<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                                   -----------

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the quarter ended March 31, 2002

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

         For the transition period from                to
                                        --------------    ----------------------


                           Commission File No. 1-13392

                               US DIAGNOSTIC INC.
             (Exact name of registrant as specified in its charter)

           DELAWARE                                             11-3164389
 -------------------------------                            -------------------
 (State or other jurisdiction of                             (I.R.S. Employer
  incorporation or organization)                            Identification No.)

                            250 S. Australian Avenue
                                    Suite 900
                         West Palm Beach, Florida 33401
                    (Address of principal executive offices)

                                 (561) 832-0006
              (Registrant's telephone number, including area code)


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

                             Yes [X]        No [ ]

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

          Class                                    Outstanding At May 13, 2002:
-----------------------------                      ----------------------------
Common stock, $ .01 par value                           22,317,205 shares

<PAGE>


                               US DIAGNOSTIC INC.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Except for historical information contained herein, certain matters discussed
herein are forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Any
statements that express, or involve discussions as to, expectations, beliefs,
plans, objectives, assumptions or future events or performance (often, but not
always, through the use of words or phrases such as will likely result, are
expected to, will continue, is anticipated, estimated, projection, outlook) are
not statements of historical facts and may be forward-looking. Forward-looking
statements involve estimates, assumptions and uncertainties that could cause
actual results to differ materially from those expressed in the forward-looking
statements. These forward-looking statements are based largely on the
expectations of US Diagnostic Inc. (the "Company"), and are subject to a number
of risks and uncertainties, including but not limited to, the ability of the
Company to achieve a restructuring of its debt on acceptable terms in a timely
manner, the ability to sell assets at favorable prices and in a timely manner,
economic, competitive, regulatory and legal factors, collections of accounts
receivable, the outcome of the Company's negotiations with its senior and
subordinated lenders, the effect of a potential Chapter 11 bankruptcy filing on
the Company's business, available financing or available refinancing for or
restructuring of existing debt, cash flow and working capital availability, the
ability of the Company to renew or successfully negotiate contracts and/or
partnership relationships given its financial condition, the ability of the
Company to reduce its overhead, the impact of any actions taken by debt holders
as a result of defaults by the Company under its debt instruments, and other
factors discussed elsewhere in this report and in other documents filed by the
Company with the Securities and Exchange Commission ("SEC"). Many of these
factors are beyond the Company's control. Actual results could differ materially
from the forward-looking statements made. In light of these risks and
uncertainties, there can be no assurance that the results anticipated in the
forward-looking information contained in this report will, in fact, occur.

Each forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time and it is impossible
for management to predict all of such factors, nor can it assess the impact of
each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.



                                       2
<PAGE>

PART I  -  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                      US DIAGNOSTIC INC. AND SUBSIDIARIES

               CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


<TABLE>
<CAPTION>

In thousands, except share data                                                        March 31,         December 31,
                                                                                         2002                2001
                                                                                       ---------         ------------
<S>                                                                                    <C>                 <C>
ASSETS
CURRENT ASSETS
    Cash and cash equivalents                                                          $   1,663           $   1,351
    Accounts receivable, net of allowance for bad debts of $16,863 in 2002
      and $16,781 in 2001                                                                  8,230               8,872
    Other receivables, net of allowance for bad debts of $503 in 2002 and
      $483 in 2001                                                                         1,264               1,252
    Prepaid expenses and other current assets                                              1,003                 955
                                                                                       ---------           ---------
     TOTAL CURRENT ASSETS                                                                 12,160              12,430

PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization
   of $19,537 in 2002 and $18,366 in 2001                                                 16,497              17,658
INTANGIBLE ASSETS, net of accumulated amortization of $995 in 2002 and
   $961 in 2001                                                                              980               1,014
GOODWILL, net of accumulated amortization of $4,814 in both 2002 and 2001                 15,617              15,617
OTHER ASSETS                                                                                 373                 439
INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED SUBSIDIARIES                                  2,339               2,467
                                                                                       ---------           ---------
    TOTAL ASSETS                                                                       $  47,966           $  49,625
                                                                                       =========           =========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
     Accounts payable                                                                  $   5,184           $   5,081
     Accrued expenses                                                                     10,456               9,057
     Subordinated convertible debentures                                                  21,958              21,935
     Current portion of long-term debt                                                    30,075              30,552
     Obligations under capital leases - current portion                                    1,147               1,202
     Other current liabilities                                                             1,189               1,618
                                                                                       ---------           ---------
         TOTAL CURRENT LIABILITIES                                                        70,009              69,445

Long-term debt, net of current portion                                                     6,615               7,210
Obligations under capital leases, net of current portion                                   4,149               4,410
Other liabilities                                                                            268                 784
                                                                                       ---------           ---------
         TOTAL LIABILITIES                                                                81,041              81,849
                                                                                       ---------           ---------
MINORITY INTEREST                                                                            475                 485
                                                                                       ---------           ---------
COMMITMENTS AND CONTINGENCIES (Note 11)

STOCKHOLDERS' DEFICIENCY
   Preferred stock, $1.00 par value; 5,000,000 shares authorized; none issued                 --                  --
   Common stock, $.01 par value; 50,000,000 shares authorized; 22,317,205
       shares issued and outstanding at both March 31, 2002 and December 31,
       2001                                                                                  223                 223
     Additional paid-in capital                                                          147,656             147,656
     Deferred stock-based compensation                                                        (8)                (18)
     Accumulated deficit                                                                (181,421)           (180,570)
                                                                                       ---------           ---------
        TOTAL STOCKHOLDERS' DEFICIENCY                                                   (33,550)            (32,709)
                                                                                       ---------           ---------

    TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                                     $  47,966           $  49,625
                                                                                       =========           =========

</TABLE>

See Notes to Condensed Consolidated Financial Statements.



