<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                   -----------

                                    FORM 10-Q

(MARK ONE)



       [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
           OCTOBER 31, 2001

       [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
           FROM ______ TO ______

                         COMMISSION FILE NUMBER 0-27568
                                   -----------

                       INNOVATIVE CLINICAL SOLUTIONS, LTD.
             (Exact name of registrant as specified in its charter)

         DELAWARE                                        65-0617076
(State of incorporation)                   (I.R.S. Employer Identification No.)

10 DORRANCE STREET, SUITE 400, PROVIDENCE, RHODE ISLAND                02903
        (Address of principal executive offices)                     (Zip Code)

       Registrant's telephone number, including area code: (401) 831-6755

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

                                      None

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

                     Common stock, par value $0.01 per share

         Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such Reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

         Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]

         On December 13, 2001, the aggregate market value of the Common Stock of
the registrant held by non-affiliates of the registrant was $591,692. On
December 13, 2001, the number of outstanding shares of the registrant's Common
Stock, par value $0.01 per share, was 11,998,972.


<PAGE>

INNOVATIVE CLINICAL SOLUTIONS, LTD.

                          QUARTERLY REPORT ON FORM 10-Q

                                      INDEX

                                                                         PAGE
PART I--FINANCIAL INFORMATION

        Item 1. Financial Statements.....................................   1

                Consolidated Balance Sheets--October 31, 2001
                (unaudited) and January 31, 2001.........................   1

                Consolidated Statements of Operations (unaudited)--
                Three Months Ended October 31, 2001 and Five Weeks
                Ended October 31, 2000 (Successor) and Eight Weeks
                Ended September 20, 2000 (Predecessor). The purchase
                method of accounting was used to record the fair
                value of assets and assumed liabilities of the
                reorganized company at September 20, 2000.
                Accordingly, the accompanying Statements of
                Operations for the three months ended October 31,
                2001 and five weeks ended October 31, 2000 are not
                comparable in certain material respects to the
                Statement of Operations for any period prior to
                September 20, 2000 since the Statement of Operations
                for the three months ended October 31, 2001 and the
                five weeks ended October 31, 2000 are based upon
                the operations of a reorganized entity...................   2

                Consolidated Statements of Operations
                (unaudited) -- Nine Months Ended October 31, 2001
                and Five Weeks Ended October 31, 2000 (Successor)
                and period ended September 20, 2000 (Predecessor).
                The purchase method of accounting was used to record
                the fair value of assets and assumed liabilities
                of the reorganized company at September 20, 2000.
                Accordingly, the accompanying Statements of
                Operations for the nine months ended October 31,
                2001 and five weeks ended October 31, 2000 are
                not comparable in certain material respects to
                the Statement of Operations for any period prior
                to September 20, 2000 since the Statement of
                Operations for the nine months ended October 31,
                2001 and the five weeks ended October 31, 2000
                are based upon the operations of a reorganized
                entity...................................................   3

                Consolidated Statements of Cash Flows
                (unaudited) -- Nine Months Ended October 31, 2001
                and Five Weeks Ended October 31, 2000 (Successor)
                and Period Ended September 20, 2000
                (Predecessor)............................................   4

                Notes to Consolidated Financial Statements
                (unaudited)-- Nine Months Ended October 31, 2001
                and Five Weeks Ended October 31, 2000 (Successor)
                and Period Ended September 20, 2000 (Predecessor)........  5-14

        Item 2. Management's Discussion and Analysis of Financial
                Condition and Results of Operations...................... 14-23

        Item 3. Quantitative and Qualitative Disclosures About
                Market Risk..............................................  23

<PAGE>

PART II--OTHER INFORMATION

        Item 1. Legal Proceedings........................................  24

        Item 2. Changes in Securities and Use of Proceeds................  25

        Item 3. Defaults Upon Senior Securities..........................  25

        Item 4. Submission of Matters to a Vote of Security Holders......  26

        Item 5. Other Information........................................  26

        Item 6. Exhibits and Reports on Form 8-K.........................  26


                                       ii

<PAGE>

                      INNOVATIVE CLINICAL SOLUTIONS, LTD.
                          CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<Table>
<Caption>
                                                                                    October 31,           January 31,
                                                                                        2001                 2001
                                                                                 -------------------  --------------------
                                                                                    (Unaudited)
<S>                                                                              <C>                  <C>
 ASSETS
 Current assets
     Cash and cash equivalents                                                              $ 3,501               $ 5,548
     Receivables:
        Accounts receivable, net                                                             11,890                11,891
        Other receivables                                                                       155                   208
        Notes receivable                                                                      1,115                 1,625
     Prepaid expenses and other current assets                                                  655                   515
     Assets held for sale                                                                         -                 1,913
                                                                                 -------------------  --------------------
             Total current assets                                                            17,316                21,700

 Property, plant and equipment, net                                                           3,125                 3,975
 Notes receivable                                                                             2,005                 3,093
 Reorganization value in excess of amounts
    allocable to identifiable assets                                                         17,438                27,000
 Restricted cash                                                                              2,420                 2,062
 Other assets                                                                                   346                   350
                                                                                 -------------------  --------------------
             Total assets                                                                  $ 42,650              $ 58,180
                                                                                 ===================  ====================

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
     Bank line of credit                                                                    $ 6,051               $ 6,209
     Current portion of debt and capital leases                                               2,744                 3,460
     Accounts payable                                                                         2,873                 1,464
     Accrued compensation                                                                     1,119                 1,152
     Accrued  and other current liabilities                                                  18,539                18,090
                                                                                 -------------------  --------------------
             Total current liabilities                                                       31,326                30,375

 Long-term debt and capital leases                                                              940                   907
 Other long-term liabilities                                                                  3,032                 4,250
                                                                                 -------------------  --------------------
             Total liabilities                                                               35,298                35,532
  Commitments and contingencies
  Stockholders' equity:
       Common stock, par value $.01, 40,000 shares authorized,
       11,999 shares issued and outstanding at October 31, 2001 and January 31, 2001            120                   120
     Additional paid in capital                                                              49,880                49,880
     Accumulated other comprehensive income                                                       -                    77
     Accumulated deficit                                                                    (42,648)              (27,429)
                                                                                 -------------------  --------------------
Total stockholders' equity                                                                    7,352                22,648
                                                                                 -------------------  --------------------
Total liabilities and stockholders' equity                                                 $ 42,650              $ 58,180
                                                                                 ===================  ====================
</Table>

               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                       1
<PAGE>


             INNOVATIVE CLINICAL SOLUTIONS, LTD.
            CONSOLIDATED STATEMENTS OF OPERATIONS
                         (Unaudited)
             (In thousands, except per share data)


   The purchase method of accounting was used to record the fair value of assets
   and assumed liabilities of the reorganized company at September 20, 2000.
   Accordingly, the accompanying Statements of Operations for the three months
   ended October 31, 2001 and five weeks ended October 31, 2000 are not
   comparable in certain material respects to the Statement of Operations for
   any period prior to September 20, 2000 since the Statement of Operations for
   the three months ended October 31, 2001 and the five weeks ended October 31,
   2000 are based upon the operations of a reorganized entity.




<Table>
<Caption>
                                                                   PREDECESSOR
                                                                     COMPANY                       SUCCESSOR COMPANY
                                                               --------------------    -------------------------------------------
                                                                   EIGHT WEEKS             FIVE WEEKS           THREE MONTHS
                                                                      ENDED                   ENDED                 ENDED
                                                                  SEPTEMBER 20,            OCTOBER 31,           OCTOBER 31,
                                                                      2000                     2000                  2001
                                                               --------------------    -------------------- ----------------------
<S>                                                            <C>                     <C>                  <C>
Net revenues from services                                                 $ 5,412                 $ 3,383                $ 7,306
Net revenues from management service agreements                              8,895                   5,559                 10,435
                                                               --------------------    -------------------- ----------------------
         Total revenue                                                      14,307                   8,942                 17,741
                                                               --------------------    -------------------- ----------------------
Operating costs and administrative expenses:
Salaries, wages and benefits                                                 3,817                   2,385                  4,592
Professional fees                                                              852                     532                  1,743
Utilities                                                                      252                     157                    271
Depreciation and amortization                                                  396                     520                  1,510
Rent                                                                           667                     417                  1,078
Provision for bad debts                                                        730                       -                     11
Gain on sale of assets                                                           -                       -                    (19)
Asset impairment writedown                                                       -                       -                  3,000
Nonrecurring expenses                                                        1,070                       -                    250
Capitation expenses and other                                                9,885                   6,180                 10,704
                                                               --------------------    -------------------- ----------------------
          Total operating costs and administrative expenses                 17,669                  10,191                 23,140
                                                               --------------------    -------------------- ----------------------
Loss from operations                                                        (3,362)                 (1,249)                (5,399)
Interest expense, net                                                         (245)                   (153)                  (413)
Reorganization item                                                           (666)                      -                      -
                                                               --------------------    -------------------- ----------------------
Loss before income taxes and extraordinary items                            (4,273)                 (1,402)                (5,812)
Income taxes                                                                 1,502                       -                      -
                                                               --------------------    -------------------- ----------------------
Loss before extraordinary item                                              (5,775)                 (1,402)                (5,812)
Extraordinary gain - Cancellation of debt                                  100,000                       -                      -
                                                               --------------------    -------------------- ----------------------
             Net income (loss)                                            $ 94,225                $ (1,402)              $ (5,812)
                                                               ====================    ==================== ======================
Net loss per share--basic (Note 9)                                       *                          $ (0.12)               $ (0.48)
Weighted average shares outstanding--basic                               *                           11,999                 11,999
</Table>
*   EPS for the Predecessor Company is not meaningful.

               The accompanying notes are an integral part of the
                       consolidated financial statements.



                                       2
<PAGE>

                       INNOVATIVE CLINICAL SOLUTIONS, LTD.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

   The purchase method of accounting was used to record the fair value of assets
   and assumed liabilities of the reorganized company at September 20, 2000.
   Accordingly, the accompanying Statements of Operations for the three months
   ended October 31, 2001 and five weeks ended October 31, 2000 are not
   comparable in certain material respects to the Statement of Operations for
   any period prior to September 20, 2000 since the Statement of Operations for
   the three months ended October 31, 2001 and the five weeks ended October 31,
   2000 are based upon the operations of a reorganized entity.


