITION
Project  revenues are recognized  primarily  using the  percentage-of-completion
method of  accounting  for  services  rendered in  connection  with  contractual
arrangements,  which generally range from a few months to two years.  Provisions
for losses to be incurred on contracts  are  recognized in full in the period in
which  it is  determined  that  a  loss  will  result  from  performance  of the
contractual  arrangement.  Unbilled services are recorded for revenue recognized
to date that is currently  unbillable  to the customer  pursuant to  contractual
terms.  In general,  amounts become billable upon the achievement of contractual
milestones or in  accordance  with  predetermined  payment  schedules.  Unbilled
services are  generally  billable  within one year from the  respective  balance
sheet date. Accounts receivable include  approximately  $493,000 and $644,000 of
unbilled  receivables  at September  30, 1998 and 1997,  respectively.  Deferred
revenue is recorded for cash received  from  customers for which revenue has not
been  recognized  at the  respective  balance  sheet  date.  Revenue  from other
activities is recognized as services are performed.


                                      F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 Bio-Imaging Technologies, Inc. and Subsidiaries


PROPERTY AND EQUIPMENT
Depreciation  of property and equipment is provided for using 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.

CAPITALIZED SOFTWARE DEVELOPMENT
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, 1998,  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.  During  1998 and 1997,  the  Company  had no costs of
software development that were capitalized.

LONG LIVED ASSETS
The provisions of Statement of Financial  Accounting  Standards  (SFAS) No. 121,
"Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to
be Disposed of " requires,  among other  things,  that an entity review its long
lived assets and certain related  intangibles for impairment whenever changes in
circumstances  indicate  that the  carrying  amount of an asset may not be fully
recoverable.  Management does not believe that any such change in  circumstances
has occurred.

                                      F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 Bio-Imaging Technologies, Inc. and Subsidiaries

EARNINGS PER SHARE
Effective for the year ended  September 30, 1998,  the Company  adopted SFAS No.
128 "Earnings per Share." The adoption of SFAS No. 128 requires the presentation
of basic  earnings  per share and  diluted  earnings  per  share.  Basic  (loss)
earnings  per common  share was  calculated  based  upon the net  (loss)  income
available  to common  stockholders  divided by the  weighted  average  number of
shares of common stock  outstanding  during the period.  Diluted loss per common
share for the year ended  September  30, 1998 excludes the impact of options and
warrants as they are  antidilutive.  Diluted  earnings  per common share for the
year ended September 30, 1997 was calculated based upon the net income available
to common  stockholders,  after  giving  effect to the  assumed  conversions  of
preferred stock divided by the weighted average number of shares of common stock
adjusted  for the  incremental  dilution of  outstanding  options,  warrants and
preferred stock during the period.  The computation of basic (loss) earnings per
share and diluted (loss) earnings per share is as follows:

                                                    1998                 1997
                                             -----------------------------------
      Net (loss) income                        $ (1,725,556)          $  791,353
      Less dividends on preferred stock              50,285               40,000
                                             -----------------------------------
      Net (loss) income applicable
         to common stock - basic               $ (1,775,841)          $  751,353
      Add dividends on preferred stock                    -               40,000
                                             -----------------------------------
      Net (loss) income applicable
         to common stock - diluted             $ (1,775,841)          $  791,353
                                             -----------------------------------

      Denominator:
      Weighted average number of
         common shares                            7,772,230            6,327,605
                                             ===================================
      Basic (loss) earnings per common
      share                                    $      (0.23)          $     0.12
                                             ===================================

      Denominator:
      Weighted average number of
         common shares                            7,772,230            6,327,605
      Common share equivalents of
         outstanding stock options and
         warrants                                         -            1,583,971
      Common share equivalents of
         diluted outstanding preferred stock              -              416,667
                                             -----------------------------------
      Total shares                                7,772,230            8,328,243
                                             ===================================
      Diluted (loss) earnings per common
      share                                    $      (0.23)          $     0.10
                                             ===================================

RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997,  SFAS No. 131 -  "Disclosures  about Segments of an Enterprise and
Related  Information"  was issued by the Financial  Accounting  Standards  Board
("FASB") and is effective for periods beginning after December 15, 1997. In June
1997 SFAS No. 130 "Reporting Comprehensive Income" was issued by the FASB and is
effective  for periods  beginning  after  December  15,  1997.  These


                                      F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 Bio-Imaging Technologies, Inc. and Subsidiaries

standards  increase financial  reporting  disclosures and will have no impact on
the  Company's  financial  position  or results of  operations.  In March  1998,
Statement of Position No. 98-1 - "Accounting for the Costs of Computer  Software
Developed or Obtained for Internal Use" was issued by the American  Institute of
Certified  Public  Accountants  and is  effective  for periods  beginning  after
December  15,  1998.  The Company has not  determined  the impact,  if any,  the
adoption of Statement of Position No. 98-1 will have on the  financial  position
or results of operations.

RECLASSIFICATIONS
Certain  reclassifications  have been made to the 1997  financial  statements to
conform with the 1998 presentation.

