|SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, DC 20549



Form 10-K


[ X ] ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended
December 31, 2001


[    ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from


Commission File Number
0-26138


_________________


Dendrite
International, Inc.


_________________


(Exact name of
registrant as specified in its charter)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|New Jersey
 (State or other jurisdiction of incorporation or organization) |  | 22-2786386
(I.R.S. Employer Identification No.)
|-------------------------------------------------------------------------- |  | -----------------------------------------------

|1200 Mt. Kemble Avenue
Morristown, NJ 07960-6797973-425-1200


_________________


(Address, including zip
code, and telephone number (including area code)
of registrants principal executive office)


SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  NONE


SECURITIES REGISTERED
PURSUANT TO SECTION 12(g) OF THE ACT:


Title of Class


Common Stock, no par
value


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


Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.  [    ]


The aggregate market value of the shares of the common stock
held by non-affiliates of the registrant was approximately $370,411,000 based upon the closing price of the common stock, which
was $10.78, on March 15, 2002. The number of shares of common stock outstanding as of March 15, 2002
was 39,757,288.


DOCUMENTS INCORPORATED
BY REFERENCE


Portions
of the Registrants Proxy Statement for the 2002 Annual Meeting of Shareholders are
incorporated by reference into Part III.


Note:  
Dendrite®, ForceAnalyzeRx®, ForceMobile, ForceKnowledge,
WebSessionManager, ForceOne®, ForcePharma, WebForce, j-forceWEB,
j-force, j-forceNET, j-forceMOBILE, Medicheck, ForceAdminstrator, ForceConfigurator,
VisiForce and SampleEnforcer are either trademarks or
registered trademarks of Dendrite International, Inc. All other service marks, trademarks
and trade names referred to in this document are the property of their respective owners.
The Company and any of its U.S. or international subsidiaries are sometimes collectively
referred to as Dendrite, we, ouror the Company.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|         | 
|-------- | 
|PART I   | 
|ITEM 1   | 
|ITEM 2   | 
|ITEM 3   | 
|ITEM 4   | 
|PART II  | 
|ITEM 5   | 
|ITEM 6   | 
|ITEM 7   | 
|ITEM 7A  | 
|ITEM 8   | 
|ITEM 9   | 
|PART III | 
|ITEM 10  | 
|ITEM 11  | 
|ITEM 12  | 
|ITEM 13  | 
|PART IV  | 
|ITEM 14  | 

---

# PART I

## ITEM 1.  BUSINESS.

## GENERAL

Dendrite
International, Inc. and its subsidiaries (the Companyor Dendrite)
is a leading global provider of a comprehensive range of customer relationship management
(sometimes called CRM), sales force effectiveness (sometimes called SFE), and eLearning
software products and specialized support services to the pharmaceutical industry
(collectively referred to as solutions). Our solutions enable customers to
effectively manage the activities of sales forces in complex selling environments. These
solutions also permit pharmaceutical companies to create a central repository of
information about each of their customers, which can be integrated and analyzed so as to
maximize the value derived from each customer.

Historically,
we have focused our solutions on large sales forces within the prescription-only
pharmaceutical industry. We believe that our extensive knowledge of the complex and
unique selling processes in this industry and our demonstrated ability to meet our
customers business needs have given us a strong position in this portion of our
target market. With approximately 80,000 pharmaceutical sales representatives and
managers from 47 companies in 58 countries using Dendrite solutions, we are presently the
worlds largest supplier of such solutions to the prescription-only pharmaceutical
industry based on the number of sales representatives supported. Our customers include 18
of the worlds top 20 pharmaceutical companies in one or more countries around the
world. Our global reach strategy has expanded our target market to mid-size
pharmaceutical companies as well as to subsidiaries of large pharmaceutical companies
located in emerging markets. Our customers sales forces now range in size from as
few as 50 representatives in smaller European and Latin American countries to several
thousand representatives in the United States.

Our
solutions are highly configurable and are designed to interface with other
customer-facing software utilized by pharmaceutical manufacturers. Our solutions
ultimately enable pharmaceutical customers to maximize the return on investment related
to sales and promotional activities and to improve profitability of their operations by
allowing them to:

| |  |  | analyze
prescriber patterns to ensure delivery of the right message at the right time;
| | - |  | --------------------------------------------------------------------------------------

| |  |  | coordinate
the activities and sales call content of multiple sales forces calling on the same
customers;
| | - |  | --------------------------------------------------------------------------------------------------------

| |  |  | provide
integrated data from multiple sources quickly to direct individual sales representatives;
| | - |  | -------------------------------------------------------------------------------------------------

| |  |  | provide
technical and support services to maximize the selling time of the sales representatives;
and
| | - |  | -----------------------------------------------------------------------------------------------------

| |  |  | provide
Internet-based training and meetings to minimize out-of-territory time of sales
representatives.
| | - |  | --------------------------------------------------------------------------------------------------------

The broad range of support services
we offer is intended to enable our customers to maximize the effectiveness of our
software products. These services include software configuration and implementation,
technical and hardware support, sales force support, and data integration and analysis.
We typically provide these services under multi-year agreements.