<Table>
<Caption>
                                                                    PREDECESSOR
                                                                    COMPANY                       SUCCESSOR COMPANY
                                                                    34 WEEKS                      FIVE       NINE MONTHS
                                                                                                  WEEKS
                                                                      ENDED                       ENDED        ENDED
                                                                    SEPTEMBER 20,                 OCTOBER    OCTOBER 31,
                                                                                                  31,
                                                                       2000                       2000             2001
<S>                                                                 <C>                       <C>                  <C>
Net revenues from services                                          $         27,560          $   3,383            $24,569
Net revenues from management service agreements                               38,195              5,559            30,670
Total revenue                                                                 65,755              8,942            55,239
Operating costs and administrative expenses:
Salaries, wages and benefits                                                  18,712              2,385            15,678
Professional fees                                                             8,240               532              4,299
Utilities                                                                     1,292               157              852
Depreciation and amortization                                                 1,893               520              4,738
Rent                                                                          4,049               417              3,045
Provision for bad debts                                                       1,048               -                46
Loss on sale of assets                                                        -                   -                223
Asset impairment writedown                                                    -                   -                6,500
Nonrecurring expenses                                                         9,091               -                750
Capitation expenses and other                                                 42,616              6,180            33,322
Total operating costs and administrative expenses                             86,941              10,191           69,453
Loss from operations                                                          (21,186)            (1,249)          (14,214)
Interest expense, net                                                         (4,616)             (153)            (1,005)
Reorganization item                                                           (666)               -                -
Loss before income taxes and extraordinary item                               (26,468)            (1,402)          (15,219)
Income taxes                                                                  1,456               -                -
Loss before extraordinary item                                                (27,924)            (1,402)          (15,219)
Extraordinary gain - Cancellation of debt                                     100,000             -                -
Net income (loss)                                                   $         72,076          $   (1,402)    $     (15,219)
Net loss per share--basic (Note 9)                                            *               $   (0.12)     $     (1.27)
Weighted average shares outstanding--basic                                    *                   11,999           11,999
* EPS for the Predecessor Company is not meaningful.
</Table>

The accompanying notes are an integral part of the consolidated financial
statements.



                                       3
<PAGE>

              INNOVATIVE CLINICAL SOLUTIONS, LTD.
             CONSOLIDATED STATEMENTS OF CASH FLOWS
                          (Unaudited)
                         (In thousands)

<Table>
<Caption>
                                                                  PREDECESSOR
                                                                    COMPANY             SUCCESSOR COMPANY
                                                             -----------------------  ---------------------------------------------
                                                                    34 WEEKS               FIVE WEEKS             NINE MONTHS
                                                                      ENDED                   ENDED                  ENDED
                                                               SEPTEMBER 20, 2000       OCTOBER 31, 2000       OCTOBER 31, 2001
                                                             -----------------------  ---------------------- ----------------------
<S>                                                          <C>                      <C>                    <C>
Cash flows from operating activities:
Net income (loss)                                                          $ 72,076                $ (1,402)             $ (15,219)
Noncash items included in net income (loss):
Extraordinary gain--cancellation of debt                                    (100,000)                      -                      -
Depreciation and amortization                                                 1,893                     520                  4,738
Nonrecurring charges                                                          5,074                       -                    750
Loss on sale of assets                                                            -                       -                    223
Asset impairment writedown                                                        -                       -                  6,500
Changes in receivables                                                        6,218                     500                   (715)
Changes in accounts payable and accrued liabilities                          (7,254)                    540                 (2,907)
Changes in other assets                                                         990                     483                   (140)
                                                             -----------------------  ---------------------- ----------------------
Net cash provided (used) by operating activities before
  reorganization items                                                      (21,003)                    641                 (6,770)
                                                             -----------------------  ---------------------- ----------------------
Operating cash flows from reorganization items:
Cancellation of accrued interest on debentures                               (4,218)                      -                      -
Bankruptcy-related professional fees                                          1,350                       -                      -
Writeoff of unamortized balance of debenture finance costs                    1,838                       -                      -
                                                             -----------------------  ---------------------- ----------------------
Net cash used by reorganization items                                        (1,030)                      -                      -
                                                             -----------------------  ---------------------- ----------------------
Net cash used by operating activities                                       (22,033)                    641                 (6,770)
                                                             -----------------------  ---------------------- ----------------------
Cash flows from investing activities:
Capital expenditures                                                           (547)                   (113)                  (230)
Sale of assets                                                                4,672                       -                  4,551
Notes receivable, net                                                         6,550                     250                  1,598
Other assets                                                                      -                       -                      3
                                                             -----------------------  ---------------------- ----------------------
Net cash provided by investing activities                                    10,675                     137                  5,922
                                                             -----------------------  ---------------------- ----------------------
Cash flows from financing activities:
Proceeds (repayment) of line of credit, net                                 (11,802)                  4,638                   (158)
Changes in restricted cash                                                       77                       -                   (358)
Repayment of debt, net                                                            -                       -                   (683)
                                                             -----------------------  ---------------------- ----------------------
Net cash provided (used) by financing activities                            (11,725)                  4,638                 (1,199)
                                                             -----------------------  ---------------------- ----------------------

Increase (decrease) in cash and cash equivalents                            (23,083)                  5,416                 (2,047)
Cash and cash equivalents, beginning of period                               25,558                   2,475                  5,548
                                                             -----------------------  ---------------------- ----------------------
Cash and cash equivalents, end of period                                    $ 2,475                 $ 7,891                $ 3,501
                                                             =======================  ====================== ======================
</Table>

             The accompanying notes are an integral part of the consolidated
financial statements.


                                       4
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     NINE MONTHS ENDED OCTOBER 31, 2001 AND
                FIVE WEEKS ENDED OCTOBER 31, 2000 (SUCCESSOR) AND
                  PERIOD ENDED SEPTEMBER 20, 2000 (PREDECESSOR)
                                   (UNAUDITED)

1.  ORGANIZATION

         The accompanying unaudited interim consolidated financial statements
include the accounts of Innovative Clinical Solutions, Ltd. (together with its
subsidiaries, "the Company" or "ICSL"). These interim consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles and the requirements of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is management's opinion that the
accompanying interim financial statements reflect all adjustments (which are
normal and recurring) necessary for a fair presentation of the results for the
interim periods. These interim financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended January 31, 2001.
Operating results for the nine months ended October 31, 2001 are not necessarily
indicative of results that may be expected for the year.

2.  GOING CONCERN EXCEPTION IN THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANT'S
    REPORT

         The Company has generated significant negative cash flow and operating
losses over the past several years. In addition, as of October 31, 2001 the
Company was in violation of certain covenants of its credit facility, which
violations were subsequently waived. The Company's independent public
accountants have included a going concern explanatory paragraph in their audit
report accompanying the fiscal 2001 financial statements. The paragraph states
that the Company's recurring losses and negative cash flow raise substantial
doubt as to the Company's ability to continue as a going concern and cautions
that the financial statements do not include adjustments that might result from
the outcome of this uncertainty.

         The Company's independent public accountants have also advised the
Company that, if negative cash flow continues without additional equity or other
financing sources, this will result in the necessity for a continued going
concern qualification in their opinion in this fiscal year's annual financial
statements.

         The Company was in default of certain financial and reporting covenants
contained in the amended New Credit Facility as of July 31, 2001 and has
executed a Forbearance Agreement with respect to this default pursuant to which
the lender has agreed to forbear exercising any of its default remedies until
January 31, 2002. The Company is also in default of a revenue covenant contained
in the amended New Credit Facility as of October 31, 2001 and has requested a
waiver of such default. See Note 12--Revolving Line of Credit and Note Payables.

3.  DESCRIPTION OF BUSINESS

         The Company operates two business lines: pharmaceutical services,
including investigative site management, clinical and outcomes research and
disease management, and single-specialty provider network management. The
Company began its operations in 1994 and closed the initial public offering of
its then existing common stock (the "Old Common Stock") in January 1996. Its
primary strategy was to develop management networks in specific geographic
locations by affiliating with physicians, medical providers and medical
networks. In order to expand its service offerings, the Company acquired
Clinical Studies, Ltd. in October 1997. By 1998, the Company had become an
integrated medical management company that provided medical management services
to the medical community, certain ancillary medical services to patients and
medical real estate development and consulting services to related and unrelated
third parties.

         REPOSITIONING

         In May 1998, in response to the adverse impact of negative publicity
surrounding the medical services industry,


                                       5
<PAGE>

the Company began evaluating various strategic alternatives available to it and
in August 1998, the Company's Board of Directors approved several strategic
initiatives designed to reposition the Company as a significant company in
pharmaceutical contract research, specifically clinical trials site management
and outcomes research. During the years ended January 31, 1999 and 2000, the
Board approved plans, consistent with achieving the stated repositioning goal,
to divest and exit the Company's physician practice management business, certain
of its ancillary services businesses, a surgery center, a physician network and
its real estate service operations. All of these identified assets held for sale
had been sold as of April 30, 2000.

         Due to market conditions affecting health care services companies
generally, the Company realized lower than expected proceeds from its asset
divestitures. The Company reported a net loss for the year ended January 31,
1999 of $130.8 million, which included an extraordinary charge of $96.8 million
and a $10.5 million nonrecurring expense related to its divestitures. The
Company reported a net loss for the fiscal year ended January 31, 2000 of $171.2
million, which included an extraordinary charge of $49.6 million that was
primarily related to the divestitures. These losses and the Company's highly
leveraged position, due principally to its $100 million 6 3/4% Convertible
Subordinated Debentures due 2003 (the "Debentures"), left the Company without
the financial resources to execute its strategic plan to grow the research,
clinical trials and network management sectors of its business.

         RECAPITALIZATION

         In the fourth quarter of fiscal 2000, the Company entered into
discussions with the owners of more than 50% of the principal amount of the
Debentures regarding the possible exchange of some or all of the Debentures for
equity in order to reduce the Company's debt burden and improve the Company's
ability to execute its strategy for improving its business and financial
condition. These negotiations resulted in a prepackaged plan of reorganization
under Chapter 11 of the Bankruptcy Code (the "Prepackaged Plan"), which provided
for the recapitalization of the Company through the exchange of newly issued
common stock of the Company (the "New Common Stock"), representing 90% of the
issued and outstanding capital stock following the recapitalization, for all of
the Debentures. In addition, the Prepackaged Plan provided for the cancellation
of all outstanding Old Common Stock and its replacement with New Common Stock
representing 10% of the Company's issued and outstanding capital stock following
the recapitalization.

         On July 14, 2000 the Company and its subsidiaries filed joint petitions
under Chapter 11 of the Bankruptcy Code. Following a hearing held on August 23,
2000, the Bankruptcy Court entered an order confirming the Company's Prepackaged
Plan on August 25, 2000. On September 21, 2000 the Company satisfied all
conditions precedent to the effectiveness of the Prepackaged Plan and,
accordingly, the Prepackaged Plan became effective on such date (the "Effective
Date").

         On the Effective Date, the Debentures, the Company's issued and
outstanding Old Common Stock and the Old Other Interests (as defined in the
Prepackaged Plan) were canceled and extinguished. Under the Prepackaged Plan,
each holder of Debentures ("Debentureholder") received for each $1,000 in face
amount of the Debentures held by such holder on the Effective Date, 108 shares
of New Common Stock and each existing stockholder received for each 31 shares of
Old Common Stock held by such stockholder on the Effective Date, 1 share of New
Common Stock. New Common Stock was issued in whole shares only, with any
fractional share amounts rounded up or down, as applicable. As a result of the
Prepackaged Plan, 10.8 million shares of New Common Stock are held by the former
Debentureholders and approximately 1.2 million are held by former holders of Old
Common Stock.

         Under the Prepackaged Plan, claims of all other creditors, whether
secured or unsecured, were unimpaired. The Company continued to pay all general
unsecured claims during the pendency of the bankruptcy proceedings in the
ordinary course of business. On the Effective Date, the Company's existing
credit facility was repaid in full and the Company entered into a new revolving
credit facility which is secured by security interests in substantially all of
the Company's assets, including inventory, accounts receivable, general
intangibles, equipment and fixtures. (See Note 12 - Revolving Line of Credit and
Notes Payable).