                                       3
<PAGE>
                      US DIAGNOSTIC INC. AND SUBSIDIARIES

          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



<TABLE>
<CAPTION>

                                                                               Three Months Ended March 31,
                                                                               ----------------------------
In thousands, except per share data                                              2002               2001
                                                                               --------           --------
<S>                                                                            <C>                <C>
NET REVENUES                                                                   $ 11,325           $ 17,020
                                                                               --------           --------
OPERATING EXPENSES
     General and administrative                                                   9,324             13,651
     Bad debt expense                                                               447                795
     Depreciation                                                                 1,171              2,136
     Amortization - amortizable intangible assets                                    34                 66
     Amortization - goodwill                                                         --                681
                                                                               --------           --------
       TOTAL OPERATING EXPENSES                                                  10,976             17,329
                                                                               --------           --------

INCOME (LOSS) FROM OPERATIONS                                                       349               (309)
                                                                               --------           --------
OTHER INCOME (EXPENSE)
     Net gain on disposition of subsidiaries                                         --              4,363
     Interest expense                                                            (1,398)            (2,205)
     Interest and other income                                                      352                287
                                                                               --------           --------
       TOTAL OTHER INCOME (EXPENSE)                                              (1,046)             2,445
                                                                               --------           --------

Income (loss) before minority interest and provision for income taxes              (697)             2,136
                                                                               --------           --------

MINORITY INTEREST:
    Minority interest in gain on sale of subsidiaries                                --              3,258
    Minority interest in income (loss) of subsidiaries                               74               (190)
                                                                               --------           --------
        TOTAL MINORITY INTEREST                                                      74              3,068
                                                                               --------           --------

Loss before provision for income taxes                                             (771)              (932)

Provision for income taxes                                                           80                243
                                                                               --------           --------

NET LOSS                                                                       $   (851)          $ (1,175)
                                                                               ========           ========

BASIC AND DILUTED LOSS PER COMMON SHARE

Net loss                                                                       $  (0.04)          $  (0.05)
                                                                               ========           ========

Weighted-average common shares outstanding                                       22,329             22,414
                                                                               ========           ========

</TABLE>




See Notes to Condensed Consolidated Financial Statements.



                                       4
<PAGE>
                      US DIAGNOSTIC INC. AND SUBSIDIARIES

   CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY FOR THE THREE
                    MONTHS ENDED MARCH 31, 2002 (UNAUDITED)


<TABLE>
<CAPTION>


                                                                        Additional                                       Total
                                              Common       Common         Paid-in       Deferred       Accumulated    Stockholders'
In thousands                                  Shares        Stock         Capital     Compensation       Deficit       Deficiency
                                              ------      ---------     ----------    ------------     -----------    -------------
<S>                                           <C>         <C>            <C>            <C>             <C>             <C>
BALANCE - JANUARY 1, 2002                     22,317      $     223      $ 147,656      $     (18)      $(180,570)      $ (32,709)

Amortization of deferred compensation             --             --             --             10              --              10

Net loss                                          --             --             --             --            (851)           (851)
                                              ------      ---------      ---------      ---------       ---------       ---------
BALANCE - MARCH 31, 2002                      22,317      $     223      $ 147,656      $      (8)      $(181,421)      $ (33,550)
                                              ======      =========      =========      =========       =========       =========

</TABLE>

See Notes to Condensed Consolidated Financial Statements.




                                       5
<PAGE>

                      US DIAGNOSTIC INC. AND SUBSIDIARIES

          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


In thousands, except supplemental schedule of non-cash activities


<TABLE>
<CAPTION>

                                                                               Three Months Ended March 31,
                                                                               ----------------------------
                                                                                 2002                2001
                                                                                --------           --------
<S>                                                                             <C>                <C>
OPERATING ACTIVITIES
      NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                       $  1,710           $ (7,100)
                                                                                --------           --------
INVESTING ACTIVITIES
      Purchases of equipment                                                         (10)               (46)
      Proceeds from the sale of imaging centers, net of
          cash retained by purchasers                                                 --             11,840
      Proceeds from dispositions of property and equipment                            --                 10
                                                                                --------           --------

      NET CASH - PROVIDED BY (USED IN) INVESTING ACTIVITIES                          (10)            11,804
                                                                                --------           --------

FINANCING ACTIVITIES
      Repayments of notes payable and obligations under capital leases            (1,388)            (4,751)
                                                                                --------           --------

      NET CASH - USED IN FINANCING ACTIVITIES                                     (1,388)            (4,751)
                                                                                --------           --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                 312                (47)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                                    1,351              4,458
                                                                                --------           --------

CASH AND CASH EQUIVALENTS - END OF PERIOD                                       $  1,663           $  4,411
                                                                                ========           ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
      Cash paid during the period for:
      Interest                                                                  $    446           $  1,591
                                                                                ========           ========
      Income taxes                                                              $    323           $    341
                                                                                ========           ========


</TABLE>

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

There were no borrowings under capitalized leases during the three months ended
March 31, 2002 and 2001, respectively.

During the three months ended March 31, 2001, debt and capital lease obligations
decreased by $4.8 million and property and equipment decreased by $6.3 million
as a result of the sale of imaging centers. The Company also wrote-off net
intangibles of $5.8 million as a result of the sale of imaging centers during
the three months ended March 31, 2001. The Company used $1.2 million of sales
proceeds to repay debt not specifically related to the sold centers during the
three months ended March 31, 2001. There were no center sales during the three
months ended March 31, 2002.

During the three months ended March 31, 2001, the Company wrote-off net property
and equipment of $132,000 as a result of the closing of a non-performing imaging
center. There were no center closures during the three months ended March 31,
2002.

The Company issued 4,800 shares of restricted stock during the three months
ended March 31, 2001.

See Notes to Condensed Consolidated Financial Statements.



                                       6
<PAGE>

                      US DIAGNOSTIC INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


[1] BASIS OF PRESENTATION

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying condensed consolidated financial statements as of March 31,
2002, include the accounts of US Diagnostic Inc., its wholly-owned subsidiaries
and non-wholly-owned but controlled subsidiaries (collectively, the "Company"),
and have been prepared by the Company pursuant to the rules and regulations of
the Securities and Exchange Commission (the "SEC"). All significant intercompany
accounts and transactions have been eliminated. Certain information related to
the Company's organization, significant accounting policies and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted. These condensed consolidated financial
statements reflect, in the opinion of management, all material adjustments
(consisting only of normal and recurring adjustments) necessary to fairly state
the financial position and the results of operations for the periods presented
and the disclosures herein are adequate to make the information presented not
misleading. Operating results for interim periods are not necessarily indicative
of the results that can be expected for a full year.

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

The condensed consolidated financial statements included herein should be read
in conjunction with the audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K filed with the SEC
for the year ended December 31, 2001.

In order to maintain consistency and comparability between the periods
presented, certain amounts have been reclassified from the previously issued
financial statements in order to conform with the financial statement
presentation of the current period. See Note 2 for further details.