Dendrite develops and markets a
comprehensive range of solutions consisting of software products and a wide range of
support services. These solutions, among other benefits, synchronize a pharmaceutical
customers interactions with its customers across all customer-facing departments
within the organization, enabling them to:

| |  |  | centralize
data to maintain a history of all contacts with each physician;
| | - |  | --------------------------------------------------------------------------

| |  |  | target
specific physicians with specific messages;
| | - |  | --------------------------------------------------

| |  |  | realign
sales territories;
| | - |  | --------------------------

| |  |  | reallocate
sales personnel on a customer or formulary basis;
| | - |  | ------------------------------------------------------------

| |  |  | share
data among sales representatives calling on the same physician; and
| | - |  | -------------------------------------------------------------------------

| |  |  | redeploy
sales and marketing resources more rapidly and more precisely.
| | - |  | -----------------------------------------------------------------------

Our software products integrate and
process large volumes of time-sensitive, sales-related data for use in developing sales
strategies and campaigns. Our current product offerings allow customers to select many
different combinations of features for different types of sales forces. These software
products typically do not require customization (i.e., modification of source code) in
order to be implemented; however, generally they are configured to address data, market,
and other customer requirements. Our current product offerings also include configuration
and administration tools that enable customers to configure and administer certain of our
software products.

We price our software products based
on the geographic area in which a customer uses them, its chosen configuration, and the
total number of users. We charge additional up-front fees to configure and install the
software and to train sales representatives, as well as annual fees for continuing
services and fees for specific projects.

Dendrite also supplies a limited
number of solutions to manufacturers of consumer packaged goods. Our consumer packaged
goods products are targeted at manufacturers whose sales representatives call on retail
outlets and enable sales representatives to manage all aspects of their call-reporting
obligations, including the collection of pricing, promotions, and product placement
information. In addition, our products also integrate sales information from a number of
data sources. By using our products, consumer packaged goods manufacturers can measure
the effect of their promotional activities and effectively plan and execute sales
strategies in ways that bring them significant competitive benefits.

## PHARMACEUTICAL SOFTWARE
PRODUCTS

Our
pharmaceutical software products are designed to provide information to personnel
involved in sales and sales management, marketing, and clinical trials, and also to other
levels within each clients organization, including senior management. For example,
information directly related to sales may be channeled to the finance and personnel
departments. In addition, field representatives can directly input information concerning
a particular physician that may assist a clients managed care sales personnel.
These systems effectively link a customers sales and management functions with
other business departments. The software products we offer our pharmaceutical customers include
the WebForce product suite, j-forceWEB, Medicheck, and VisiForce.

WEBFORCE. 
WebForce is a comprehensive suite of sales force tools with data sharing,
analysis, and interfacing capabilities intended to serve as the basis of the CRM
environment for large, multinational pharmaceutical customers. With country-specific
functionality, the WebForce product suite offers a common architecture with
interfaces that can be configured to support software solutions for every user market
within the pharmaceutical arena.

Included
in the WebForce product suite are the ForcePharma laptop/tablet-based Sales
Force Effectiveness or SFE solution and the ForceMobile Windows CE-based palmtop
solution. Several tools are embedded within the WebForce suite to support these
offerings, including ForceAnalyzer, a decision support tool for all user levels;
SampleEnforcer, a home office-level samples management system; ForceAdministrator,
an interactive territory-management tool; and ForceConfigurator , which enables
pharmaceutical companies to configure WebForce to the exact requirements of
individual sales forces.

| |  |  | FORCEPHARMA.
The ForcePharma SFE solution is available in multiple configurations to support a
variety of field forces including Field Sales, Account Sales, Institution Sales,
Managers, and Home Office users and can be additionally configured to address a customers
specific business requirements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | New
functions, which integrate fully with an existing configuration, can be added over time,
allowing the customer to acquire a system capable of evolving as business requirements
change. A typical major pharmaceutical customer will select the components and
configuration that reflect the structure of their sales force, the geographic region
involved, and the type of pharmaceutical sales data available. Each component is offered
with specific continuing support services. ForcePharma is also available to the
European and Eastern European markets incorporating unique country-specific
functionality.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | FORCEMOBILE. 
ForceMobile, a Windows CE-based handheld application, provides functionality
comparable to many laptop applications at a reduced cost. ForceMobile is optimized
for growth-focused organizations of all sizes that require greater portability, instant
data access, and lower cost of hardware ownership. The product provides comprehensive
functionality, two-tier synchronization capabilities, and a common enterprise
architecture with WebForce. ForceMobile enables organizations to increase
sales force effectiveness by delivering and capturing information at the customer point
of contact, enabling sales representatives to effectively and timely target customers.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | FORCEANALYZER. 
ForceAnalyzer is a flexible, easy-to-use data viewing and analysis tool that standardizes the decision
support and reporting process for all levels of a pharmaceutical sales organization. It
enables territory representatives to track the effects of their promotional activities,
and enables managers to achieve sales objectives, assure call-plan compliance, and manage
promotional program implementation.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | SAMPLEENFORCER. 
SampleEnforcer is a Home Office administration tool specifically designed to manage
sampling activity and assist pharmaceutical companies in complying with the PDMA
(Prescription Drug Marketing Act) and 21 CFR (Code of Federal Regulations) Part 11
guidelines.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | FORCEADMINISTRATOR. 
ForceAdministrator is an interactive territory-management tool that enables
pharmaceutical companies to align sales representatives to the right customer, at the
right time, with the right product and the right message. It manages product, user, and
alignment field force changes.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | FORCECONFIGURATOR. 
ForceConfigurator  enables pharmaceutical companies to configure WebForce to
the exact requirements of individual sales forces. It creates uniquely personalized
interfaces by enabling users to configure screens, amend text, and change parameters.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