         On the Effective Date, the Company's 2000 Stock Option Plan became
effective and the Company granted options


                                       6
<PAGE>

to purchase 2,028,570 shares of its New Common Stock to its executive officers
and certain of its non-employee directors. In addition, the Company entered into
employment agreements with the Company's President and Chief Executive Officer
and four other executive officers.

4.  SIGNIFICANT EVENTS

         SALE OF ONCOLOGY GROUP

         On August 30, 2001, the Company sold the oncology and hematology
business operations for approximately $2.5 million. The net proceeds from this
transaction were used to pay down the Company's line of credit under the New
Credit Facility. In connection therewith, the Company executed an amendment to
the New Credit Facility, which reduced the maximum amount available under the
New Credit Facility to $8.5 million.

         PLANNED MERGER OF CLINICAL STUDIES, LTD. AND COMPREHENSIVE
         NEUROSCIENCE, INC.

         On October 31, 2001, the Company entered into a definitive Agreement
and Plan of Merger (the "Merger Agreement") for the merger of its wholly owned
subsidiary, Clinical Studies, Ltd ("CSL"), with Comprehensive Neuroscience, Inc.
("CNS"), a privately held healthcare company. Under the terms of the Merger
Agreement, a specially created subsidiary of CNS will merge into CSL ("the
Merger"), with CSL as the surviving company becoming a wholly owned subsidiary
of CNS. The Company will receive common stock of CNS in exchange for its CSL
stock. No cash consideration is contemplated to be paid by or to the Company or
its stockholders. The Company expects to receive approximately 43% of the voting
securities of the combined enterprise at the date of the Merger, taking into
account convertible notes which would be issued by CNS simultaneously with the
Merger and that have voting rights. The closing of the Merger is subject to
significant conditions, which may not be met, including the replacement of the
New Credit Facility, and CNS securing new convertible debt sufficient to provide
CNS with at least $4.0 million of cash following the Merger. CNS has received a
commitment letter from Heller Healthcare Finance ("Heller") for a $10 million
line of credit to replace the New Credit Facility. The parties are negotiating a
loan agreement with Heller, but no assurances can be given that a definitive
loan agreement will be executed. CNS has received verbal commitments from
certain CNS stockholders and ICSL's major stockholder to subscribe for $3.5
million of the new convertible debt, but no assurances can be given that this
amount will be subscribed to at closing. For further detailed information
concerning the Merger, CNS and CSL please refer to the Information Statement
filed with the SEC on December 11, 2001, and mailed to ICSL stockholders on such
date. The parties currently expect the Merger to be consummated on January 15,
2002, but there can be no assurances that the transaction will be completed by
such date, or at all.

5.  BASIS OF PRESENTATION

         The Company and subsidiaries filed petitions for relief under Chapter
11 of the United States Bankruptcy Code ("Chapter 11") on July 14, 2000. Prior
to emerging from Chapter 11 on September 21, 2000, the Company (the
"Predecessor") operated its business as a debtor-in-possession subject to the
jurisdiction of the Bankruptcy Court. The reorganized Company (the "Successor")
adopted fresh-start reporting and gave effect to its emergence as of September
20, 2000.

         Under fresh-start reporting, the final consolidated balance sheet as of
September 20, 2000 became the opening consolidated balance sheet of the
reorganized Company. Since fresh-start reporting has been reflected in the
accompanying consolidated balance sheets as of October 31, 2001 and January 31,
2001, respectively, the consolidated balance sheets as of those dates are not
comparable in certain material respects to any such balance sheet for any period
prior to September 20, 2000 since the balance sheet as of October 31, 2001 and
January 31, 2001, respectively, are that of a reorganized entity. In addition,
the results of the operations of the business prior to September 21, 2000 (the
Predecessor) are not comparable to the Company's results of operations due to
the emergence from bankruptcy, and the prior period results include the
operation of certain discontinued businesses.

         The Company's independent public accountants have included a going
concern explanatory paragraph in their


                                       7
<PAGE>

audit report accompanying the fiscal 2001 financial statements. The paragraph
states that the Company's recurring losses and negative cash flow raise
substantial doubt as to the Company's ability to continue as a going concern and
cautions that the financial statements do not include adjustments that might
result from the outcome of this uncertainty.

6.  ASSETS HELD FOR SALE

         Assets Held for Sale at January 31, 2001 included undeveloped land in
Florida, which was sold on July 13, 2001. During August 2001, the Company sold
the assets of the Oncology Group, which were reflected as Assets Held for Sale
at July 31, 2001.

7.  INCOME TAXES

         The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, "ACCOUNTING FOR INCOME TAXES." Deferred taxes arise
primarily from the recognition of revenues and expenses in different periods for
income tax and financial reporting purposes.

         Tax assets and liabilities, including loss and credit carry forwards
were valued at fair market value at the reorganization date. The Company has
concluded that its net tax assets, primarily operating loss carryforwards should
be fully reserved because of the uncertainty surrounding whether these will ever
be realized. The Company has recorded no tax benefit related to its net loss
because of uncertainty as to the ultimate realizability of this benefit.

8. REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE ASSETS

         Fresh start reporting requires the Company to restate its assets and
liabilities to reflect their reorganization value, which reflects fair value at
the date of the reorganization. The amount of the reorganization value that
exceeded the amounts allocable to the specific tangible and identifiable
intangible assets is allocated to a specific intangible referred to as
"Reorganization value in excess of amounts allocable to identifiable assets."
The implementation of fresh start reporting resulted in a Reorganization value
in excess of amounts allocable to identifiable assets of approximately $55
million as of September 20, 2000. This asset is being amortized over five years.
Recently, the Financial Accounting Standards Board has concluded that goodwill,
such as excess reorganization value, would no longer be amortized but would be
subject to periodic review for impairment. (See Note 14 - "Recent Accounting
Pronouncements".)

         The reorganization value, which drives the Reorganization value in
excess of amounts allocable to identifiable assets, was based, in part, upon the
planned integration of the Company's network management and clinical trials/site
management and healthcare research operations. The Company has not realized the
synergies that it had expected from linking these two business lines and plans
to sell its network management division. Preliminary indications of interest
from potential purchasers indicate a lower valuation for the network management
division as a standalone enterprise than when valued as an integrated component
of the clinical trials and healthcare research operations. The decision to sell
the network management division, coupled with a revised plan for the remainder
of the business triggered an impairment review of the Company's long-lived
assets. The revised plan provided the basis for measurement of the asset
impairment charge. The Company calculated the present value of expected cash
flows to determine the fair value of its assets. Accordingly, in the fourth
quarter of fiscal 2001, the Company recorded an impairment write-down of $26.9
million, which resulted in a Reorganization value in excess of amounts allocable
to identifiable assets of $27 million as of January 31, 2001.

         Subsequent to the filing of its Annual Report on Form 10-K for the
fiscal year ended January 31, 2001, the Company reviewed the value of the
Company's long lived assets and determined, based on preliminary expressions of
interest received to date for the sale of the network management division, that
a further impairment charge of $3.5 million was necessary to write down its
assets to fair market value. This write-down was taken in the quarter ended
April 30, 2001. The combination of this write-down and amortization during the
quarter reduced Reorganization Value in excess of amounts allocable to
identifiable assets to $17.4 million as of October 31, 2001.


                                       8
<PAGE>

9.  NET LOSS PER SHARE

         Basic earnings per share is calculated by dividing net income (loss) by
the weighted average number of shares of Common Stock outstanding during the
period. Stock to be issued at a future date pursuant to acquisition agreements
is treated as outstanding in determining basic earnings per share. In addition,
diluted earnings per share is calculated using the weighted average number of
shares of Common Stock and common stock equivalents, if dilutive.

         Net loss per share for periods prior to September 20, 2000 is for the
Predecessor and is not comparable to net loss per share for the Company, which
reflects the exchange of New Common Stock for the Debentures and Old Common
Stock. Net loss per share for the nine months ended October 31, 2001 was
$(1.02). Basic and fully diluted earnings per share are the same because the
effect of Common Stock equivalents would be anti-dilutive. The Predecessor
Company earnings per share for the nine months ended October 31, 2000 is not
meaningful and therefore has not been presented.

         A reconciliation of the numerators and denominators of the basic and
fully diluted earnings per share computations was not provided because the basic
and fully diluted EPS are the same.

         For the quarter ended October 31, 2001, approximately 2.0 million
shares related to stock options were not included in the computation of diluted
earnings per share because the option exercise price was greater than the
average market price of the common shares.

10.  ACCUMULATED OTHER COMPREHENSIVE INCOME IN STOCKHOLDER'S EQUITY

         The Company had an investment in a marketable equity security which was
considered an available-for-sale investment in the January 31, 2001 balance
sheet and was carried at market value, with the difference between cost and
market value recorded in the "Accumulated other comprehensive income" component
of stockholders' investment. The Company sold this investment during the quarter
ended April 30, 2001.

11.  PREPACKAGED PLAN AND FRESH-START REPORTING

          As discussed above, the Company's Prepackaged Plan was consummated on
September 21, 2000 and ICSL emerged from Chapter 11. Pursuant to the AICPA's
Statement of Position No. 90-7, FINANCIAL REPORTING BY ENTITIES IN
REORGANIZATION UNDER THE BANKRUPTCY CODE ("SOP 90-7"), the Company adopted
fresh-start reporting in the consolidated balance sheet as of September 20, 2000
to give effect to the reorganization as of such date. Fresh-start reporting
required the Company to restate its assets and liabilities to reflect their
reorganization value, which approximates fair value at the date of the
reorganization. In so restating, SOP 90-7 required the Company to allocate its
reorganization value to its assets based upon their estimated fair values in
accordance with the procedures specified by Accounting Principles Board (APB)
Opinion No. 16, BUSINESS COMBINATIONS, for transactions reported on the purchase
method. The amount of the reorganization value that exceeded the amounts
allocable to the specific tangible and the identifiable intangible assets has
been allocated to a specific intangible referred to as "Reorganization value in
excess of amounts allocable to identifiable assets" which is being amortized in
accordance with APB Opinion No.17, INTANGIBLE ASSETS, over a five year life.
Each liability existing on the date the Prepackaged Plan was confirmed by the
Bankruptcy Court, other than deferred taxes, is stated at the present value of
the amounts to be paid, determined using an appropriate discount rate. Deferred
taxes are not recorded in the accompanying financial statements due to the
uncertainty regarding future operating results. Any benefits derived from
pre-confirmation net operating losses will first reduce the Reorganization value
in excess of amounts allocable to identifiable assets and other intangibles
until exhausted and thereafter be reported as a direct addition to additional
paid-in capital. Finally, any accounting principle changes required to be
adopted in the financial statements of the Company within the twelve months
following the adoption of fresh-start reporting were adopted at the time
fresh-start reporting was adopted.

         The fresh-start reporting reorganization value was primarily derived
from a discounted cash flow analysis of the business based on the Company's
projected earnings before interest, taxes, depreciation and amortization
("EBITDA") through 2006 fiscal year and discounted to present value using the
Company's weighted average cost of capital rate of 19.5%. The discount rate
utilized by the Company reflected a relatively high-risk investment. The
determination of equity


                                       9
<PAGE>

value included in the distributable value as of the Effective Date was derived
from an estimated enterprise value of the reorganized Company on an unleveraged
basis.