GOING CONCERN

The accompanying condensed consolidated financial statements have been prepared
assuming that the Company will continue as a going concern which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business. The Company has experienced significant net losses since
1995 and as of March 31, 2002 had an accumulated deficit of approximately $181.4
million. Based on current estimates, unless the Company can successfully sell
remaining imaging centers at favorable prices and terms, obtain additional
significant financial resources (which is unlikely), or restructure its debt,
the Company's current cash and cash from operations will be insufficient to meet
its anticipated cash needs. Furthermore, the Company has defaulted on the March
31, 2001, September 30, 2001 and March 31, 2002 interest payments on its 9%
Subordinated Convertible Debentures due 2003 (the "Debentures"). Also, the
Company has defaulted on its obligation to repurchase Debentures which is
required as a result of failing to maintain consolidated net worth of at least
$18.0 million. On May 1, 2001, the Company received a default notice from the
Trustee under the Debenture Indenture ("Indenture"). These defaults could give
rise to an acceleration of the maturities of the Debentures. In addition, the
Company is prohibited from borrowing additional amounts without causing
additional non-compliance with certain Indenture covenants and an additional
default under the Indenture. Furthermore, the Company failed to pay the $10.0
million principal amount (and accrued interest) of its 6 1/2% Convertible Notes
that matured on




                                       7
<PAGE>

June 30, 2001 (the "Notes"). This failure constitutes a default under the Notes
and may also constitute a cross default under other of the Company's debt
instruments which could entitle the holders of such instruments to accelerate
the maturity of such debt instruments. If these uncertainties cannot be resolved
successfully and in a timely manner, the Company could be required to seek a
reorganization or liquidation under the federal bankruptcy laws. These
conditions, among others, raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans concerning these matters are
described below. The condensed consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

MANAGEMENT'S PLANS

The Company's financial condition continued to deteriorate during 2001 despite
the Company's efforts, begun in 1997, to improve operating results, cash flows
and capitalization through overhead reductions; dispositions of non-core and
underperforming assets; and the sale of 36 medical diagnostic imaging centers
under a plan of restructuring that was adopted in 2000. The plan of
restructuring was suspended during 2001 because the Company determined that it
would not be able to obtain acceptable prices for its remaining imaging centers
due in part to industry and general economic conditions.

The Company remains burdened by a high level of indebtedness to its secured and
unsecured lenders and most of this indebtedness has relatively short maturities
(or may be current as a result of acceleration or rights to accelerate) which
require the Company to devote a significant portion of its cash flows to the
amortization of debt and interest payments. The Company also has ongoing
significant capital expenditure requirements in order to maintain and modernize
its imaging equipment. Furthermore, cost containment by the managed care
industry and governmental payors such as Medicare continues to adversely affect
pricing levels for medical imaging services. The Company also needs to maintain
its corporate infrastructure to operate remaining centers and collect accounts
receivable. As a result, the Company's cash flows from operating activities
continue to be insufficient to meet the Company's operating needs, scheduled
debt repayment obligations and capital expenditure requirements.

In light of its financial condition, the Company, assisted by its financial and
legal advisors, commenced negotiations during 2001, with its senior lenders and
an adhoc committee of Debenture holders. These negotiations continue with
respect to the terms of a restructuring plan that would require the Company to
commence a voluntary case under Chapter 11 of the Bankruptcy Code and pursuant
to which an entity affiliated with or supported by the Company's primary senior
secured lenders ("Senior Lender"), would acquire substantially all of the
Company's operating assets in exchange for a cash payment that would be used to
partially repay creditors. In all likelihood, there would be little or no value
remaining in the Company for its current stockholders. There can be no assurance
that a definitive agreement with respect to the proposed sale will be entered
into or whether any such agreement would receive the required approval of the
bankruptcy court, nor can there be any assurance as to the amount of funds that
will be available to pay the Company's creditors or the particular percentage of
each class of creditors' claims that could be repaid.

Moreover, if these negotiations cannot be resolved successfully, the Company
would be required to pursue other options, which could include voluntarily
seeking a reorganization or liquidation in bankruptcy, or its creditors could
file an involuntary bankruptcy petition against the Company under the federal
bankruptcy laws.

RECENT ACCOUNTING PRONOUNCEMENTS - The Company has adopted Statement of
Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other
Intangible Assets," effective January 1, 2002. SFAS 142 requires, among other
things, the discontinuance of goodwill amortization. In addition, the standard
includes provisions for the reclassification of certain existing recognized
intangibles as goodwill, reassessment of the useful lives of existing recognized
intangibles, reclassification of certain intangibles out of previously reported
goodwill and the identification of reporting units for purposes of assessing
potential future impairments of goodwill. SFAS 142 also requires the Company to
complete a transitional goodwill impairment test within six months from the date
of adoption. The Company has not yet completed its evaluation of the effect of
adopting this statement. See Note 5 for a reconciliation of net loss and net
loss per share.




                                       8
<PAGE>

The Company has adopted Statement of Financial Accounting Standards No. 143
("SFAS 143"), "Accounting for Asset Retirement Obligations," effective January
1, 2002. SFAS 143 addresses financial accounting and reporting for legal
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The adoption of SFAS 143 did not have any
effect on the Company's financial statements or disclosures.

The Company has adopted Statement of Financial Accounting Standards No. 144
("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived Assets,"
effective January 1, 2002. SFAS 144 addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. The provisions of SFAS 144
generally are to be applied prospectively. The Company has completed its
evaluation of the effect of adopting this statement. The adoption of SFAS 144
did not have any effect on the Company's financial statements. See Notes 3, 4
and 6 for further detail.

[2] DISCONTINUED OPERATIONS SUBSEQUENTLY RETAINED

The Company's Board of Directors approved a restructuring plan in 2000 which
allowed for the sale of all or substantially all of its imaging centers (the
"Plan of Restructuring"). The Company's sales of its imaging centers pursuant to
the Plan of Restructuring, were not completed within the one year time period
following the approval of the Plan of Restructuring at the annual stockholders'
meeting on July 21, 2000. As a result, effective June 30, 2001, the Company
began treating as continuing operations its remaining operations that had
previously been presented as discontinued operations. The accompanying condensed
consolidated financial statements have been reclassified to reflect this change
in presentation. Consequently, the Company's operations are no longer
differentiated between continuing and discontinued operations.

[3] PROPERTY AND EQUIPMENT

A summary of the property and equipment is as follows:

<TABLE>
<CAPTION>

                                                          March 31,        December 31,
In thousands                                                2002              2001
                                                          --------         ------------
<S>                                                       <C>                <C>
Land                                                      $  1,125           $  1,125
Buildings                                                    1,528              1,528
Medical equipment                                           21,006             20,996
Furniture and fixtures                                       1,245              1,245
Office, data processing equipment and software               7,102              7,102
Leasehold improvements                                       4,028              4,028
                                                          --------           --------
  Total                                                     36,034             36,024

Less:  accumulated depreciation and amortization           (19,537)           (18,366)
                                                          --------           --------

    Property and equipment, net                           $ 16,497           $ 17,658
                                                          ========           ========

</TABLE>

Included in property and equipment is equipment under capital leases amounting
to $8.5 million at both March 31, 2002 and December 31, 2001. Accumulated
depreciation for equipment under capital leases was $2.1 million and $1.9
million as of March 31, 2002 and December 31, 2001, respectively.