J-FORCEWEB.
Our j-forceWEB solution was specifically developed for the Japanese market and
contains functionality similar to the WebForce product. The j-forceWEB solution
is web-enabled and provides all of the functionality offered in its predecessor product,
j-force. The solution is highly configured to meet local market requirements that
reflect the unique characteristics of the Japanese prescription-only pharmaceutical
market. Dendrite has also launched j-forceNET and j-forceMOBILE, web-based
solutions that utilize new broadband communications being rolled out in Japan.

VISIFORCE.VisiForce, a new component of the Dendrite sales and marketing effectiveness
solution set, has been specifically configured to meet the needs of pharmaceutical sales
forces in Latin America, Asia, Eastern Europe, and the Middle East. VisiForcecombines
the business process and training components of Dendrites Medichecksolution
with the flexible WebForce technology platform. It enables marketing staff to rank
targeted customers, which gives the district manager and their team the ability to
determine which customers require additional focus. VisiForce allows multiple input
devices for the end users with a common backend architecture.

MEDICHECK. Medicheck,
a Windows CE based personal digital assistant solution, is used by pharmaceutical
company sales representatives in emerging markets where highly portable, lower cost
hardware is essential. The multiple module palmtop system replaces paper-based systems
and permits information sharing among multiple levels within a sales organization. In
2002, Medicheck will be phased out in our emerging markets and replaced with our
VisiForce solution. We will, however, continue to sell and implement Medicheck in
our Japanese market.

## CPG INDUSTRY PRODUCTS

Our
CPG software products are generally configured in a manner similar to our pharmaceutical
software products. However, CPG sales representatives are more likely to use handheld or
palmtop computing devices than laptop and desktop personal computers.

FORCEONE®.
  Our ForceOne® is our sales force software product for the consumer packaged
goods or CPG markets and is sold in the United States and Canada. ForceOne® contains
most of the same basic features as our ForcePharma product, as well as
features specifically created for the CPG industry. ForceOne® can be
configured to support field sales representatives, their managers and key account
managers. The structure of our license, implementation and ongoing service fees for our
CPG customers is generally similar to that of our pharmaceutical customers, however, to
date this market segment has outsourced very little ongoing support services.

## SERVICES

In
addition to our product offerings, Dendrite provides services to its customers, including
software implementation, technical and hardware support, sales force support services,
analytical and consulting services and clinical trial services. We also provide data-related services,
including data scrubbing, match, merge and purge activities, and a variety of data
analysis services. Virtually all customers engage Dendrite to provide all or some of
these services, including software defect resolution.

For
the year ended December 31, 2001, service revenues represented approximately 92% of our
total revenues. As a result of providing these ongoing services, we have developed
long-term strategic relationships with our customers. Once we begin supplying solutions
to our customers, we generally continue to provide support services to them beyond the
expiration of the initial service agreement. As these relationships develop, our
customers typically increase the amount and variety of support services they purchase
from us.

The
complexity and size of the sales and market research databases being integrated and
manipulated by our software products require highly specialized information systems
skills, particularly as new sources of data must be integrated. The creation of a customers
database requires loading third party data onto a central server or servers and encoding
that data with proprietary Dendrite data links. This encoding process allows the data to
be integrated into a functional sales-related database used by Dendrites CRM
software products. We initially perform these services during installation and, if
requested, may continue to manage these information systems over time. Many companies
choose not to employ the information systems staff needed to manage these large, complex
databases and consider the outsourcing of these tasks to us or other third parties as
both economically and operationally advantageous to their business.

IMPLEMENTATION
SERVICES.  Our implementation services include: the implementation and configuration,
if applicable, of a Dendrite software product to meet customer requirements; creation of
the customers specific version of the Dendrite data model; creation of the customers
integrated database; loading of data onto the customers remote computer hardware;
and training customer employees on the use and capabilities of Dendrite sales force
software products.

TECHNICAL
AND HARDWARE SUPPORT SERVICES.  Our technical and hardware support service offerings
consist of management of technical support for Dendrites software products,
customization of source code (if applicable) to meet the customers needs and
continued support of the customers database. These services include loading and
linking new releases of third party data purchased by the customer; identifying new
functional segments for data analysis; providing software defect resolution and issuing
performance enhancements, feature changes and, in certain circumstances, new versions of
products; operation and maintenance of server computers; providing asset control and
maintaining remote computer hardware, including recapture of data on defective equipment
and replacement of defective equipment; and developing business interruption plans for
management of any unforeseen interference with Dendrites provision of ongoing
support services, including coordinating the retention of a disaster recovery provider
for the customers servers.