         Based on this methodology, the Company determined that reorganization
equity value as of the Effective Date was $50 million, which was more than the
market value of its assets on such date. In accordance with the purchase method
of accounting, the excess of the reorganization value over net assets, which
totaled $55 million, was allocated to "Reorganization value in excess of amount
allocable to identifiable assets".

         The calculated revised reorganization equity value was based upon a
variety of estimates and assumptions about circumstances and events that have
not yet taken place. Such estimates and assumptions are inherently subject to
significant economic and competitive uncertainties beyond the control of the
Company, including, but not limited to, those with respect to the future course
of the Company's business activity. The Company regularly reviews the value of
the intangible assets represented by "Reorganization Value in excess of amounts
allocable to identifiable assets" and writes down this asset as appropriate to
represent what it believes is the fair market value of its assets. (See Note 8 -
"Reorganization Value in Excess of Amounts Allocable to Identifiable Assets".)

12.  REVOLVING LINE OF CREDIT AND NOTES PAYABLE

         On the Effective Date, the Company entered into a $10.0 million
revolving credit facility (the "New Credit Facility") with Ableco Finance LLC
("Ableco"). The $10.0 million New Credit Facility has a two-year term and
availability based upon eligible accounts receivable. The New Credit Facility
bears interest at prime plus 2.00% (but never less than 11.5%) and provides for
an unused line fee of .50%. The New Credit Facility is secured by all assets of
the Company and its subsidiaries, limits the ability of the Company and its
subsidiaries to incur certain indebtedness and make certain dividend payments
and requires the Company to comply with other customary covenants. The
qualification with respect to the Company's ability to continue as a going
concern contained in the Report of Arthur Andersen LLP in the January 31, 2001
audited financial statements, constituted an event of default under the New
Credit Facility. In addition, as of July 31, 2001 the Company was in default of
certain financial and reporting covenants contained in the New Credit Facility.
On August 30, 2001, in connection with the sale of the Company's oncology sites,
Ableco executed a waiver of these defaults. On August 30, 2001, the Company and
Ableco also executed an amendment to the New Credit Facility, which reduced the
maximum amount available thereunder to $8.5 million.

         The Company was in default of the revenue covenant contained in the
amended New Credit Facility as of July 31, 2001. The Company and Ableco have
executed a Forbearance Agreement with respect to this default pursuant to which
Ableco has agreed to forbear exercising any of its default remedies until
January 31, 2002. In connection with the Forbearance Agreement, the Company has
agreed to pay Ableco $50,000, $25,000 of which has been paid and $25,000 of
which is due on December 15, 2001 plus an additional $75,000 if the amended New
Credit Facility is not repaid in full by December 31, 2001. The Company is also
in default of the revenue covenant contained in the amended New Credit Facility
as of October 31 and has requested a waiver of such default. There can be no
assurance that such waiver will be obtained. The Company is currently
negotiating the terms of a replacement debt facility with Heller Healthcare
Financial. If the Company is not able to obtain the requested waiver or to
consummate the proposed Merger, the New Credit Facility is subject to
acceleration of all outstanding indebtedness and default interest on such
outstanding amount at prime plus 5%.

         In September 2001, CSL entered into an Amended and Restated
Subordinated Promissory Note payable to Steven Targum, M.D., which extended the
payment terms of the existing note. The Company has paid $600,000 on the amended
note, leaving an outstanding balance of $1,400,000, of which $500,000 may be
paid through the issuance of CNS common stock.

13.  SEGMENT INFORMATION

         The Company has determined that its reportable segments are those that
are based on its current method of internal reporting. The reportable segments
are: provider network management and site management and research organization.
Corporate items consist of corporate expenses and corporate net assets, which
are not allocated. The


                                       10
<PAGE>


<Table>
<Caption>
                                        ---------------     SITE
                                           PROVIDER      MANAGEMENT
                                            NETWORK     AND RESEARCH    CORPORATE    CONSOLIDATED
SUCCESSOR                                 MANAGEMENT    ORGANIZATION     ITEMS         TOTALS
                                                       --------------
13 weeks ended October 31, 2001
--------------------------------------------------------------------------------------------------
<S>                                           <C>            <C>                <C>      <C>
Net revenues                                  $ 10,435       $ 7,306            $ -      $ 17,741
--------------------------------------------------------------------------------------------------
Income (loss) before Income taxes
--------------------------------------------------------------------------------------------------
  and Extraordinary Items                       (2,909)         (128)        (2,775)       (5,812)
--------------------------------------------------------------------------------------------------

SUCCESSOR
5 WEEKS ENDED OCTOBER 31, 2000
--------------------------------------------------------------------------------------------------
Net revenues                                   $ 5,559       $ 3,383            $ -       $ 8,942
--------------------------------------------------------------------------------------------------
Income (loss) before Income taxes
--------------------------------------------------------------------------------------------------
  and Extraordinary Items                          175          (197)        (1,380)       (1,402)
--------------------------------------------------------------------------------------------------
PREDECESSOR
8 WEEKS ENDED SEPTEMBER 20, 2000
----------------------------------------
Net revenues                                   $ 8,895       $ 5,412            $ -      $ 14,307
--------------------------------------------------------------------------------------------------
Income (loss) before income taxes
--------------------------------------------------------------------------------------------------
  and extraordinary items                         (349)       (1,177)        (2,747)       (4,273)
--------------------------------------------------------------------------------------------------
13 WEEKS ENDED OCTOBER 31, 2000
--------------------------------------------------------------------------------------------------
Net revenues                                  $ 14,454       $ 8,795            $ -      $ 23,249
--------------------------------------------------------------------------------------------------
Income (loss) before income taxes
--------------------------------------------------------------------------------------------------
  and extraordinary items                         (174)       (1,374)        (4,127)       (5,675)
----------------------------------------                                            --------------

SUCCESSOR
39 WEEKS ENDED OCTOBER 31, 2001
----------------------------------------
Net revenues                                  $ 30,670      $ 24,569            $ -      $ 55,239
----------------------------------------                                            --------------
Income (loss) before income taxes
----------------------------------------
  and extraordinary items                       (2,549)         (146)       (12,524)      (15,219)
----------------------------------------                                            --------------
Net assets                                       3,463        11,605         (7,716)        7,352
                                                                                    --------------

SUCCESSOR
5 WEEKS ENDED OCTOBER 31, 2000
----------------------------------------
Net revenues                                   $ 5,559       $ 3,383            $ -       $ 8,942
----------------------------------------                                            --------------
Income (loss) before Income taxes
----------------------------------------
  and Extraordinary Items                          175          (197)        (1,380)       (1,402)
----------------------------------------
PREDECESSOR
34 WEEKS ENDED SEPTEMBER 20, 2000
----------------------------------------
Net revenues                                  $ 38,195      $ 27,560            $ -      $ 65,755
----------------------------------------                                            --------------
Income (loss) before income taxes
----------------------------------------
  and extraordinary items                         (154)       (3,774)       (22,540)      (26,468)
----------------------------------------
39 WEEKS ENDED OCTOBER 31, 2000
----------------------------------------
Net revenues                                  $ 43,754      $ 30,943            $ -      $ 74,697
----------------------------------------
Income (loss) before income taxes
----------------------------------------
  and extraordinary items                           21        (3,971)       (23,920)      (27,870)
----------------------------------------
Net assets                                      23,145        23,152          2,301        48,598
                                                                                    --------------
</Table>


accounting policies of the segments are the same as those described in the
"Summary of Significant Accounting Policies". There are no intersegment revenues
and the Company does not allocate corporate overhead to its segments. The tables
below present revenue, pretax income (loss), and net assets of each reportable
segment for the indicated periods:


14.  RECENT ACCOUNTING PRONOUNCEMENTS

          On July 20, 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Account Standards ("SFAS") 142, "GOODWILL AND
OTHER INTANGIBLE ASSETS." SFAS 142 addresses financial accounting and reporting
for acquired goodwill and other intangible assets and supersedes APB Opinion No.
17, "INTANGIBLE ASSETS".


                                       11
<PAGE>

Under SFAS 142, goodwill and intangible assets that have indefinite useful lives
will no longer be amortized, but rather will be tested at least annually for
impairment. SFAS 142 applies to existing goodwill (I.E., recorded goodwill at
the date the financial statement is issued), as well as goodwill arising
subsequent to the effective date of the Statement. Intangible assets that have
finite useful lives will continue to be amortized over their useful lives, but
without the constraint of the 40-year maximum life required by APB Opinion No.
17. The provisions of SFAS 142 must be applied for fiscal years beginning after
December 15, 2001 and may not be adopted earlier. Any goodwill and intangible
assets determined to have indefinite useful lives that are acquired in a
purchase business combination completed after June 30, 2001 will not be
amortized. At October 31, 2001, the Company had $17.4 million of goodwill on its
balance sheet that was being amortized at a rate of $4.6 million annually.

         In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 143 ("SFAS No. 143"), "ACCOUNTING FOR
ASSET RETIREMENT OBLIGATIONS". SFAS No. 143 addressed financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 requires that the
fair value of a liability for an asset retirement obligation be recognized in
the period in which it is incurred if a reasonable estimate of fair value can be
made. The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset. SFAS No. 143 is effective for financial
statements issued for fiscal years beginning after June 15, 2002 with early
adoption permitted. Management is currently assessing the impact of SFAS No. 143
and has not yet determined the impact, if any, on the Company's consolidated
financial statements.

         In October 2001, the FASB issued SFAS No. 144 ("SFAS No. 144"),
"ACCOUNTING FOR THE IMPAIRMENT OF DISPOSAL OF LONG-LIVED ASSETS". SFAS No. 144
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets and does not apply to goodwill or intangible assets that are
not being amortized and certain other long-lived assets. This Statement
supersedes FASB Statement No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED Of" and the accounting and
reporting provisions of APB Opinion No. 30 "REPORTING THE RESULTS OF OPERATIONS
- REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS AND
EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS", for
the disposal of a segment of a business (as previously defined in that Opinion).
This Statement also amends APB No. 51, "CONSOLIDATED FINANCIAL STATEMENTS", to
eliminate the exception to consolidation for a subsidiary for which control is
likely to be temporary. SFAS No. 144 is effective for financial statements
issued for fiscal years beginning after December 15, 2001 with early adoption
encouraged.

15.  SUBSEQUENT EVENTS

                  In February 2001, Medical Office Portfolio Properties Limited
Partnership ("MOPP") filed a complaint against the Company and PhyMatrix
Management Company, Inc. ("PMCI") in the Palm Beach County Florida Circuit Court
(Case No. CL01 1898AF) seeking damages for breach of lease for the premises
located in Jupiter, Florida. Total rent under the lease for the balance of the
lease term is approximately $2.3 million. In February 2001, MOPP filed a
complaint against the Company and PMCI in Palm Beach County Florida Circuit
Court (Case No. CL01 1901AB) seeking damages for breach of lease for the
premises located in Palm Bay, Florida. The stipulated damages in this action are
$2,100,000. On November 14, 2001, the Company entered into a Settlement
Agreement with MOPP with respect to the two court suits. Under the terms of the
Settlement Agreement the Company has agreed to pay $1,591,669 in full
satisfaction of all amounts owed under the two leases, of which $651,000 was
paid upon execution of the Settlement Agreement. The balance will be payable
upon closing of the sale of the network management division. If the network
management division sale does not occur before February 15, 2002, the balance
will accrue interest at 18% per year, and payment plus accrued interest will be
required as follows: $287,500 on February 16, 2002, April 15, 2002, and July 15,
2002, and $79,169 on October 15, 2002. MOPP has been granted a first priority
perfected security interest, effective at the time that the New Credit Facility
is repaid in certain notes receivable with an aggregate value at October 31,
2001 of $3.4 million.