Depreciation expense amounted to $1.2 million and $2.1 million during the three
months ended March 31, 2002 and 2001, respectively, of which $0.2 million and
$0.5 million, respectively, was attributed to equipment under capital leases.




                                       9
<PAGE>

[4] INTANGIBLE ASSETS

A summary of amortizable intangible assets is as follows:

<TABLE>
<CAPTION>


                                                  As of March 31, 2002                   As of December 31, 2001
                                         ----------------------------------         ----------------------------------
                                         Gross Carrying        Accumulated          Gross Carrying        Accumulated
In thousands                                 Amount            Amortization             Amount            Amortization
                                         --------------        ------------         --------------        ------------
<S>                                          <C>                  <C>                   <C>                  <C>
Amortizable intangible assets:

Covenants not to compete                     $  775               $ (563)               $  775               $ (550)
Customer lists                                1,193                 (425)                1,193                 (404)
Other intangibles                                 7                   (7)                    7                   (7)
                                             ------               ------                ------               ------
Total                                        $1,975               $ (995)               $1,975               $ (961)
                                             ======               ======                ======               ======

</TABLE>

Aggregate amortization expense related to amortizable intangible assets was
$34,000 and $66,000 for the three months ended March 31, 2002 and 2001,
respectively. Estimated amortization expense of amortizable intangible assets
for each of the five succeeding fiscal years is as follows:

        In thousands

        Estimated Amortization Expense
        ------------------------------

        For the year ended 3/31/2003                           $ 137
        For the year ended 3/31/2004                             137
        For the year ended 3/31/2005                             137
        For the year ended 3/31/2006                             137
        For the year ended 3/31/2007                              99
                                                               -----

        Total                                                  $ 647
                                                               =====

The Company has no unamortizable intangible assets.

[5] GOODWILL

Goodwill consists of the cost of purchased businesses in excess of the fair
value of net tangible assets acquired. Under SFAS 142, goodwill is no longer
amortized but reviewed for impairment annually, or more frequently if certain
indicators arise. The Company is required to complete the initial step of a
transitional impairment test within six months of adoption of SFAS 142 and, if
it is determined that a potential impairment exists, to complete the final step
of this test by the end of the fiscal year. Any impairment losses resulting from
the transitional impairment test would be recorded as a cumulative effect of a
change in accounting principle for the quarter ended March 31, 2002. Subsequent
impairment losses will be reflected in operating income or loss in the condensed
consolidated statements of operations. There have been no changes in the
carrying amount of goodwill for the quarter ended March 31, 2002.



                                       10
<PAGE>
Had the Company been accounting for its goodwill according to SFAS 142 for all
periods presented, the Company's net loss and loss per share would have been as
follows:

    In thousands, except per share data

<TABLE>
<CAPTION>
                                                       Three Months Ended March 31,
                                                       ----------------------------
                                                         2002               2001
                                                       --------           --------
<S>                                                    <C>                <C>
REPORTED NET LOSS                                      $   (851)          $ (1,175)
Add back: Goodwill amortization                              --                576
Add back: Equity-method goodwill amortization                --                105
                                                       --------           --------

ADJUSTED NET LOSS                                      $   (851)          $   (494)
                                                       ========           ========

BASIC AND DILUTED LOSS PER COMMON SHARE
Reported net loss                                      $  (0.04)          $  (0.05)
Add back: Goodwill amortization                              --               0.03
Add back: Equity-method goodwill amortization                --                 --
                                                       --------           --------

Adjusted net loss                                      $  (0.04)          $  (0.02)
                                                       ========           ========

Weighted-average common shares outstanding               22,329             22,414
                                                       ========           ========

</TABLE>

Goodwill amortization had no effect on the Company's provision for income taxes
for the three months ended March 31, 2001.

[6] ASSET IMPAIRMENT LOSSES

According to SFAS 144, all long-lived assets and intangible assets with definite
lives were analyzed on an individual center basis to determine if expected
future cash flows would be sufficient to cover annual amortization of such
intangible and long-lived assets. The Company will record impairment losses for
those centers for which the sum of the expected future cash flows does not cover
the carrying value of the assets acquired. No impairment losses were necessary
in the quarter ended March 31, 2002.

[7] INCOME TAXES

Income taxes have been provided based upon the Company's anticipated annual
effective income tax rate at both the Federal and State levels. Tax benefits
relating to the Company's loss are recognized only to the extent that, in the
opinion of management, it is more likely than not, that the tax benefits are
realizable.

[8] DEBT

The Company did not make the interest payments on the Debentures that were due
March 31, 2001, September 30, 2001 and March 31, 2002, each of which failures
constitute an event of default under the Indenture and could give rise to an
acceleration of the maturity of the Debentures. A default on the Debentures
could also allow other debt holders to accelerate the maturity of their debt
instruments. The amount of past due interest on the Debentures as of March 31,
2002 is approximately $3.0 million. Since the September 30, 2000 quarter and all
the subsequent quarters, the Company has not been in compliance with the
consolidated net worth covenant under the Indenture; as a result, the Company
was obligated to conduct a Deficiency Offer. Given the Company's cash resources
and pending its efforts to restructure its debt, the Company did not make a
Deficiency Offer. On May 1, 2001, the Company received a default notice from the
Trustee for the Indenture regarding certain technical defaults and the failure
to make a Deficiency Offer. Such default could permit the acceleration of
maturity of the Debentures. Such an event could also give rise to the
acceleration of other debt issued by the Company. In addition, the Company's
debt to operating cash flow ratio is insufficient under the debt incurrence test
thereby limiting its



                                       11
<PAGE>

ability to incur additional debt. Due to the defaults and cross defaults, the
Debentures have been classified as a current liability since June 30, 2001 for
financial statement purposes. See MANAGEMENT'S PLANS under Note 1 for further
details.

The Company has failed to pay the $10.0 million principal amount (and accrued
interest) of the Notes that matured on June 30, 2001. The amount of past due
interest on the Notes as of March 31, 2002 is approximately $0.7 million. This
failure constitutes a default under the Notes and may also constitute a cross
default under other of the Company's debt instruments which could entitle the
holders of such instruments to accelerate the maturity. The Company is seeking a
restructuring of certain of its debt obligations and covenants including the
Notes. See Note 1, MANAGEMENT'S PLANS for further details.