SALES
FORCE SUPPORT SERVICES.  Our sales force support services include project management;
ongoing training on the use and capabilities of Dendrites sales force software
products; assistance to the customer in planning and executing realignments of sales
territories or functional (e.g., formulary-based) segments to allow more effective
resource allocation; direct customer service telephone support for Dendrite and most
third party software products (available seven days a week and in many foreign
languages); proactive prescription data analysis at a territory and physician level to a
customers sales representatives to improve sales and promotional campaigns; and
data integration and data management services with data our customers obtain from third
party sources.

When a
major customer licenses a Dendrite sales force software product, the Company typically
establishes an implementation services group for that customer, as well as a separate
support service group composed of both customer support and technical support personnel
dedicated to servicing that customer. For customers with smaller sales forces or sales
forces with specialized needs, such as non-home country language capability, the service
group may have responsibility for more than one client.

Typically,
we provide services under multi-year contracts. In North America, we enter into service
agreements directly with customers. Outside North America, we enter into service
agreements through our local wholly-owned subsidiary or branch. Depending upon the size
of the customer and the scope of services to be performed, a dedicated service group may
be comprised of five to 100 persons.

## ANALYTICAL TOOLS AND
SERVICES

The
Companys Analytika division (sometimes called Analytika) provides analytical
and consulting services based on the development of a differentiating database and the application of
unique tools. Analytika has developed strategic partnerships with a consortium of chain
and independent retail pharmacies that are demographically and geographically diverse
throughout the United States. These pharmacy data partners deliver a new level of timely,
accurate and anonymous data for incorporation into Analytikas proprietary
algorithms and tools. Through this alliance, Analytika offers its clients access to
unique data, that when combined with its advanced analytics and predictive modeling
capabilities, this provides information regarding prescriber behavior, which typically is
not available from standard forms of analysis.

Our
approach to advanced analytics recognizes that each customers portfolio of products
possesses unique characteristics that must be represented in the analysis in order to
produce meaningful and actionable results. Therefore, when a client chooses to implement
modeling for one or more of its brands, our consultants work together with the clients
managers and analysts to identify and quantify those aspects of the market and product
conditions that need to be represented in the analysis. We then tailor the models to the
clients specific business and marketing needs. Once this tailoring has been
completed, the resulting models and tools can be incorporated into the clients
overall solution for ongoing use. The clients business can be positively impacted
when the analytics drive actions which, when implemented, result in changed behavior to
enhance business performance in a measurable way.

CLINICAL
TRIAL SERVICES.  Dendrite provides a broad range of clinical trial services to
pharmaceutical companies, enabling them to conduct these trials more efficiently and
expeditiously. By supporting and facilitating clinical solutions for the pharmaceutical
industry, Dendrite streamlines and supports eClinical processes such as patient
randomization, electronic and mobile data capture, document management, worldwide serious
adverse event reporting, and investigator coordination through its global, multilingual,
24x7 help desk. Our customers are able to optimize protocols and identify ideal
investigators and sites using Dendrites proprietary data and analytic engines. In
addition, Dendrite facilitates and manages the eLearning process by providing application
sharing of eClinical solutions for investigators, clinical research coordinators, and
clinical research associates.

## SOFTWARE
CONFIGURATION

Our
pharmaceutical software products are configured to allow information access and
communication among geographically dispersed sales and marketing personnel and regional
and home offices. The core of the configuration is a central database server, which
stores customer information and integrates and controls all data flow from external
points. Most servers used by our customers are manufactured by IBM, Compaq,
Hewlett-Packard or Sun Microsystems and operate on UNIX(TM), Windows NT(R) or Windows
2000 operating systems. Servers are purchased or leased by Dendrites customers or
leased for them by Dendrite. Some smaller customers lease space on our servers located in
various worldwide offices.

Remote
databases are stored on laptop and palmtop computers used by sales representatives in the
field and are updated regularly via modem. Regional sales managers using personal
computers may access the server via wide area networks. Our customers are responsible for
selecting computer equipment and for deciding when to upgrade or replace it.

Our
pharmaceutical software products permit a sales representative to send updated
information to the central database server. Similarly, the sales representative can
receive information concerning upcoming calls as well as additional sales efforts planned
by other sales representatives within the same company. This server, in most cases
located at one of our facilities, contains the customers own database of
sales-related information, which is generally maintained and operated for the customer by
Dendrite.

## CUSTOMERS

Our
major customers consist of large, multinational pharmaceutical companies, including:
Abbott; Allergan; AstraZeneca; Aventis; Bristol-Myers Squibb; Celltech Medeva;
Dai-nippon; Eli Lilly; Forest Laboratories; Kissei; Mitsubishi Tokyo; Novartis; Novo
Nordisk; Ono Pharmaceuticals; Pfizer; Proctor & Gamble; Sanofi; Solvay; Takeda Pharma;
Teijin; Tokyo Tanabe; Torii; Tsumura; and Wyeth Lederle. In addition, in the CPG market,
our major customers include: Bacardi/Martini Triodis; Gillette; and Prodirest.