         In March 2001, Biltmore Investors Limited Partnership ("Biltmore")
filed a complaint against CSL in Arizona Superior Court (Maricopa County) (No.
CV2001-003880) seeking damages of $16,625 for past due rent through February
2001 for breach of lease for the premises located in Phoenix, Arizona. Total
rent under the lease for the balance of the lease


                                       12
<PAGE>

term is approximately $1.3 million. On November 14, 2001 a settlement was
reached with Biltmore in the amount of $318,000, due February 15, 2002 or
earlier if the network management division is sold before that date. Biltmore
has been granted a first priority perfected security interest, effective at the
time that the New Credit Facility is repaid, in a note receivable with a balance
at October 31, 2001 of $1,505,000.

         In October, 2001, the Company filed a complaint against Clinical
Research Center, P.C., with which it has a Clinical Research Management
Agreement, in the United States District Court for the Central District of
Illinois Springfield Division (Case No. 01-3326) seeking temporary and permanent
injunctive relief and monetary damages for breach of contract, breach of
covenant, and tortious interference with the Company's business relations. The
complaint included a claim under the Federal Arbitration Act seeking to force
the defendants to mediate the dispute. The Court denied the Company's request
for a temporary restraining order based, in part, on the ground that the Company
had failed to prove that the defendants had received notice of the bankruptcy
proceeding and, therefore, the defendants could contest the assumption of the
management agreement at issue. The Company filed a motion for reconsideration
and the Court reversed its finding on the issue of defendants' notice of the
bankruptcy proceeding. A hearing on the Company's motion for a preliminary
injunction was held on December 17, 2001 and the Company is awaiting the Court's
decision.

         In November 2001, Northeast Medical Research Associates, Inc. ("NMRA")
filed a complaint against the Company, its wholly owned subsidiary, CSL, and
certain directors and officers of the Company in the Bristol County
Massachusetts Superior Court (Civil Action No. BRCV2001-01380) seeking damages
for, among other things, alleged breach of contract, fraud, misrepresentation,
breach of fiduciary duty and violations of the Massachusetts Consumer Protection
Act arising from a Clinical Research Management Agreement and Purchase Agreement
and Bill of Sale entered into by the parties. NMRA is seeking payment of actual
damages suffered plus interest and attorney's fees, and, in connection with the
alleged violations of the Massachusetts Consumer Protection Act, up to three but
not less than two times actual damages. The Company intends to move to dismiss
the claim in its entirety and has filed a complaint and moved for a temporary
restraining order against NMRA and certain physicians employed by NMRA.

         In November 2001, Allergy Associates, Inc. ("AAI"), which is affiliated
with NMRA, filed a first amended complaint against the Company and CSL in the
Bristol County Massachusetts Superior Court (BRCV2001-01295) seeking damages
for, among other things, alleged breach of contract and violations of the
Massachusetts Consumer Protection Act arising from the nonpayment of invoices
for services performed for CSL. This action arises out of the same agreements
and actions as are the subject of the NMRA litigation. AAI's last demand for
payment, delivered to the Company on or about November 14, 2001, stated the
amount owed was $82,445. AAI is seeking payment of actual damages suffered plus
interest and attorney's fees, and, in connection with the alleged violations of
the Massachusetts Consumer Protection Act, up to three but not less than two
times actual damages. The Company filed a motion to dismiss the first amended
complaint in its entirety.

         In December 2001, the Company's Network Management Group was notified
by its major customer that it was planning to discontinue certain business lines
with the Company. Since this will have a significant impact on attempts to sell
that segment, the Company has recorded a $3 million charge in the quarter ended
October 31, 2001, to provide for estimated asset impairment write downs.


                                       13
<PAGE>

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         The following "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contains certain forward-looking statements
that involve risks and uncertainties. Readers should refer to a discussion under
"Factors to be Considered" contained in Part I, Item 1 of the Company's Annual
Report on Form 10-K for the year ended January 31, 2001 concerning certain
factors that could cause the Company's actual results to differ materially from
the results anticipated in such forward-looking statements. This discussion is
hereby incorporated by reference into this Quarterly Report.

INTRODUCTION

         Innovative Clinical Solutions, Ltd. (together with its subsidiaries,
the "Company" or "ICSL") operates two business lines: pharmaceutical services,
including investigative site management, clinical and outcomes research and
disease management, and single-specialty provider network management. The
Company began its operations in 1994 and closed the initial public offering of
its then existing common stock (the "Old Common Stock") in January 1996. Its
primary strategy was to develop management networks in specific geographic
locations by affiliating with physicians, medical providers and medical
networks. In order to expand its service offerings and to take advantage of the
higher margins resulting from clinical studies, the Company acquired Clinical
Studies, Ltd. in October 1997. By 1998, the Company had become an integrated
medical management company that provided medical management services to the
medical community, certain ancillary medical services to patients and medical
real estate development and consulting services to related and unrelated third
parties.

REPOSITIONING

         In May 1998, in response to the adverse impact of negative publicity
surrounding the medical services industry; the Company began evaluating various
strategic alternatives available to it and in August 1998, the Company's Board
of Directors approved several strategic initiatives designed to reposition the
Company as a significant company in pharmaceutical contract research,
specifically clinical trials site management and outcomes research. During the
years ended January 31, 1999 the Board approved, consistent with achieving its
stated repositioning goal plans to divest and exit the Company's physician
practice management business, certain of its ancillary services businesses, a
surgery center, a physician network and its real estate service operations. All
of these identified assets held for sale had been sold as of April 30, 2000.

         Due to market conditions affecting health care services companies
generally, the Company realized lower than expected proceeds from its asset
divestitures. The Company reported a net loss for the year ended January 31,
1999 of $130.8 million, which included an extraordinary charge of $96.8 million
and a $10.5 million nonrecurring expense related to its divestitures. The
Company reported a net loss for the fiscal year ended January 31, 2000 of $171.2
million, which included an extraordinary charge of $49.6 million, which was
primarily related to the divestitures. These losses and the Company's highly
leveraged position, due principally to its $100 million 6 3/4% Convertible
Subordinated Debentures due 2003 (the "Debentures"), left the Company without
the financial resources to execute its strategic plan to grow the research,
clinical trials and network management sectors of its business.

RECAPITALIZATION

         In the fourth quarter of fiscal 2000, the Company entered into
discussions with the owners of more than 50% of the principal amount of the
Debentures regarding the possible exchange of some or all of the Debentures for
equity in order to reduce the Company's debt burden and improve the Company's
ability to execute its strategy for improving its business and financial
condition. These negotiations resulted in a prepackaged plan of reorganization
under Chapter 11 of the Bankruptcy Code (the "Prepackaged Plan"), which provided
for the recapitalization of the Company through the exchange of newly issued
common stock of the Company (the "New Common Stock"), representing 90% of the
issued and outstanding capital stock following the recapitalization, for all of
the Debentures. In addition, the Prepackaged Plan provided for the cancellation
of all outstanding Old Common Stock and its replacement with New Common Stock
representing 10% of the


                                       14
<PAGE>

Company's issued and outstanding capital stock following the recapitalization.

         On July 14, 2000 the Company and its subsidiaries filed joint petitions
under Chapter 11 of the Bankruptcy Code. Following a hearing held on August 23,
2000, the Bankruptcy Court entered an order confirming the Company's Prepackaged
Plan on August 25, 2000. On September 21, 2000 the Company satisfied all
conditions precedent to the effectiveness of the Prepackaged Plan and,
accordingly, the Prepackaged Plan became effective on such date (the "Effective
Date").

         On the Effective Date, the Debentures, the Company's issued and
outstanding Old Common Stock and the Old Other Interests (as defined in the
Prepackaged Plan) were canceled and extinguished. Under the Prepackaged Plan,
each holder of Debentures ("Debentureholder") received for each $1,000 in face
amount of the Debentures held by such holder on the Effective Date, 108 shares
of New Common Stock and each existing stockholder received for each 31 shares of
Old Common Stock held by such stockholder on the Effective Date, 1 share of New
Common Stock. New Common Stock was issued in whole shares only, with any
fractional share amounts rounded up or down, as applicable. As a result of the
Prepackaged Plan, 10.8 million shares of New Common Stock are held by the former
Debentureholders and approximately 1.2 million are held by former holders of Old
Common Stock.

         Under the Prepackaged Plan, claims of all other creditors, whether
secured or unsecured, were unimpaired. The Company continued to pay all general
unsecured claims during the pendency of the bankruptcy proceedings in the
ordinary course of business. On the Effective Date, the Company's existing
credit facility was repaid in full and the Company entered into a new revolving
credit facility which is secured by security interests in substantially all of
the Company's assets, including inventory, accounts receivable, general
intangibles, equipment and fixtures. (See Note 12 - Revolving Line of Credit and
Notes Payable).

         On the Effective Date, the Company's 2000 Stock Option Plan became
effective and the Company granted options to purchase 2,028,570 shares of its
New Common Stock to its executive officers and certain of its non-employee
directors. In addition, the Company entered into employment agreements with the
Company's President and Chief Executive Officer and four other executive
officers.

ACCOUNTING TREATMENT

         FRESH-START ACCOUNTING

         As discussed above (See "Recapitalization"), the Company's Prepackaged
Plan was consummated on September 21, 2000 and ICSL emerged from Chapter 11.
Pursuant to the AICPA's Statement of Position No. 90-7, FINANCIAL REPORTING BY
ENTITIES IN REORGANIZATION UNDER THE BANKRUPTCY CODE ("SOP 90-7"), the Co mpany
adopted fresh-start reporting in the consolidated balance sheet as of September
20, 2000 to give effect to the reorganization as of such date. Fresh-start
reporting required the Company to restate its assets and liabilities to reflect
their reorganization value, which approximates fair value at the date of the
reorganization. In so restating, SOP 90-7 required the Company to allocate its
reorganization value to its assets based upon their fair values in accordance
with the procedures specified by Accounting Principles Board (APB) Opinion No.
16, BUSINESS COMBINATIONS, for transactions reported on the purchase method. The
amount of the reorganization value that exceeded the amounts allocable to the
specific tangible and the identifiable intangible assets has been allocated to a
specific intangible referred to as "Reorganization value in excess of amounts
allocable to identifiable assets" ("EXCESS REORGANIZATION VALUE"), which is
being amortized in accordance with APB Opinion No.17, INTANGIBLE ASSETS, over a
5 year period. Each liability existing on the date the Prepackaged Plan was
confirmed by the Bankruptcy Court, other than deferred taxes, is stated at the
present value of the amounts to be paid, determined using an appropriate
discount rate. Deferred taxes are not recorded in the accompanying financial
statements due to the uncertainty regarding future operating results. Any
benefits derived from pre-confirmation net operating losses will first reduce
the Excess Reorganization Value (Goodwill) and other intangibles until exhausted
and thereafter be reported as a direct addition to additional paid-in capital.