2.  PROPERTY AND EQUIPMENT

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

                                                                Estimated
September 30,                            1998          1997    Useful Life
----------------------------------------------------------------------------
Equipment                         $ 3,340,764   $ 2,975,461         5 years
Equipment under capital leases        640,914       565,319         5 years
Furniture and fixtures                246,371       227,877         7 years
Leasehold improvements                 84,060        84,060   Term of lease
Computer software costs               123,436       143,436       30 months
----------------------------------------------------------------------------
                                    4,435,545     3,996,153
Less accumulated depreciation
and amortization                   (2,892,111)   (2,326,475)
----------------------------------------------------------------------------
                                  $ 1,543,434   $ 1,669,678
============================================================================

Accumulated  depreciation  related to equipment  acquired  under capital  leases
amounted to approximately  $465,000 and $401,000 at September 30, 1998 and 1997,
respectively.

Accumulated   amortization  related  to  computer  software  costs  amounted  to
approximately $111,000 and $59,000 at September 30, 1998 and 1997, respectively.


                                      F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 Bio-Imaging Technologies, Inc. and Subsidiaries

3.  LONG-TERM DEBT

Long-term  debt consists of equipment  lease  obligations.  The equipment  lease
obligations are payable in monthly  installments  ranging from $1,882 to $3,472,
including  interest at rates ranging from 8.78% to 9.53%,  through May 2000. 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, 1998 are as follows:

Year ending September 30,
-------------------------------------------------------
              1999                             $49,956
              2000                              26,808
-------------------------------------------------------
                                               $76,764
=======================================================



                                      F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 Bio-Imaging Technologies, Inc. and Subsidiaries

4.  STOCKHOLDERS' EQUITY

In June 1992, in connection  with a public offering of 1,000,000 units at $5 per
unit,  the Company  issued  purchase  options to the  underwriter.  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. Such stock options have terms not exceeding ten
years and  vesting  terms vary from  immediate  vesting on date of grant to five
years.

The following table summarizes the transactions  pursuant to the Company's stock
option plan for the two-year period ended September 30, 1998:

                                                Number of       Weighted Average
                                                 Options         Exercise Price
--------------------------------------------------------------------------------
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
Options granted                                   317,250              0.67
Options canceled                                (513,500)              0.93
Options exercised                                (20,000)              0.80
--------------------------------------------------------------------------------
Unexercised options outstanding at
September 30, 1998                              1,268,750              $1.41
================================================================================


                                      F-13
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 Bio-Imaging Technologies, Inc. and Subsidiaries

Approximately  882,000 and 943,000 options are exercisable at September 30, 1998
and 1997, respectively, at a weighted average exercise price of $1.62 and $1.58,
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 method of SFAS 123, the Company's  net (loss) income  applicable to common
stock and net (loss) earnings per common share for the years ended September 30,
1998 and 1997 would have been the pro forma  amounts  indicated in the following
table:
<TABLE>
<CAPTION>

Year ended September 30,                                           1998              1997
-------------------------------------------------------------------------------------------
<S>                                                            <C>                 <C>     
Net (loss) income applicable to common stock - as reported     $(1,775,841)        $751,353
Net (loss) income applicable to common stock - pro forma       $(1,890,395)        $601,637
Net (loss) income per common share - basic - as reported       $     (0.23)        $   0.12
Net (loss) income per common share - basic - pro forma         $     (0.24)        $   0.10
Net (loss) income per common share - diluted - as reported     $     (0.23)        $   0.10
Net (loss) income per common share - diluted - pro forma       $     (0.24)        $   0.07
</TABLE>


At  September  30,  1998,  by range of  exercise  prices,  the  number of shares
represented by outstanding  options with their weighted  average  exercise price
and weighted  average  remaining  contractual  life, in years, and the number of
shares  represented by exercisable  options with their weighted average exercise
price are as follows:
<TABLE>
<CAPTION>
                      Options Outstanding                                Options Exercisable
-----------------------------------------------------------------   ----------------------------
   Range of                     Weighted Average      Weighted                       Weighted
   Exercise       Number           Remaining          Average         Number         Average
    Prices      Outstanding     Contractual Life   Exercise Price   Exercisable   Exercise Price
-----------------------------------------------------------------   ----------------------------
<S>      <C>     <C>               <C>                 <C>            <C>              <C>  
 $0.63 - $1.44   1,116,750         5.76 years          $0.98          730,108          $1.00
 $4.13 - $4.69     152,000         3.67 years          $4.60          152,000          $4.60
-----------------------------------------------------------------   ----------------------------
 $0.63 - $4.69   1,268,750         5.51 years          $1.41          882,108          $1.62
=================================================================   ============================
</TABLE>


                                      F-14
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 Bio-Imaging Technologies, Inc. and Subsidiaries

The weighted  average fair value of options  granted in 1998 and 1997 were $0.53
and $1.09  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,        1998            1997
--------------------------------------------------------------------
Risk-free interest rate                         4.5%           5.5%
Expected dividend yield                         0.0%           0.0%
Expected volatility                             107%           109%
Expected life in years                          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  expired on October 13, 1998 without
being exercised.