In addition, under its credit facilities with DVI Financial Services, Inc.
("DVIFS") and DVI Business Credit Corporation ("DVIBC"), (collectively, "DVI"),
DVI has the right to sweep specified amounts of the Company's cash deposits and
apply such amounts to the payment of interest and principal outstanding under
those facilities. On August 30, 2001, the Company and DVI entered into a
Forbearance Agreement (the "Forbearance Agreement") pursuant to which DVI agreed
to extend certain financial accommodations to the Company and forbear from
exercising its rights and remedies against the Company with respect to the
existing defaults for a period ended on September 30, 2001 (the "Forbearance
Period"). Under the Forbearance Agreement, the Company granted DVI additional
collateral in all accounts receivable and a pledge of the Company's equity
interests in certain subsidiaries in addition to the collateral already granted
for various DVI loans. Unless a further restructuring is completed, the Company
will be required to pay DVIFS an amount equal to the difference between the
payments actually made and the regular monthly payments that should have been
made had the Forbearance Agreement not been entered into (the "Forbearance
Amount"). The Forbearance Amount is estimated to be approximately $5.0 million
as of March 31, 2002. Since the expiration of the Forbearance Period, DVI has
agreed to accept, and has indicated it will continue to accept, reduced payments
at a level comparable to that set in the expired Forbearance Agreement (or less
than such level) in order to permit the Company to meet its current cash
demands. Unless and until the Company can negotiate a comprehensive
restructuring of its indebtedness or complete the sale of its assets
contemplated by Note 1 MANAGEMENT'S PLANS, it will continue to be substantially
dependent on DVI's willingness to provide additional financial accommodations,
as to which there can be no assurance.

On March 1, 2002, DVIBC extended the expiration date of the revolving credit
loan of $35.0 million from April 1 to June 1, 2002.

[9] EARNINGS PER SHARE

The Company had a net loss for the three months ended March 31, 2002 and March
31, 2001, and all potentially dilutive securities were excluded from the
computations of basic and diluted earnings per share during such periods since
the effect would be anti-dilutive. Such potentially dilutive securities consist
of the following: (i) unexercised stock options and warrants to purchase 1.1
million and 2.1 million shares of the Company's common stock as of March 31,
2002 and March 31, 2001, respectively; (ii) 3.6 million shares of the Company's
common stock issuable upon conversion of convertible debt as of both March 31,
2002 and March 31, 2001; and (iii) unissued restricted stock amounting to 91,800
shares of the Company's common stock as of both March 31, 2002 and March 31,
2001.

[10] SOLD/CLOSED IMAGING CENTERS

On January 2, 2001, the Company sold the assets of three imaging centers to
Comprehensive Diagnostic Imaging, Inc. and Comprehensive Medical Imaging, Inc.
(collectively referred to as "CMI"). CMI had previously purchased 13 imaging
centers from the Company in August and September 2000. The sales price was $13.9
million, consisting of $11.2 million cash and the assumption by the purchaser of
debt and other obligations




                                       12
<PAGE>

amounting to $2.7 million. The Company also repaid $1.2 million on its revolving
credit loan with DVIBC from the proceeds of this sale.

On January 18, 2001, the Company sold its partnership interest in an imaging
center with an effective date of January 1, 2001. The sales price was $350,000
in cash.

On March 5, 2001, the Company sold its assets in an imaging center. The sales
price was $2.0 million, $1.1 million of which was cash. As a result of the sale,
the Company also repaid $900,000 on a loan with DVIFS.

On January 19, 2001, the Company entered into an agreement concerning the sale
of its 80% interest in two imaging centers in Louisiana, with an effective date
of January 1, 2001. The consideration was approximately $2.3 million. The
conditions of the agreement were fully satisfied on March 20, 2001.

The Company closed one underperforming imaging center in the first quarter of
2001.

No imaging centers were sold or closed in the first quarter of 2002.

The following is a summary of the gains/losses recognized on the above described
sales for the quarter ending March 31, 2001 as well as the gains/losses on the
closing of a non-performing imaging center.

       In thousands

                                                                  2001
                                                                 -------
       Net gains on sold imaging centers                         $ 4,498
       Net losses on a closed imaging center                       (135)
                                                                 -------
          Net gain on disposition of subsidiaries                $ 4,363
                                                                 =======


[11]  LITIGATION

RADNET MANAGEMENT II, INC. VS. US DIAGNOSTIC INC. AND MODESTO IMAGING CENTER,
INC. - The Company is a Defendant in an action, before the American Arbitration
Association, Los Angeles Regional Office. This is an action for breach of
representations and warranties in an asset purchase agreement. The claimant
alleges the Company failed to disclose that a certain lease agreement had been
extended for ten years through the year 2014, rather than terminating in 2004.
The claimant seeks approximately $1 million pursuant to the surviving covenants
and agreements related to such asset purchase agreement. The matter is currently
in discovery and the Company cannot currently determine whether it is liable for
such alleged breach or the appropriate amount of the claim if it is determined
to be liable. The parties have agreed to a nonbinding mediation which is set for
May 21, 2002 in California.

OTHER MATTERS - The Company could be subject to legal actions arising out of the
performance of its diagnostic imaging services. Damages assessed in connection
with, and the cost of defending, any such actions could be substantial. The
Company maintains liability insurance and other insurance, which it believes is
adequate for its present operations although, even if adequate, contains
deductibles for which the Company would be responsible. There can be no
assurance that the Company will be able to continue or increase such coverage or
to do so at an acceptable cost, or that the Company will have other resources
sufficient to satisfy any liability or litigation expense that may result from
any uninsured or underinsured claims. The Company also requires all of its
affiliated physicians to maintain malpractice and other liability coverage.

The Company is also a party to, and has been threatened with, a number of other
legal proceedings in the ordinary course of business. While it is not feasible
to predict the outcome of these matters, and although there can be no





                                       13
<PAGE>

assurances, the Company does not anticipate that the ultimate disposition of any
such proceedings will have a material adverse effect on the Company.

[12]  SUBSEQUENT EVENTS

On April 16, 2002, the Company entered into a capital lease agreement with DVIFS
for approximately $3.0 million for equipment for a new fee-for-service center.
The Company has pledged the stock of MICA Imaging Inc., a subsidiary, as part of
this transaction.

On May 2, 2002, the Company received a notice from a hospital limited partner of
one of the Company's partnerships that the hospital intends to not renew the
partnership which is scheduled to end effective January 31, 2003. The
partnership accounted for net revenues of $1.3 million during the year ended
December 31, 2001.