         The fresh-start reporting reorganization equity value was primarily
derived from a discounted cash flow analysis of our business based on the
Company's projected earnings before interest, taxes and depreciation and
amortization


                                       15
<PAGE>

("EBITDA") through our 2006 fiscal year and discounted to present value using
the Company's weighted average cost of capital rate of 19.5%. The discount rate
utilized by the Company reflected a relatively high-risk investment. The
determination of equity value was derived from an estimated enterprise value of
the reorganized Company on an unleveraged basis.

         Based on this methodology, the Company determined that reorganization
equity value as of the Effective Date was $50 million, which was more than the
market value of its assets on such date. In accordance with the purchase method
of accounting, the excess of the reorganization value over net assets, which
totaled $55 million, was allocated to "Reorganization value in excess of amount
allocable to identifiable assets".

         The reorganization equity value of $50 million as of the Effective Date
was based, in part, upon the planned integration of the Company's network
management and clinical trials/site management and healthcare research
operations. The Company has not realized the synergies that it had expected from
linking these two business lines and plans to sell its network management
division. Preliminary indications of interest from potential purchasers indicate
a lower valuation for the network management division as a standalone enterprise
than when valued as an integrated component of the clinical trials and
healthcare research operations, using the methodology described above.
Accordingly, the Company concluded that the reorganization value in excess of
the revalued net assets was partially impaired and recorded a write-down of
$26.9 million for the 19 weeks ended January 31, 2001. This resulted in
"Reorganization value in excess of an amount allocable to identifiable assets"
as of January 31, 2001 of $27 million. Subsequent to the filing of its Annual
Report on Form 10-K for the fiscal year ended January 31, 2001, the Company
reviewed the value of its long-lived assets and determined, based on preliminary
expressions of interest received to date for the sale of the network management
division, that a further impairment charge of $3.5 million was necessary to
write down its assets to fair market value. This write-down was taken in the
quarter ended July 31, 2001. The combination of this write-down and amortization
during the quarter reduced Reorganization Value in excess of amounts allocable
to identifiable assets to $17.4 million as of October 31, 2001, which amount is
being amortized over the five-year period commencing on the Effective Date.

         The calculated revised reorganization equity value was based upon a
variety of estimates and assumptions about circumstances and events that have
not yet taken place. Such estimates and assumptions are inherently subject to
significant economic and competitive uncertainties beyond the control of the
Company, including but not limited to those with respect to the future course of
the Company's business activity.

         RECENT ACCOUNTING PRONOUNCEMENTS

         On July 20, 2001, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Account Standards ("SFAS") 142, "GOODWILL AND
OTHER INTANGIBLE ASSETS" SFAS 142 addresses financial accounting and reporting
for acquired goodwill and other intangible assets and supersedes APB Opinion No.
17, "INTANGIBLE ASSETS". Under SFAS 142, goodwill and intangible assets that
have indefinite useful lives will no longer be amortized, but rather will be
tested at least annually for impairment. The Statement applies to existing
goodwill (I.E., recorded goodwill at the date the financial statement is
issued), as well as goodwill arising subsequent to the effective date of the
Statement. Intangible assets that have finite useful lives will continue to be
amortized over their useful lives, but without the constraint of the 40-year
maximum life required by the APB Opinion No. 17. The provisions of SFAS 142 must
be applied for fiscal years beginning after December 15, 2001 and may not be
adopted earlier. Any goodwill and intangible assets determined to have
indefinite useful lives that are acquired in a purchase combination completed
after June 30, 2001 will not be amortized. At October 31, 2001, the Company had
$17.4 million of goodwill on its balance sheet that was being amortized at a
rate of $4.5 million annually.

         In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 143 ("SFAS No. 143"), "ACCOUNTING FOR
ASSET RETIREMENT OBLIGATIONS". SFAS No. 143 addressed financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 requires that the
fair value of a liability for an asset retirement obligation be recognized in
the period in which it is incurred if a reasonable estimate of fair value can be
made. The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset. SFAS No. 143 is effective for financial
statements issued for fiscal years beginning after June 15, 2002 with early
adoption permitted. Management is currently


                                       16
<PAGE>

assessing the impact of SFAS No. 143 and has not yet determined the impact, if
any, on the Company's consolidated financial statements.

         In October 2001, the FASB issued SFAS No. 144 ("SFAS No. 144"),
"ACCOUNTING FOR THE IMPAIRMENT OF DISPOSAL OF LONG-LIVED ASSETS". SFAS No. 144
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets and does not apply to goodwill or intangible assets that are
not being amortized and certain other long-lived assets. This Statement
supersedes FASB Statement No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED Of" and the accounting and
reporting provisions of APB Opinion No. 30 "REPORTING THE RESULTS OF OPERATIONS
- REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS AND
EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS", for
the disposal of a segment of a business (as previously defined in that Opinion).
This Statement also amends APB No. 51, "CONSOLIDATED FINANCIAL STATEMENTS", to
eliminate the exception to consolidation for a subsidiary for which control is
likely to be temporary. SFAS No. 144 is effective for financial statements
issued for fiscal years beginning after December 15, 2001 with early adoption
encouraged.

SIGNIFICANT EVENTS

         On August 30, 2001, the Company sold the oncology and hematology
business operations for approximately $2.5 million. The net proceeds from this
transaction were used to pay down the Company's line of credit under the New
Credit Facility. In connection therewith, the Company executed an amendment to
the New Credit Facility, which reduced the maximum amount available under the
New Credit Facility to $8.5 million

         On October 31, 2001, the Company entered into a definitive Agreement
and Plan of Merger (the "Merger Agreement") for the merger of its wholly owned
subsidiary, Clinical Studies, Ltd ("CSL"), with Comprehensive Neuroscience, Inc.
("CNS"), a privately held healthcare company. Under the terms of the Merger
Agreement, a specially created subsidiary of CNS will merge into CSL ("the
Merger"), with CSL as the surviving company becoming a wholly owned subsidiary
of CNS. The Company will receive common stock of CNS in exchange for its CSL
stock. No cash consideration is contemplated to be paid by or to the Company or
its stockholders. The Company expects to receive approximately 43% of the voting
securities of the combined enterprise at the date of the Merger, taking into
account convertible notes which will be issued by CNS simultaneously with the
Merger and that have voting rights. The closing of the Merger is subject to
significant conditions, which may not be met, including the replacement of the
amended New Credit Facility, and CNS securing new convertible debt sufficient to
provide CNS with at least $4.0 million of cash following the Merger. CNS has
received a commitment letter from Heller Healthcare Finance ("Heller") for a $10
million line of credit to replace the New Credit Facility. The parties are
negotiating a loan agreement with Heller, but no assurances can be given that a
definitive loan agreement will be executed. CNS has received verbal commitments
from certain CNS stockholders and ICSL's major stockholder to subscribe for $3.5
million of the new convertible debt, but no assurances can be given that this
amount will be subscribed to at closing. For further detailed information
concerning the Merger, CNS and CSL please refer to the Information Statement
filed with the SEC on December 11, 2001, and mailed to ICSL stockholders on such
date. The parties currently expect the Merger to be consummated on January 15,
2002, but there can be no assurances that the transaction will be completed by
such date, or at all.

RESULTS OF OPERATIONS

         Notwithstanding the recapitalization, the Company has continued to
experience losses and negative cash flows from operations. The rate at which the
Company has lost money, however, has diminished significantly. Net cash used by
operating activities was $6.8 million in the first nine months of fiscal 2002,
compared to $20.4 million net cash used in operations in the first nine months
of fiscal 2001. Nevertheless, continued losses and negative cash flows raise
substantial doubt about the Company's ability to continue as a going concern and
the Company's independent public accountants have included a going concern
explanation paragraph in their audit report for the fiscal year ended January
31, 2001. The consolidated financial statements do not include any adjustments
to reflect the possible future effects on the recoverability and classification
of assets or the amounts and classification of liabilities that might result
from this uncertainty.


                                       17
<PAGE>

         In addition to the operating improvements, the Company sold
non-strategic assets including undeveloped land, and the Company's oncology and
hematology business operations. The Company has negotiated a strategic merger of
its CSL subsidiary, which the Company believes is necessary to improve
short-term and long-term profitability (see "Significant Events"). In addition,
the Company intends to sell the network management division and is actively
seeking a buyer for this business line. However, there can be no assurance that
management plans will be successful. (See "Factors to be Considered" in the
Company's Annual Report on Form 10-K for the fiscal year ended January 31,
2001.)

PERCENTAGE OF NET REVENUE TABLE

The following table shows the percentage of net revenue represented by various
expense categories reflected in the Consolidated Statements of Operations. The
information that follows should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto included elsewhere herein.

<Table>
<Caption>

                                                               Three Months Ended                   Nine Months Ended
                                                               October 31,                          October 31,
                                                               2001                   2000          2001                2000
<S>                                                            <C>                    <C>           <C>                 <C>
Net revenues from services                                     100.0%                 100.0%        100.0%              100.0%
Operating costs and administrative expenses:
Salaries, wages and benefits                                   25.9%                  26.7%         28.4%               28.2%
Professional fees                                              9.8%                   6.0%          7.8%                11.7%
Utilities                                                      1.5%                   1.8%          1.5%                1.9%
Depreciation and amortization                                  8.5%                   4.0%          8.6%                3.2%
Rent                                                           6.1%                   4.7%          5.5%                6.0%
Provision for bad debts                                        0.1%                   3.1%          0.1%                1.4%
Loss on sale of assets                                         -0.1%                  0.0%          0.4%                0.0%
Asset impairment write-down                                    16.9%                  0.0%          11.7%               0.0%
Nonrecurring expenses                                          1.4%                   4.6%          1.4%                12.2%
Capitation expenses and other                                  60.4%                  69.1%         60.3%               65.3%
Total operating costs and administrative expenses              130.5%                 119.9%        125.7%              130.0%
Income (loss) from operations                                  -30.5%                 -19.9%        -25.7%              -30.0%
Interest expense, net                                          2.3%                   1.7%          1.8%                6.4%
Reorganization item                                            0.0%                   2.9%          0.0%                0.9%
Income (loss) before provision for income taxes                -32.8%                 -24.5%        -27.5%              -37.3%
Income tax expense (benefit)                                   0.0%                   6.5%          0.0%                1.9%
Extraordinary Gain - cancellation of debt                      0.0%                   430.1%        0.0%                133.9%
Net income (loss)                                              -32.8%                 399.1%        -27.5%              94.6%
</Table>



The Three and Nine Months Ended October 31, 2001 Compared to the Three and Nine
Months Ended October 31, 2000

         The following discussion reviews the results of operations for the
three and nine months ended October 31, 2001 (the "2002 Quarter" and the "2002
Period"), respectively, compared to the three and nine months ended October 31,
2000 (the "2001 Quarter" and the "2001 Period"). The purchase method of
accounting was used to record the fair value of assets and assumed liabilities
of the reorganized company (Predecessor") at September 20, 2000. Accordingly,
the accompanying statement of operations for the three and nine months ended
October 31, 2001 and the five weeks ended October 31, 2000 is not comparable in
certain material respects to the statement of operations for any period prior to
September 20, 2000 since the statement of operations for the three and nine
months ended October 31, 2001 and the five weeks ended October 31, 2000 is based
upon the balance sheet of a reorganized entity. Certain comparisons of the 2002
Quarter and 2001 Quarter and the 2002 Period and 2001 Period are included to
facilitate a discussion of the results of operations.