Approximately
51% of our total revenues in 2001 came from our two largest clients: Pfizer and
Bristol-Myers Squibb. Approximately 52% of our total revenues in 2000 came from Pfizer,
Johnson & Johnson, and Bristol-Myers Squibb. Approximately 37% of our total revenues
in 1999 came from Pfizer and Johnson & Johnson.

## SALES AND MARKETING

Dendrite
actively markets its solutions to companies worldwide using regional and local sales and
marketing personnel. Sales presentations are typically made to the customers
management information services department or sales department. The selection of a sales
force software product often entails an extended decision-making process that typically
takes nine to eighteen months. This process may involve senior levels of management and,
in some cases, the board of directors.

The
Company works with a potential customer to identify its business requirements in light of
its markets, sales organization, and operating structure. We draw upon our broad product
functionality and experience in the applicable vertical market to provide a comprehensive
yet highly targeted solution.

The
positive response of our customerssales representatives can influence the decisions
of those customers to license additional functionality and/or to contract for expanded
support services. Accordingly, we attempt to address the concerns of sales personnel
during the training portion of our implementation services. We also promptly respond to
customer communications and evaluate them for indications of potential systemic problems
or changing market trends.

Our
relationships with existing customers have been shown to create additional sales and
marketing opportunities. Further, our network of international offices allows us to serve
our existing customers in new locations. Many of our pharmaceutical customers have
over-the-counter operations as well, which provide us with additional sales
opportunities.

Occasionally,
we have entered into arrangements with business partners to jointly market our products
and/or services. In addition, at the request of certain customers, we may resell computer
hardware and third-party software.

## COMPETITION

The
current market for the type of solutions we provide, including CRM and SFE and related
support services is highly competitive and rapidly changing. Many companies offer CRM and
SFE products and/or services in the pharmaceutical and consumer packaged goods
industries. We also compete with many companies that provide support services similar to
our own.

Although
there are a number of other companies that sell CRM and SFE products, both within and
outside the pharmaceutical industry (including Siebel, Synavant, Stay-in-Front and
Cegedim), many companies, such as Siebel, attempt to adapt their products across a broad
number of industries and uses. Dendrite, however, believes that it has distinguished
itself and is well positioned in the pharmaceutical market by reason of its unique
combination of deep pharmaceutical market knowledge, recognized technical support and
depth of personnel experienced in the pharmaceutical industry, and proprietary products
and product architecture uniquely suited to the pharmaceutical industry.

Our
products and services compete with others principally on the basis of:

| |  |  | industry
applicability;
| | - |  | -----------------------

| |  |  | product
flexibility and configuration;
| | - |  | --------------------------------------

| |  |  | platform
configuration;
| | - |  | -----------------------

| |  |  | name
recognition;
| | - |  | -----------------

| |  |  | global
competence;
| | - |  | ------------------

| |  |  | service
standards;
| | - |  | ------------------

| |  |  | cost;
| | - |  | -----

| |  |  | breadth
of customer base; and
| | - |  | -----------------------------

| |  |  | technical
support and service.
| | - |  | ------------------------------

The
Company believes that its solutions compete favorably with respect to these factors, and
that we are particularly well positioned to maintain strong market leadership through
innovative new product and application developments, and continued focus on support
services.

The
Company expects competition to increase as new competitors enter the market to supply CRM
and SFE products and/or services and as existing competitors expand their product lines,
consolidate, or offer more compelling solutions. Some of our competitors and potential
competitors are part of large corporate groups and have longer operating histories and
significantly greater financial, sales, marketing, and technology resources than
Dendrite. We also expect to encounter additional competition in the future from firms
offering outsourcing of information technology services and from vendors of software
products providing specialized applications not offered by us, including enterprise
resource planning vendors and database vendors.

The
Company may also face competition from vendors that do not currently compete within our
vertical markets. In addition, we face potential competition from our current customers
and potential customers who may elect to design and install or to operate their own
systems.

## RESEARCH AND DEVELOPMENT

Dendrite
continues to take advantage of new technologies in developing new products and services.
We charged to expense approximately $11,104,000, $10,875,000 and $7,669,000 of research
and development in the years ended December 31, 2001, 2000, and 1999, respectively.

We have capitalized certain costs
related to the development of new software products and the enhancement of existing
software products consistent with Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed. Capitalized software development costs net of accumulated amortization
were $5,518,000 at December 31, 2001 and $4,392,000 at December 31, 2000. These amounts
exclude $0 and $4,144,000 as of December 31, 2001 and 2000, respectively, of purchased capitalized
software associated with the acquisitions of Associated Business Computing, N.V.,
Marketing Management International, Inc., and Analytika, Inc. See Note 4 to the Companys
Consolidated Financial Statements.