                                       14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

Certain matters discussed herein are forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are based largely on the Company's
expectations and are subject to a number of risks and uncertainties, including
but not limited to, the ability of the Company to achieve a restructuring of its
debt on acceptable terms in a timely manner, the ability to sell assets at
favorable prices and in a timely manner, economic, competitive, regulatory and
legal factors, collections of accounts receivable, the outcome of the Company's
negotiations with its senior and subordinated lenders, the effect of a potential
Chapter 11 bankruptcy filing on the Company's business, available financing or
available refinancing for or restructuring of existing debt, cash flow and
working capital availability, the ability of the Company to renew or
successfully negotiate contracts and/or partnership relationships given its
financial condition, the ability of the Company to reduce its overhead, the
impact of any actions taken by debt holders as a result of defaults by the
Company under its debt instruments, and other factors discussed elsewhere in
this report and in other documents filed by the Company with the SEC. Many of
these factors are beyond the Company's control. Actual results could differ
materially from the forward-looking statements made. In light of these risks and
uncertainties, there can be no assurance that the results anticipated in the
forward-looking information contained in this report will, in fact, occur.

OVERVIEW AND RECENT DEVELOPMENTS

The Company's financial condition continued to deteriorate during 2001 despite
the Company's efforts, begun in 1997, to improve operating results, cash flows
and capitalization through overhead reductions; dispositions of non-core and
underperforming assets; and the sale of 36 medical diagnostic imaging centers
under a plan of restructuring that was adopted in 2000. The plan of
restructuring was suspended during 2001 because the Company determined that it
would not be able to obtain acceptable prices for its remaining imaging centers
due in part to industry and general economic conditions.

The Company remains burdened by a high level of indebtedness to its secured and
unsecured lenders and most of this indebtedness has relatively short maturities
(or may be current as a result of acceleration or rights to accelerate) which
require the Company to devote a significant portion of its cash flows to the
amortization of debt and interest payments. The Company also has ongoing
significant capital expenditure requirements in order to maintain and modernize
its imaging equipment. Furthermore, cost containment by the managed care
industry and governmental payors such as Medicare continues to adversely affect
pricing levels for medical imaging services. The Company also needs to maintain
its corporate infrastructure to operate remaining centers and collect accounts
receivable. As a result, the Company's cash flows from operating activities
continue to be insufficient to meet the Company's operating needs, scheduled
debt repayment obligations and capital expenditure requirements.

The Company's shortfall in cash flows has forced it to default on interest
payments due in March and September of 2001, as well as the March 2002 payment,
on its $21.9 million principal amount of the Debentures aggregating $3.0 million
at March 31, 2002, plus interest on the overdue amounts, the repayment at
maturity of the Notes aggregating $10.0 million in principal amount plus unpaid
interest to the maturity date, as well as defaults on other obligations,
judgments and indebtedness. Moreover, in the absence of a comprehensive debt
restructuring, the Company is unlikely to have sufficient cash resources to pay
additional maturing debt obligations which could give rise to additional
defaults. The Company has also committed various financial covenant defaults
with respect to the Debentures and failed to conduct an offer to purchase the
Debentures as a result of the Company's failure to maintain a consolidated net
worth of at least $18.0 million. These defaults permit the Debenture holders to
accelerate the maturity of the Debentures, constitute cross defaults under other
instruments and limit the Company's ability to obtain other financing. The
Company's continued operation has been largely dependent on the willingness of
the Senior Lender to reduce its sweeps of the Company's available cash which in
part secures




                                       15
<PAGE>
the Company's obligations under its credit facilities with the Senior Lender. If
the Senior Lender were to terminate its forbearances, the Company would likely
be forced to seek immediate protection in bankruptcy.

In light of its financial condition, the Company, assisted by its financial and
legal advisors, commenced negotiations during 2001, with its senior lenders and
an adhoc committee of Debenture holders. These negotiations continue with
respect to the terms of a restructuring plan that would require the Company to
commence a voluntary case under Chapter 11 of the Bankruptcy Code and pursuant
to which an entity affiliated with or supported by the Senior Lender would
acquire substantially all of the Company's operating assets in exchange for a
cash payment that would be used to partially repay creditors. In all likelihood,
there would be little or no value remaining in the Company for its current
stockholders. There can be no assurance that a definitive agreement with respect
to the proposed sale will be entered into or whether any such agreement would
receive the required approval of the bankruptcy court, nor can there be any
assurance as to the amount of funds that will be available to pay the Company's
creditors or the particular percentage of each class of creditors' claims that
could be repaid. See Note 1 GOING CONCERN and MANAGEMENT'S PLANS which are
incorporated herein by reference.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's financial statements and accompanying notes are prepared in
accordance with accounting principles generally accepted in the United States of
America. Preparing financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenue
and expenses. The most significant of these estimates relate to contractual and
bad debt allowances on accounts receivable and other receivables, useful lives
of medical equipment, the realizability of long-lived and intangible assets and
reserves for litigation contingencies. These estimates and assumptions are
affected by management's application of accounting policies. Critical accounting
policies for the Company include property and equipment, intangible assets,
long-lived assets and net revenue.

DISCONTINUED OPERATIONS SUBSEQUENTLY RETAINED

The Company's Board of Directors approved a restructuring plan in 2000 which
allowed for the sale of all or substantially all of its imaging centers. The
Company's sales of its imaging centers pursuant to the Plan of Restructuring,
were not completed within the one year time period following the approval of the
Plan of Restructuring at the annual stockholders' meeting on July 21, 2000. As a
result, effective June 30, 2001, the Company is treating as continuing
operations its remaining operations that had previously been presented as
discontinued operations. The accompanying condensed consolidated financial
statements have been reclassified to reflect this change in presentation.
Consequently, the Company's operations are no longer differentiated between
continuing and discontinued operations.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002 COMPARED WITH
THE THREE MONTHS ENDED MARCH 31, 2001.

Net revenue for the three months ended March 31, 2002 (the "2002 three month
period") decreased to $11.3 million, from $17.0 million for the three months
ended March 31, 2001 (the "2001 three month period"). The decrease resulted
primarily from the sale of the imaging centers that were part of the 2001 three
month period. Net revenue relating to those centers that are still in operation
as of March 31, 2002 (the "open centers") was $11.4 million for the 2002 three
month period compared to $12.3 million for 2001 three month period. The decrease
in net revenue of the open centers is related to a 5.7% decrease in scan volume.