                                       18
<PAGE>

         REVENUES

         During the 2002 Quarter the Company derived revenues primarily from the
following segments: provider network management and site management
organizations. Revenues from provider network management were derived from
management services to management service organization and administrative
services to health plans which include reviewing, processing and paying claims
and subcontracting with specialty care physicians to provide covered services.
Revenues from site management organizations were derived primarily from services
provided to pharmaceutical companies for clinical trials.

         Net revenues were $17.7 million and $55.2 million during the 2002
Quarter and 2002 Period, respectively. Of this amount, $10.4 million and $30.7
million or 58.8% and 55.6% of such revenues was attributable to provider network
management; $7.3 million and $24.2 million or 41.2% and 44.4% was related to
site management organizations; and $0 and $.3 million was related to
miscellaneous corporate revenue.

         Net revenues were $23.3 million and $74.7 million during the 2001
Quarter and 2001 Period, respectively. Of this amount, $14.5 million and $43.3
million or 62.2% and 58.0% of such revenues was attributable to provider network
management; $9.0 million and $25.7 million or 38.6% and 34.4% was related to
site management organizations; and $0 and $5.6 million and or 0% and 7.5% was
attributable to assets held for sale; and $(.2) million and $.1 million or (.8)%
and .1% was attributable to miscellaneous corporate revenue.

         The Company's net revenues from provider network management services
decreased by $4.1 million from $14.5 million for the 2001 Quarter to $10.4
million for 2002 Quarter and decreased by $12.6 million from $43.3 million for
the 2001 Period to $30.7 million for the 2002 Period. The majority of the
decrease is attributable to the termination of an unprofitable practice
management agreement. The Company's net revenues from site management
organizations decreased by $1.8 million from $9.0 million for the 2001 Quarter
to $7.2 million for the 2002 Quarter and by $1.5 million from $25.7 million for
the 2001 period to $24.2 million for the 2002 Period. The majority of the
decrease is attributable to the closing of unprofitable site management
facilities. The Company's net revenues from assets held for sale and
miscellaneous corporate items increased by $.2 million from $(.2) million for
the 2001 Quarter to $0 for the 2002 Quarter and decreased by $5.4 million from
$5.7 million for the 2001 Period to $.3 million for the 2002 Period. The
majority of the decrease is attributable to the assets held for sale.

         EXPENSES

         The Company's salaries, wages and benefits decreased by $1.6 million
from $6.2 million or 26.7% of net revenues during the 2001 Quarter to $4.6
million or 25.9% of net revenues during the 2002 Quarter and by $5.4 million
from $21.1 million or 28.2% of net revenues during the 2001 Period to $15.7
million or 28.4% of net revenues during the 2002 period. The decrease in dollars
is primarily attributable to the reductions in personnel in conjunction with the
termination of an unprofitable practice management agreement and the closing of
unprofitable site management facilities.

         The Company's professional fees expense (which includes fees paid to
physicians) increased by $.3 million from $1.4 million or 5.9% of net revenues
during the 2001 Quarter to $1.7 million or 9.8% of net revenues during the 2002
Quarter and decreased by $4.5 million from $8.8 million or 11.7% of net revenues
during the 2001 Period to $4.3 million or 7.8% of net revenues during the 2002
Period. The decrease in professional fees expense is primarily the result of the
termination of unprofitable management agreements and the closing of
unprofitable site management facilities.

         The Company's other expenses, which also include supplies, utilities,
rents, depreciation, amortization, provision for bad debt, and capitation
expenses decreased by $5.6 million from $19.2 million or 82.6% of net revenues
during the 2001 Quarter to $13.6 million or 76.5% of net revenues during the
2002 Quarter and by $16.2 million from $58.2 million or 77.9% of net revenues
during the 2001 Period to $42.0 million or 76.0% of net revenues during the 2002
Period. The dollar decrease in other expenses is due to the reduction in
capitation and supply related expenses, which corresponds to


                                       19
<PAGE>

the decrease in revenues in the network management segment of the business and
the reduction in rent expenses due to the closing of site management facilities.

         The Company recorded a loss of $.055 million related to disposition
costs on the sale of land during the 2002 Period as well as a loss on the August
30, 2001 sale of the Oncology Group's assets of $0.231 million and a gain of
$0.063 million from the sale of marketable securities recorded during the 2002
Period.

         The Company reviewed the value of the Company's long lived assets and
determined, based on preliminary expressions of interest received to date for
the sale of the network management division, an impairment charge of $3.5
million was necessary to write down its assets to fair market value during the
2002 Period.

         The Company's loss from operations during the 2002 Quarter was $5.4
million, compared to a loss from operations of $4.6 million in the 2001 Quarter
and $14.2 million for the 2002 Period compared to $22.4 for the 2001 Period. The
operating loss in the 2002 Quarter includes a $3.0 million charge to provide for
the estimated asset impairment write downs at the Network Management segment,
due to the decision by its major customer that it was planning to discontinue
certain business lines with the Company. Excluding the asset impairment charge,
the reduction in the operating loss during the 2002 Quarter and 2002 Period is
primarily attributable to the termination of an unprofitable management service
agreement and the closing of unprofitable site management facilities.

         The Company's interest expense decreased by $3.8 million from $4.8
million or 6.4% of net revenues during the 2001 Period to $1.0 million or 1.8%
of net revenues during the 2002 Period. The decrease is due to the conversion of
the Debentures into New Common Stock pursuant to the Prepackaged Plan.

         The Company's loss prior to income taxes of $5.8 million during the
2002 Quarter and $12.2 million during the 2002 Period includes a $3.0 million
charge in the quarter to provide for the estimated asset impairment write downs
at the Network Management segment due to the decision by its major customer that
it was planning to discontinue certain business lines with the Company.
Excluding the affect of the $3.0 million asset impairment write downs the
Company's loss prior to income taxes decreased $2.8 million for the 2002 Quarter
from $5.7 million in the 2001 Quarter and $12.2 million in the 2002 Period as
compared to $27.9 million.

         The Company's net loss after income taxes and extraordinary items
during the 2002 Quarter was $2.8 million compared to income of $92.8 million in
the 2001 Quarter and a loss of $12.2 million for the 2002 Period compared to
income of $70.7 million for the 2001 Period. The income related to the 2001
Quarter and Period is due to the extraordinary gain from the cancellation of
$100 million of debt related to the recapitalization pursuant to the Prepackage
Plan, which was effected during the 2001 Quarter and Period.

         LIQUIDITY AND CAPITAL RESOURCES

         Cash used by operating activities was $6.8 million during the 2002
Period and $21.4 million during the 2001 Period. At October 31, 2001, the
Company's principal sources of liquidity consisted of $3.5 million in cash and
$1.2 million availability under its revolving credit facility. The Company had
$28.3 million of current liabilities, including $6.1 million outstanding under
the New Credit Facility.

         Cash provided by investing activities was $5.9 million during the 2002
Period and primarily represented the net cash received from the sales of assets
of $4.6 million and from collections against notes receivable of $1.6 million
offset partially by capital expenditures of $0.2 million. Cash provided by
investing activities was $10.8 million during the 2001 Period and primarily
represented the net cash received from the sale of assets of $4.7 million and
net cash received from notes receivable of $6.8 million offset partially by
capital expenditures of $0.7 million.

         Cash used by financing activities was $1.2 million during the 2002
Period and primarily represented the borrowings under the New Credit Facility,
net of debt payments of $0.1 million, repayment of debt of $0.7 million, and an
increase in restricted cash of $0.4 million. Cash used by financing activities
was $7.1 million during the 2001 Period and


                                       20
<PAGE>

primarily represented the net payments against the then existing credit
facility.

         In conjunction with an acquisition that closed April 17, 1998, the
Company may be required to make a contingent payment in the event that the
acquired company attains a predetermined financial target income during the four
years following the acquisition. If the applicable financial targets were
satisfied, the Company would be required to pay an aggregate of approximately
$2.35 million for the four-year period ending April 17, 2002. At this time no
payment is expected since the target income is not likely to be achieved for the
four-year period. In addition, in conjunction with such acquisition, the Company
has agreed to make payments in shares of common stock of the Company. As of
January 31, 2000, the Company had committed to issue $1.1 million of its Common
Stock; therefore, in April 2000, the Company issued approximately 5.2 million
shares of ICSL Old Common Stock (converted into approximately 168,000 shares of
New Common Stock under the Prepackaged Plan) in satisfaction of this commitment.

         The Company has received notification from the Internal Revenue Service
that the method used to calculate a prior year's tax refund was incorrect by
$1.3 million. This will likely result in an assessment of additional taxes and
interest under the alternative minimum taxes rules, which assessment would have
to be paid in cash. In addition, the Company is discussing several other issues
with the Internal Revenue Service. The Company cannot predict the outcome of
this examination, but any income adjustment would likely result in a reduction
of the Company's net operating loss carryforward, rather than an additional tax
liability.

         Prior to the Effective Date, the Company had outstanding $100 million
in face amount of Debentures. The Debentures bore interest at an annual rate of
6 3/4% payable semi-annually on each June 15 and December 15 and matured on June
15, 2003. The Debentures were unsecured obligations of the Company, guaranteed
by certain of the Company's wholly owned subsidiaries, and were convertible into
Old Common Stock of the Company at a conversion price of $28.20 per share,
subject to adjustment. On the Effective Date, the Debentures were exchanged for
10.8 million shares of New Common Stock representing 90% of the Company's
equity. The Company's New Common Stock was delisted from the OTC Bulletin Board
during July 2001 due to the Company's failure to timely file its annual and
quarterly reports with the Securities and Exchange Commission. Such listing was
reinstated in October 2001 upon the Company's filing of all delinquent reports.

         Prior to the Effective Date, the Company had a $30.0 million revolving
line of credit based upon eligible accounts receivable (the "Prior Loan"). The
Prior Loan bore interest at prime plus 1.0% and fees were 0.0875%. The Prior
Loan was secured by the assets of the Company and its subsidiaries, limited the
ability of the Company and its subsidiaries to incur certain indebtedness and
make certain dividend payments and required the Company to comply with other
customary covenants. Upon the Company's filing of a voluntary petition under
Chapter 11 of the Bankruptcy Code on July 14, 2000, the interest rate on the
Prior Loan increased to 12%. The Prior Loan was paid in full on the Effective
Date with available cash.

         On the Effective Date, the Company entered into a $10.0 million
revolving credit facility (the "New Credit Facility") with Ableco Finance LLC
("Ableco"). The $10.0 million New Credit Facility has a two-year term and
availability based upon eligible accounts receivable. The New Credit Facility
bears interest at prime plus 2.00% (but not less than 11.5%) and provides for an
unused line fee of .50%. The New Credit Facility is secured by all assets of the
Company and its subsidiaries, limits the ability of the Company and its
subsidiaries to incur certain indebtedness and make certain dividend payments
and requires the Company to comply with other customary covenants. The
qualification with respect to the Company's ability to continue as a going
concern contained in the Report of Arthur Andersen LLP in the January 31, 2001
audited financial statements, constituted an event of default under this New
Credit Facility. In addition, as of July 31, 2001, the Company was in default of
certain financial and reporting covenants contained in the New Credit Facility.
On August 30, 2001, in connection with the sale of the oncology sites, Ableco
executed a waiver of these defaults. On August 30, 2001, the Company and Ableco
also executed an amendment to the New Credit Facility, which reduced the maximum
amount available thereunder to $8.5 million. The Company was in default of the
revenue covenant contained in the amended New Credit Facility as of July 31,
2001. The Company and Ableco have executed a Forbearance Agreement with respect
to this default pursuant to which Ableco has agreed to forbear exercising any of
its default remedies until January 31, 2002. In connection with the Forbearance
Agreement, the Company has agreed to pay


                                       21
<PAGE>

Ableco $50,000, $25,000 of which has been paid and $25,000 which was paid on
December 15, 2001, plus an additional $75,000 if the amended New Credit Facility
is not repaid in full by December 31, 2001. The Company is also in default of
the revenue covenant as of October 31, 2001 and has requested a waiver of this
default. There is no assurance the Company will obtain such waiver. If the
Company is not able to obtain such waiver or to consummate the proposed CNS
Merger, the amended New Credit Facility is subject to acceleration of all
outstanding indebtedness and default interest on such outstanding amount at
prime plus 5.0%. The Company is currently negotiating with Heller Healthcare
Finance to replace the New Credit Facility (see Significant Events paragraph
regarding the proposed CNS Merger).