## PROPRIETARY RIGHTS

Dendrite
relies on a combination of methods to protect our proprietary intellectual technology,
including:

| |  |  | trade
secret, copyright, and trademark laws;
| | - |  | --------------------------------------------

| |  |  | license
agreements with customers containing confidentiality provisions;
| | - |  | ------------------------------------------------------------------------

| |  |  | confidentiality
agreements with consultants, vendors, and suppliers;
| | - |  | --------------------------------------------------------------------

| |  |  | non-disclosure
agreements with each of our executive officers and technical employees; and
| | - |  | ------------------------------------------------------------------------------------------

| |  |  | restrictive
covenants with our executive officers and with many of our other key employees.
| | - |  | -------------------------------------------------------------------------------------------

Existing
United States copyright laws provide only limited protection, and even less protection
may be available under foreign laws.

## EMPLOYEES

As of
December 31, 2001, the Company employed 1,590 employees: 1,147 in the United States and
Canada; 201 in Europe; 125 in the Pacific Rim; and 117 in Latin America.

We
believe that relations with our employees are strong. Our employees are not part of any
collective bargaining unit except for those in France who are subject to a national
collective bargaining agreement. We believe that our future growth and success will
depend upon our ability to attract and retain skilled and motivated personnel, which is
becoming increasingly difficult for many technology and services companies.

## EXECUTIVE OFFICERS

The
following table identifies the current executive officers of the Company:

|Name                    |  | Age |  | Capacities in Which Serve                         | 
|----------------------- |  | --- |  | ------------------------------------------------- | 
|John E. Bailye          |  | 48  |  | Chairman of the Board and Chief
Executive Officer | 
|Paul L. Zaffaroni       |  | 55  |  | President and Chief Operating Officer             | 
|George T. Robson        |  | 54  |  | Executive Vice President                          | 
|Luke M. Beshar          |  | 43  |  | Senior Vice President and Chief
Financial Officer | 
|Kathleen E. Donovan     |  | 41  |  | Vice President and Treasurer                      | 
|Christine A. Pellizzari |  | 34  |  | Vice President, General Counsel and
Secretary     | 
|Brent J. Cosgrove       |  | 37  |  | Vice President and Corporate Controller           | 

Each
executive officer serves at the discretion of the Board of Directors.

John
E. Bailye has served as Chief Executive Officer and Director since the Companys founding
in 1987 and since 1991 in the additional position of Chairman of the Board. Prior to
1987, Mr. Bailye served as Managing Director of Foresearch Pty., Limited (Foresearch),
a consulting company to the pharmaceutical industry in Australia. Mr. Bailye served in
that capacity from the time he acquired Foresearch in 1976 until he sold the company in
1986. Mr. Bailye served as a market researcher for Foresearch prior to 1976. Mr. Bailye
holds a Bachelor of Commerce in Finance, Marketing and Business from the University of
New South Wales.

Paul
L. Zaffaroni has served as President and Chief Operating Officer of Dendrite since
October 2001. Prior to joining the Company, Mr. Zaffaroni spent 10 years at Acxiom
Corporation, serving in various capacities including Corporate Sales Leader, Division
Leader and Senior Vice President. Prior to Acxiom, Mr. Zaffaroni spent 21 years at IBM
Corporation. Mr. Zaffaroni holds a Bachelor of Science in Business Administration from
Youngstown State University.

George
T. Robson has served as Executive Vice President since February 1999, and as Chief
Financial Officer from June 1997 to October 2000. Prior to joining the Company, Mr.
Robson served as Senior Vice President, Chief Financial Officer and Treasurer of H&R Block,
Inc. from 1996 to 1997. In addition, Mr. Robson served as Senior Vice President of Unisys
Corporation from 1991 to 1996, and as Chief Financial Officer of Unisys from 1990 until
1996. Mr. Robson holds a Bachelor of Science in Economics from the Wharton School of the
University of Pennsylvania and an M.S. in Management Science from the State University of
New York at Binghamton.

Luke
M. Beshar has served as Senior Vice President and Chief Financial Officer since January
2002. Prior to joining the Company, Mr. Beshar served as Chief Financial Officer to four
companies. Most recently, beginning in November 1998, Mr. Beshar served as Executive Vice
President- Finance and Chief Financial Officer of Expanets, Inc. Prior to Expanets, Mr.
Beshar served as Senior Vice President and Chief Financial Officer of PNY Technologies,
Inc. Mr. Beshar is a Certified Public Accountant and a graduate of The Executive Program
from the Darden Graduate School of Business, University of Virginia. He also holds a
Bachelor of Arts in Accounting from Michigan State University.

Kathleen
E. Donovan has served as Vice President and Treasurer since January 2002. Ms. Donovan has
been with Dendrite since 1997 and has previously served as Vice President and Chief
Financial Officer of America Operations, Vice President and Corporate Controller, and
Vice President of Financial Operations. Prior to joining the Company, Ms. Donovan spent
14 years at Unisys Corporation, most recently as Director of Corporate Financial
Planning. Ms. Donovan holds a Bachelor of Science in Finance from Georgetown University.