General and Administrative ("G&A") expense decreased to $9.3 million during the
2002 three month period, compared to G&A expense of $13.7 million during the
2001 three month period. The decrease from 2001 to 2002 resulted primarily from
the sale of the imaging centers that were part of the 2001 three month period.
G&A




                                       16
<PAGE>

expense relating to the open centers was $9.3 million for the 2002 three month
period compared to $10.3 million for the 2001 three month period.

Bad debt expense was $0.4 million during the 2002 three month period compared to
$0.8 million during the 2001 three month period. Bad debt expense decreased from
2001 to 2002 resulting primarily from the sale of the imaging centers that were
part of the 2001 three month period. Bad debt expense relating to the open
centers was $0.4 million for the 2002 three month period compared to $0.5
million for the 2001 three month period.

Depreciation expense was $1.2 million during the 2002 three month period,
compared to $2.1 million during the 2001 three month period. Depreciation
expense decreased from 2001 to 2002 resulting primarily from the sale of the
imaging centers that were part of the 2001 three month period. Depreciation
expense relating to the open centers was $1.2 million for the 2002 three month
period and $1.7 million for the 2001 three month period. The decrease in
depreciation expense of the open centers is related to the write off of property
and equipment in 2001 as part of the asset impairment analysis under Statement
of Financial Accounting Standards No. 121 ("SFAS 121") "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."

Amortization expense was $34,000 during the 2002 three month period, compared to
$0.7 million (for both intangible assets and goodwill) during the 2001 three
month period. Amortization expense decreased from 2001 to 2002 resulting
primarily from the sale of the imaging centers that were part of the 2001 three
month period as well as the adoption of SFAS 142 effective January 1, 2002 which
discontinued amortization of goodwill. Amortization expense relating to the open
centers was $34,000 for the 2002 three month period compared to $0.7 million for
2001 three month period. The decrease in amortization expense of the open
centers is related to the write off of intangibles as part of the asset
impairment analysis under SFAS 121 in 2001 and the adoption of SFAS 142
effective January 1, 2002.

Interest expense decreased to $1.4 million, during the 2002 three month period,
compared to $2.2 million during the 2001 three month period, resulting primarily
from reduced debt in connection with the sale of the imaging centers that were
part of the 2001 three month period. Interest expense relating to the open
centers was $1.4 million for the 2002 three month period compared to $2.1
million for the 2001 three month period. The decrease in interest expense of the
open centers is primarily due to reduced debt in connection with the sale of the
imaging centers.

During the 2001 three month period, the Company recognized a net gain of $4.5
million on the sale of seven imaging centers and recognized a net loss of
approximately $135,000 relating to the closing of one imaging center that was
non-performing. There were no imaging center sales or closures during the 2002
three month period.

Minority interest in gain on sale of subsidiaries of $3.3 million in the 2001
three month period was attributable to the sale of majority owned subsidiaries.
There were no center sales during the 2002 three month period.

The Company had a basic and diluted loss per share of $0.04 during the 2002
three month period compared to basic and diluted loss per share of $0.05 during
the 2001 three month period.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2002, the Company had a working capital deficiency of $57.8
million, compared to a working capital deficiency of $57.0 million at December
31, 2001. The increase in the working capital deficiency from 2001 to 2002 is
primarily due to an increase in the unpaid interest on the Debentures and the
Notes from $3.0 million at December 31, 2001 to $3.7 million at March 31, 2002,
which is shown as a current liability. The Company's primary short-term
liquidity requirements as of March 31, 2002 include obligations under the
Debentures, secured debt and capital leases (including the amounts of principal
and interest in default), rent, salaries, other operating expenses (such as
unpaid portion of the non-executive employee retention bonuses and payments per
executive employment agreements), accounts payable, other current liabilities
and capital expenditures related to the




                                       17
<PAGE>

replacement and enhancement of existing imaging equipment and imaging centers.
See Note 8 of Notes to Condensed Consolidated Financial Statements which are
incorporated herein by reference.

Net cash provided by operating activities during the 2002 three month period was
$1.7 million, compared to $7.1 million used in operating activities during the
2001 three month period. The positive cash flow from operations in 2002 in part
is due to minimal minority interest (partnership distributions) in the 2002
three month period compared to significant partnership distributions in the 2001
three month period. In 2001, the partnership distributions included a $4.8
million distribution relating to three imaging centers that were sold during the
2001 three month period in addition to the regular distributions of $211,000
during such period. Also, the accounts payable and accrued expenses from
December 31, 2001 to March 31, 2002 have increased by $1.5 million while they
decreased from December 31, 2000 to March 31, 2001 by $6.2 million as a result
of imaging center sales. Furthermore, a $2.4 million gain resulting from a legal
settlement was recorded during the first quarter of 2001 which was offset by a
$2.1 million loss from another unrelated legal settlement recorded during the
same period.

Net cash used in investing activities was $10,000 during the 2002 three month
period, compared to net cash provided by investing activities of $11.8 million
during the 2001 three month period. During the 2001 three month period, the
Company received $11.8 million in net cash proceeds from the sale of imaging
centers. The net cash proceeds from the sale of imaging centers in 2001 is net
of $1.2 million of sale proceeds used to repay debt not specifically related to
the sale of the imaging centers. Equipment purchases were $10,000 during the
2002 three month period, compared to $46,000 during the 2001 three month period.

Net cash used in financing activities was $1.4 million during the 2002 three
month period, compared to $4.8 million used in financing activities during the
2001 three month period. Repayments of notes and capital leases totaled $1.4
million during the 2002 three month period, compared to $4.8 million during the
2001 three month period. The Company repaid an aggregate of $1.2 million under
its revolving credit loan with DVIBC from proceeds received upon the sale of
imaging centers for debt not specifically related to the sold centers during the
2001 three month period.

As of March 31, 2002, the Company has approximately $3.0 million of purchase
commitments for capital expenditures for which it either already has, or expects
to have financing available.

Based on current estimates, unless the Company can successfully sell remaining
imaging centers at favorable prices and terms, obtain additional significant
financial resources (which is unlikely), or restructure its debt, the Company's
current cash and cash from operations will be insufficient to meet its
anticipated cash needs. Furthermore, the Company has defaulted on the March 31,
2001, September 30, 2001 and March 31, 2002 interest payments on its Debentures.
Also, the Company has defaulted on its obligation to repurchase Debentures which
is required as a result of failing to maintain consolidated net worth of at
least $18.0 million. On May 1, 2001, the Company received a default notice from
the Trustee under the Indenture. These defaults could give rise to an
acceleration of the maturities of the Debentures. In addition, the Company is
prohibited from borrowing additional amounts without causing additional
non-compliance with certain Indenture covenants and an additional default under
the Indenture. Furthermore, the Company failed to pay the $10.0 million
principal amount (and accrued interest) of its Notes that matured on June 30,
2001. This failure constitutes a default under the Notes and may also constitute
a cross default under other of the Company's debt instruments which could
entitle the holders of such instruments to accelerate the maturity of such debt
instruments. See GOING CONCERN and MANAGEMENT'S PLANS under Note 1 of Notes to
Condensed Consolidated Financial Statements which are incorporated herein by
reference.