         In May 2001, the Company paid $623,624 in settlement of an arbitration
award, which liability was fully reserved on the balance sheet as of January 31,
2001.

         On July 13, 2001, the Company closed the sale of an undeveloped tract
of land in Sarasota, Florida for $1.8 million. In addition, on August 30, 2001,
the Company sold oncology and hematology business operations for approximately
$2.5 million. The net proceeds of these transactions were used to pay down the
Company's line of credit under the New Credit Facility.

         In September 2001, the Company entered into an Amended and Restated
Subordinated Promissory Note payable to Steven Targum, M.D., which extended the
payments terms of the existing note. During the 2002 Quarter the Company paid
$600,000 on the amended note, leaving an outstanding balance of $1,400,000, of
which $500,000 may be paid through the issuance of CNS common stock (see
Significant Events paragraph).

         In December 2001, the Company's Network Management Group was notified
by its major customer that it was planning to discontinue certain business lines
with the Company. Since this will have a significant impact on attempts to sell
that segment, the Company has recorded a $3 million charge in the quarter ended
October 31, 2001, to provide for estimated asset impairment write downs.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

                  The Company is exposed to market risk related to interest
rates primarily through its borrowing activities. The Company does not use
derivative financial instruments for speculative or trading purposes. In
December 2001, the Company's Network Management Group was notified by its major
customer that it was planning to discontinue certain business lines with the
Company. Since this will have a significant impact on attempts to sell that
segment, the Company has recorded a $3.0 million non-operating charge in the
2002 Quarter for costs to close or sell Network Management segment.


                                       22
<PAGE>

PART II--OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         As described above under Part I, Item 1, Business, the Company and its
wholly owned subsidiaries emerged from bankruptcy proceedings under Chapter 11
on September 21, 2000.

OFFICE LEASES WITH THE MEDICAL OFFICE PORTFOLIO PROPERTIES LIMITED PARTNERSHIP

         In February 2001, Medical Office Portfolio Properties Limited
Partnership ("MOPP") filed a complaint against the Company and PhyMatrix
Management Company, Inc. ("PMCI") in the Palm Beach County Florida Circuit Court
(Case No. CL01 1898AF) seeking damages for breach of lease for the premises
located in Jupiter, Florida. Total rent under the lease for the balance of the
lease term is approximately $2.3 million. The Court granted a Summary Judgment
for the plaintiff in the amount of $2,583,747, plus interest and attorneys fees,
on October 11, 2001.

         In February 2001, MOPP filed a complaint against the Company and PMCI
in Palm Beach County Florida Circuit Court (Case No. CL01 1901AB) seeking
damages for breach of lease for the premises located in Palm Bay, Florida. The
stipulated damages are $2,100,000.

         On November 14, 2001, the Company entered into a Settlement Agreement
with MOPP with respect to the two court suits. Under the terms of the Settlement
Agreement the Company has agreed to pay $1,591,669 in full satisfaction of all
amounts owed under the two leases, of which $651,000 was paid upon execution of
the Settlement Agreement. The balance will be payable upon closing of the sale
of the network management division. If the network management division sale does
not occur before February 15, 2002, the balance will accrue interest at 18% per
year, and payments plus accrued interest will be required as follows: $287,500
on February 16, 2002, April 15, and 2002, July 15, 2002, and $79,169 on October
15, 2002. MOPP has been granted a first priority perfected security interest,
effective at the time that the New Credit Facility is repaid in certain notes
receivable with an aggregate value at October 31, 2001 of $3.4 million.

CLINICAL SITE LEASE WITH BILTMORE INVESTORS LIMITED PARTNERSHIP

         In March 2001, Biltmore Investors Limited Partnership ("Biltmore")
filed a complaint against CSL in Arizona Superior Court (Maricopa County) (No.
CV2001-003880) seeking damages of $16,625 for past due rent through February
2001 for breach of lease for the premises located in Phoenix, Arizona. Total
rent under the lease for the balance of the lease term is approximately $1.3
million. On November 14, 2001 a settlement was reached with Biltmore in the
amount of $318,000, due February 15, 2002 or earlier if the network management
division is sold before that date. Biltmore has been granted a first priority
perfected security interest, effective at the time that the New Credit Facility
is repaid, in a note receivable with a balance at October 31, 2001 of 1,505,000.
CNS will assume responsibility for the payment of this clinical site lease
effective on the merger of CSL and CNS.

DISPUTE WITH CLINICAL RESEARCH CENTER P.C.

         In October 2001, the Company filed a complaint against Clinical
Research Center, P.C., with which it has a Clinical Research Management
Agreement, in the United States District Court for the Central District of
Illinois Springfield Division (Case No. 01-3326) seeking temporary and permanent
injunctive relief and monetary damages for breach of contract, breach of
covenant, and tortious interference with the Company's business relations. The
complaint included a claim under the Federal Arbitration Act seeking to force
the defendants to mediate the dispute. The Court denied the Company's request
for a temporary restraining order based, in part, on the ground that the Company
had failed to prove that the defendants had received notice of the bankruptcy
proceeding and, therefore, the defendants could contest the assumption of the
management agreement at issue. The Company filed a motion for reconsideration
and the Court reversed its finding on the issue of defendants' notice of the
bankruptcy proceeding. A hearing on the Company's motion


                                       23
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for a preliminary injunction was held on December 17, 2001 and the Company is
awaiting the Court's decision.

NORTHEAST MEDICAL RESEARCH ASSOCIATES, INC./ALLERGY ASSOCIATES, INC. LITIGATION

         In November 2001, Northeast Medical Research Associates, Inc. ("NMRA")
filed a complaint against the Company, its wholly owned subsidiary, CSL, and
certain directors and officers of the Company in the Bristol County
Massachusetts Superior Court (Civil Action No. BRCV2001-01380) seeking damages
for, among other things, alleged breach of contract, fraud, misrepresentation,
breach of fiduciary duty and violations of the Massachusetts Consumer Protection
Act arising from a Clinical Research Management Agreement and Purchase Agreement
and Bill of Sale entered into by the parties. NMRA is seeking payment of actual
damages suffered plus interest and attorney's fees, and, in connection with the
alleged violations of the Massachusetts Consumer Protection Act, up to three but
not less than two times actual damages. The Company intends to move to dismiss
the claim in its entirety and has filed a complaint and moved for a temporary
restraining order against NMRA and certain physicians employed by NMRA.

         In November 2001, Allergy Associates, Inc. ("AAI"), which is affiliated
with NMRA, filed a first amended complaint against the Company and CSL in the
Bristol County Massachusetts Superior Court (BRCV2001-01295) seeking damages
for, among other things, alleged breach of contract and violations of the
Massachusetts Consumer Protection Act arising from the nonpayment of invoices
for services performed for CSL. This action arises out of the same agreements
and actions as are the subject of the NMRA litigation. AAI's last demand for
payment, delivered to the Company on or about November 14, 2001, stated the
amount owed was $82,445. AAI is seeking payment of actual damages suffered plus
interest and attorney's fees, and, in connection with the alleged violations of
the Massachusetts Consumer Protection Act, up to three but not less than two
times actual damages. The Company filed a motion to dismiss the first amended
complaint in its entirety.

OTHER LEGAL PROCEEDINGS

         The Company is subject to other legal proceedings in the ordinary
course of its business, and arising out of its bankruptcy filing. While the
Company cannot estimate the ultimate settlements or awards with respect to these
legal proceedings, if any, the outcomes could have a material adverse effect on
the Company, its liquidity, financial position and results of operations.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

         None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

                  On the Effective Date, the Company entered into a $10.0
million revolving credit facility (the "New Credit Facility") with Ableco
Finance LLC ("Ableco"). The $10.0 million New Credit Facility has a two-year
term and availability based upon eligible accounts receivable. The New Credit
Facility bears interest at prime plus 2.00% (but never less than 11.5%) and
provides for an unused line fee of .50%. The New Credit Facility is secured by
all assets of the Company and its subsidiaries, limits the ability of the
Company and its subsidiaries to incur certain indebtedness and make certain
dividend payments and requires the Company to comply with other customary
covenants. The qualification with respect to the Company's ability to continue
as a going concern contained in the Report of Arthur Andersen LLP in the January
31, 2001 audited financial statements, constituted an event of default under
this New Credit Facility. In addition, on July 31, 2001 the Company was in
default on certain financial and reporting covenants contained in the New Credit
Facility. On August 30, 2001 Ableco executed a waiver of these defaults. On
August 30, 2001, the Company and Ableco also executed an amendment to the New
Credit Facility, which reduced the maximum amount available thereunder to $8.5
million. The Company was in default of the revenue covenant contained in the
amended New Credit


                                       24
<PAGE>

Facility as of July 31, 2001. The Company and Ableco have executed a Forbearance
Agreement with respect to this default pursuant to which Ableco has agreed to
forbear exercising any of its default remedies until January 31, 2002. In
connection with the Forbearance Agreement, the Company has agreed to pay Ableco
$50,000, $25,000 of which has been paid and $25,000 of which is due on December
15, 2001 (or the date of the consummation of the CNS Merger if earlier) plus an
additional $75,000 if the amended New Credit Facility is not repaid in full by
December 31, 2001. The Company is also in default of the revenue covenant
contained in the amended New Credit Facility as of October 31, 2001 and has
requested a waiver of this default. There is no assurance the Company will
obtain such a waiver. If the Company is not able to obtain such a waiver or to
consummate the proposed CNS Merger, the amended New Credit Facility is subject
to acceleration of all outstanding indebtedness and default interest on such
outstanding amount at prime plus 5.0%.

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

         No matters were submitted to a vote of the Company's stockholders
during the period covered by this report.

ITEM 5. OTHER

         None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits.

         10.4.2   Forbearance Agreement dated November 2001

     (b) Reports on Form 8-K

         (i)      Form 8-K dated September 12, 2001.

         (ii)     Form 8-K dated November 13, 2001.


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                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Quarterly
Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto
duly authorized.


                             INNOVATIVE CLINICAL SOLUTIONS, LTD


                             By:  /s/ GARY S. GILLHEENEY
                                 --------------------------------------------
                                              Gary S. Gillheeney
                                    Chief Financial Officer and Treasurer
                                 (Principal Financial and Accounting Officer)
                                            DATE:DECEMBER 21, 2001