Christine
A. Pellizzari has served as Vice President, General Counsel and Secretary since August
2000. Ms. Pellizzari served as Associate Counsel from 1998 to 2000. Prior to joining the
Company, Ms. Pellizzari was an Associate at Wilentz, Goldman & Spitzer, P.A. from 1995 to
1998 and was a law clerk to the Honorable Reginald Stanton, Superior Court of New Jersey,
from 1994 to 1995. Ms. Pellizzari holds a Bachelor of Arts in Legal Studies from the
University of Massachusetts at Amherst and a Juris Doctorate from the University of
Colorado School of Law.

Brent
J. Cosgrove has served as Vice President and Corporate Controller since June 2001. Mr.
Cosgrove has been with Dendrite since 1997 and previously served as Director of European
Finance, and most recently as Director of Investor Relations for the Company. Mr.
Cosgrove holds a Bachelor of Science in Accountancy from Ferris State University.

## ADDITIONAL INFORMATION

For
additional information regarding the Companys business, see Item 7, Managements
Discussion and Analysis of Financial Condition and Results of Operations.

## ITEM 2.  PROPERTIES.

The
Company leases a 101,500 square foot building, which currently serves as our corporate
headquarters in Morristown, New Jersey; a 100,000 square foot facility in Chesapeake,
Virginia, which houses our data center; a 33,000 square feet facility in Bridgewater, New
Jersey, which will serve as our corporate headquarters in 2002; a 33,000 square foot
building in Stroudsburg, Pennsylvania, which houses customer support personnel; a 26,280
square foot building in Basking Ridge, New Jersey, which houses customer support
personnel; a 26,500 square foot office in Liberty Corner, New Jersey, which houses
customer support personnel; a 37,745 square foot building in Bethlehem, Pennsylvania
which serves as a hardware repair and maintenance facility; a 10,000 square foot
warehouse in Somerset, New Jersey; a 9,490 square foot office in Durham, North Carolina,
which houses personnel in our Analytika Division; and a 120 square foot office in Newark,
Delaware, which also serves as an administrative office space. We also lease a total of
60,202 square feet in eighteen foreign locations: Australia, Belgium, Brazil, Canada,
Colombia, China, Ecuador, France, Germany, Hungary, Italy, Japan (two locations), Mexico,
New Zealand, Portugal, Spain and the United Kingdom for local management, sales offices
and customer support operations. The Company also owns a 145,000 square foot building in
New Jersey, which was purchased for the purpose of establishing a new U.S. operations
facility to accommodate the Companys growth. In connection with its restructuring
plan, the Company has since determined to shift its operations to other existing
facilities and therefore determined to sell this facility. See Note 1 to the Companys
Consolidated Financial Statements.

Servers
located at our facilities are commonly maintained in a secured area and are subject to
regular audit and inspection by our customers. The Company maintains database servers
located at our facilities for substantially all of our U.S. customers and for a
substantial majority of our international customers. For these customers, we offer a
business interruption service, which is intended to protect these customers businesses
in the event of any unforeseen interruption, interference or disruption of the Companys
provision of customer support services. As part of this offering, we will assist a
customer in developing a business interruption plan, which includes the coordination of
the customers retention of a disaster recovery provider.

## ITEM 3.  LEGAL PROCEEDINGS.

Dendrite
is occasionally involved in litigation relating to personnel and other claims arising in
the ordinary course of business. The Company is not currently engaged in any legal
proceedings that are expected, individually or in the aggregate, to have a material
adverse effect on our business.

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

Not
applicable.

## PART II

## ITEM 5.  MARKET FOR
REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The
Companys common stock, no par value, is quoted on the Nasdaq National Market System
under the symbol DRTE. As of March 18, 2002, there were approximately 250
holders of record of our common stock.

The
following table sets forth for the periods indicated the high and low sale prices for our
common stock as reported by the Nasdaq National Market System.

|Period                           |  | High     |     | Low      |    
|-------------------------------- |  | -------- | --- | -------- | ---
|Quarter Ended March 31, 2001     |  | $     27 | .19 | $     11 | .63
|Quarter Ended June 30, 2001      |  | 13       | .34 | 7        | .42
|Quarter Ended September 30, 2001 |  | 13       | .65 | 6        | .56
|Quarter Ended December 31, 2001  |  | 15       | .15 | 6        | .90
|Quarter Ended March 31, 2000     |  | $     35 | .00 | $     17 | .19
|Quarter Ended June 30, 2000      |  | 33       | .56 | 14       | .00
|Quarter Ended September 30, 2000 |  | 33       | .38 | 21       | .38
|Quarter Ended December 31, 2000  |  | 27       | .88 | 10       | .63

The
Company has never paid any cash dividends on its common stock and does not intend to pay
any cash dividends on common stock in the foreseeable future. If the Company were to
consider paying cash dividends, certain of the covenants of the Companys line of
credit may limit the amount of any such dividends we may pay. See Note 6 of Notes
to Consolidated Financial Statementsand Liquidity and Capital Resourcesin
Item 7 for a discussion of our line of credit agreement.