As noted above, the Company remains burdened by a high level of indebtedness to
its secured and unsecured lenders and most of this indebtedness has relatively
short maturities (or may be current as a result of acceleration or rights to
accelerate) which require the Company to devote a significant portion of its
cash flows to the amortization of debt and interest payments. The Company also
has ongoing significant capital expenditure




                                       18
<PAGE>

requirements in order to maintain and modernize its imaging equipment.
Furthermore, cost containment by the managed care industry and governmental
payors such as Medicare continues to adversely affect pricing levels for medical
imaging services. The Company also needs to maintain its corporate
infrastructure to operate remaining centers and collect accounts receivable. As
a result, the Company's cash flows from operating activities continue to be
insufficient to meet the Company's operating needs, scheduled debt repayment
obligations and capital expenditure requirements.

In light of its financial condition, the Company, assisted by its financial and
legal advisors, commenced negotiations during 2001, with its senior lenders and
an adhoc committee of Debenture holders. These negotiations continue with
respect to the terms of a restructuring plan that would require the Company to
commence a voluntary case under Chapter 11 of the Bankruptcy Code and pursuant
to which an entity affiliated with or supported by the Senior Lender would
acquire substantially all of the Company's operating assets in exchange for a
cash payment that would be used to partially repay creditors. In all likelihood,
there would be little or no value remaining in the Company for its current
stockholders. There can be no assurance that a definitive agreement with respect
to the proposed sale will be entered into or whether any such agreement would
receive the required approval of the bankruptcy court, nor can there be any
assurance as to the amount of funds that will be available to pay the Company's
creditors or the particular percentage of each class of creditors' claims that
could be repaid.

If these uncertainties cannot be resolved successfully and in a timely manner,
the Company could be required to seek a reorganization or liquidation under the
federal bankruptcy laws. These conditions, among others, raise substantial doubt
about the Company's ability to continue as a going concern.

For additional information regarding contingencies and uncertainties related to
litigation and regulatory matters, see Note 11 of Notes to Condensed
Consolidated Financial Statements which is incorporated herein by reference.



                                       19
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The table below represents in tabular form contractual balances of the Company's
capitalized lease and long-term debt financial instruments at March 31, 2002.
The expected maturity categories take into consideration amortization of
principal as currently classified in the condensed consolidated financial
statements and do not take prepayments into consideration. The weighted-average
interest rates for the various liabilities presented are as of March 31, 2002.


<Table>
<Caption>
                                                    Principal Amount Maturing in:
                           ---------------------------------------------------------------------------
                                                                                                          Fair Value
In thousands                 2003       2004       2005       2006       2007     Thereafter    Total     At 3/31/02
                           --------    -------    -------   --------    ------    ----------   -------    ----------
<S>                        <C>         <C>        <C>       <C>         <C>        <C>         <C>         <C>
   Interest rate
   sensitive
   liabilities:

   Long-term debt
   adjustable-rate
   borrowings                 7,494         68         75         81        90          598      8,406        8,406
   Average interest rate      6.77%      9.07%      9.07%      9.07%     9.07%        9.07%      7.02%

   Long-term debt
   fixed-rate
   borrowings                44,539      2,485      1,445        844       516          413     50,242       50,242
   Average interest rate      8.89%      9.03%     10.55%     10.27%     9.88%       10.13%      8.99%

   Capitalized lease
   obligations
   fixed-rate
   borrowings                 1,147      1,106      1,499        388       428          728      5,296        5,296
   Average interest rate      9.75%     10.73%     10.57%      9.89%     9.91%        9.93%     10.24%
                           --------    -------    -------   --------    ------     --------    -------     --------

   Total                   $ 53,180    $ 3,659    $ 3,019   $  1,313    $1,034     $  1,739    $63,944     $ 63,944
                           ========    =======    =======   ========    ======     ========    =======     ========

   Weighted-Average
   Interest Rates             8.61%      9.54%     10.52%     10.08%     9.82%        9.68%      8.83%
                              =====      =====     ======     ======     =====        =====      =====

</TABLE>




                                       20
<PAGE>

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 11 of Notes to Condensed Consolidated Financial Statements which is
incorporated herein by reference.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The Company did not pay the $10.0 million principal amount (and accrued
interest) of the Notes that matured on June 30, 2001. The amount of past due
interest on the Notes as of March 31, 2002 is approximately $0.7 million. This
failure constitutes a default under the Notes and may also constitute a cross
default under other of the Company's debt instruments which could entitle the
holders of such instruments to accelerate their maturity.

Also, the Company has not made the interest payments on the Debentures that were
due March 31, 2001, September 30, 2001 and March 31, 2002. Because these
defaults have remained uncured for 30 days, they could give rise to an
acceleration of the maturity of the Debentures. A default on the Debentures
would also allow other debt holders to accelerate their debt instruments. The
amount of past due interest on the Debentures as of March 31, 2002 is
approximately $3.0 million. The Company is seeking to restructure its
indebtedness, including the Notes and is currently engaged in negotiations with
its secured and unsecured lenders. See GOING CONCERN and MANAGEMENT'S PLANS
under Note 1 and Note 8 of Notes to Condensed Consolidated Financial Statements
which are incorporated herein by reference.

ITEM 5. OTHER INFORMATION

Mr. Warren Lichtenstein resigned from the Board of Directors of the Company
effective April 15, 2002.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

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

            3.1            Amended and restated by-laws of US Diagnostic Inc. as
                           amended April 22, 2002.

(b) Reports on Form 8-K

None.

Items 2 and 4 are not applicable and have been omitted.



                                       21
<PAGE>
                                   SIGNATURES

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

                                       US DIAGNOSTIC INC.



Dated: May 20, 2002                    By: /s/ Leon F. Maraist
                                           -------------------------------------
                                           Leon F. Maraist
                                           President and Chief Executive Officer



                                       By: /s/ P. Andrew Shaw
                                           -------------------------------------
                                           P. Andrew Shaw
                                           Executive Vice President and
                                           Chief Financial Officer





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