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").   The  preferred  stock  provides  for  (i)  voting  rights  on  an
as-converted to common stock basis, with standard protective provisions;  (ii) a
liquidation  preference of $1.20 per share; (iii)  anti-dilution  protection and
price protection  provisions;  (iv) cumulative dividends of $0.096 per share per
annum,  payable out of funds legally  available for the payment of dividends and
only upon declaration of dividends by the Board of Directors of the Company; and
(v) registration rights with respect to the shares of common stock issuable upon
conversion  of the  preferred  stock.  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 $0.63,  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


                                      F-15
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 Bio-Imaging Technologies, Inc. and Subsidiaries

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 a related 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,
1998, the adjusted exercise price of the warrant is $0.63.

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,
December 21, 1995,  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  approximately  $0.096 per share per annum,  and as when declared by the
Board of  Directors.  Dividends  are payable  either in cash or in the Company's
common stock at the discretion of the Company. At September 30, 1998,  preferred
dividends in arrears aggregated  approximately $10,000 or $0.02 per share of the
preferred stock.

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,
          1999                                 $ 205,000
          2000                                    52,000
---------------------------------------------------------
                                               $ 257,000
=========================================================

Rent expense  charged to operations  for the years ended  September 30, 1998 and
1997 approximated $247,000 and $210,000, respectively.



                                      F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 Bio-Imaging Technologies, Inc. and Subsidiaries

The Company has an employment contract with an officer which expires April 2000.
The amount due under this contract is approximately $278,000.  Additionally, the
contract  provided for the granting of options to purchase 150,000 shares of the
Company's  common stock at $0.63 which was greater than the fair market value of
the  Company's  common  stock at the date of grant.  Options to purchase  50,000
shares of the Company's common stock vested  immediately,  and 25,000 on each of
the first, second, third and fourth anniversary of the date of grant.

6.  EMPLOYEE BENEFIT PLAN

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.  The Company may make
discretionary  matching contributions either in common stock or in cash, subject
to plan limits. For the year ended September 30, 1997, the Company made matching
contributions  to the  account  of the  401(k)  Plan  of  76,719  shares,  at an
estimated  fair value of $68,182,  and a cash  contribution  of  $12,500.  These
shares were newly  issued  shares  previously  reserved in  November  1994.  The
Company did not make a matching  contribution to this account for the year ended
September 30, 1998.

7.  MAJOR CUSTOMERS

Three  customers  accounted  for  approximately  20%,  19% and  13% of  accounts
receivable at September 30, 1998 and two customers  accounted for  approximately
45% and 16% of accounts receivable at September 30, 1997.

Revenue from two major  customers  accounted  for  approximately  26% and 24% of
project  revenues  for the year ended  September  30, 1998 and revenue  from two
major customers  accounted for approximately 34% and 13% of project revenues for
the year ended September 30, 1997.

8.  INCOME TAXES

The Company has net operating loss  carryforwards  of  approximately  $6,233,000
which expire in various years through  2013.  The deferred  income tax assets at
September  30,  1998  and  1997  of  approximately  $2,500,000  and  $1,800,000,
respectively,  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.


                                      F-17
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 Bio-Imaging Technologies, Inc. and Subsidiaries

9.  FOREIGN OPERATIONS

Foreign  customers account for approximately 32% and 38% of project revenues for
the years ended September 30, 1998 and 1997, respectively.

The Company's  Netherlands  subsidiary recognized project revenues from services
provided to unaffiliated  customers of  approximately  $520,000 and $679,000 for
the years ended  September 30, 1998 and 1997,  respectively.  For the year ended
September 30, 1998 net loss from operations was  approximately  $418,000 and for
the year ended September 30, 1997 net income from  operations was  approximately
$10,000.

Identifiable  operating assets of the Company's foreign operations  approximated
$619,000 and $545,000 at September 30, 1998 and 1997, respectively.

10.    NON-RECURRING CHARGES

In February 1998, the Company  engaged in a proxy contest in an effort to, among
other  things,  elect the members of the  Company's  Board of  Directors  at the
Annual Meeting of Stockholders  held on February 27, 1998. Costs associated with
the proxy  contest  and  related  litigation  were  $320,000  for the year ended
September  30, 1998.  In  addition,  the Company  incurred  expenses of $277,000
consisting of  restructuring  costs of $105,000 and severance  costs of $172,000
during the year ended September 30, 1998.

The  restructuring  costs were  associated  with the termination of two business
divisions,  the Marketing  Information Services Division and the Data Management
and Information  Systems Division,  by the Company in December 1997. These costs
consisted of $38,000 of severance  costs and $67,000 related to the write-off of
assets and costs associated with the termination of the divisions.

In a separate matter, two executive officers of the Company resigned in December
1997.  The Company  entered  into a  separation  agreement  with one such former
executive  officer  requiring  the Company to pay him $127,000 of which  $30,000
remains  payable at September 30, 1998. As a result of these  resignations,  the
Company recorded  severance  expenses of approximately  $172,000 during the year
ended September 30, 1998.


                                      F-18