---

## ITEM 6.  SELECTED
CONSOLIDATED FINANCIAL DATA.

`YEAR ENDED DECEMBER 31,
                                             ------------------------------------------------------------------------
                                                   2001         2000             1999               1998         1997
                                             -----------   --------------  ---------------    -------------   -------
                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                 -------------------------------------

STATEMENT OF OPERATIONS DATA:
Revenues:
     License fees.....................          $ 18,695     $  23,966        $  24,244       $ 14,955         $ 9,074
      Services........................           205,952       190,360          148,441        115,678          82,248
                                                --------     ---------        ---------       --------         -------
                                                 224,647       214,326          172,685        130,633          91,322
                                                --------     ---------        ---------       --------         -------
Costs of revenues:
     Cost of license fees.............             4,897         3,420            2,360          2,314           1,758
     Purchased software impairment (a)             2,614            --               --             --              --
     Cost of services.................           114,597        88,234           72,380         57,887          45,078
                                                --------     ---------        ---------       --------         -------
                                                 122,108        91,654           74,740         60,201          46,836
                                                --------     ---------        ---------       --------         -------
     Gross margin.....................           102,539       122,672           97,945         70,432          44,486
                                                --------     ---------        ---------       --------         -------
Operating expenses:
     Selling, general and administrative          94,578        67,884           56,927         44,046          33,305
     Research and development.........            11,104        10,875            7,669          4,584           3,674
     Mergers and acquisitions.........                --            --            3,466             --              --
     Restructuring charge (b).........             6,110            --               --             --              --
     Asset impairments (c)............            11,723            --               --             --              --
     Write-off of in-process research and
       Development....................                --            --               --          1,230              --
                                                --------     ---------        ---------       --------         -------
                                                 123,515        78,759           68,062         49,860          36,979
                                                --------     ---------        ---------       --------         -------
     Operating (loss) income..........           (20,976)       43,913           29,883         20,572           7,507
Interest income.......................             2,439         3,541            1,880          1,099             531
Other income (expense)................                 3             5             (189)          (466)           (261)
                                                --------     ---------        ---------       --------         -------
     Income (loss) before income taxes           (18,534)       47,459           31,574         21,205           7,777
Income tax (benefit) expense..........            (6,063)       16,848           12,234          8,446           3,002
                                                ---------    ---------        ---------       --------         -------
Net income (loss).....................          $(12,471)    $  30,611        $  19,340       $ 12,759         $ 4,775
                                                =========    =========        =========       ========         =======
Net income (loss) per share:
     Basic............................          $  (0.31)    $   0.78         $   0.51        $   0.35         $  0.13
                                                =========    =========        =========       =========        ========
     Diluted..........................          $  (0.31)    $   0.74         $   0.48        $   0.32         $  0.13
                                                =========    =========        =========       =========        ========
Shares used in computing net income
   (loss) per share:
     Basic............................            39,681        39,354           37,725         36,080          35,601
                                                ========     =========        =========        =======         =======
     Diluted..........................            39,681        41,344           40,599         39,392          36,870
                                                ========     =========        =========        =======         =======



                                                                DECEMBER 31,
                                               2001        2000         1999         1998       1997
                                            ---------    --------     --------    ---------   --------
                                                                     (IN THOUSANDS)
                                                                      ------------

BALANCE SHEET DATA:
Working capital...........................   $84,989     $113,738      $78,131      $50,608   $34,813
Total assets..............................   166,483      175,903      124,720       81,831    57,876
Capital lease obligation, less current
  portion.................................        --           --          285          544       353
Stockholders' equity......................   128,847      153,298      101,116       61,049    40,672


(a)  Purchased  software   impairment  is  discussed  in  Note  3  of  Notes  to
     Consolidated Financial Statements.
(b)  Restructuring  charge  is  discussed  in Note 2 of  Notes  to  Consolidated
     Financial Statements.
(c)  Asset impairment is discussed in Note 3 of Notes to Consolidated  Financial
     Statements.`

---

## ITEM 7.  MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

## FORWARD-LOOKING
STATEMENTS

This
Form 10-K may contain certain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21-E of the Securities Exchange Act of
1934, which are intended to be covered by the safe harbors created by such acts. For this
purpose, any statements that are not statements of historical fact may be deemed to be
forward-looking statements, including the statements under Managements
Discussion and Analysis of Financial Condition and Results of Operations and
Business regarding
our strategy, future operations, future expectations or future estimates, financial
position and objectives of management. Those statements in this Form 10-K containing the
words believes, anticipates, plans, expects and
similar expressions constitute forward-looking statements, although not all
forward-looking statements contain such identifying words. These forward-looking
statements are based on our current expectations, assumptions, estimates and projections
about our Company and the pharmaceutical and consumer packaged goods industries. All such
forward-looking statements involve risks and uncertainties, including those risks
identified under  Factors That May Affect Future Operating Results, many of
which are beyond our control. Although we believe that the assumptions underlying our
forward-looking statements are reasonable, any of the assumptions could be inaccurate and
actual results may differ from those indicated by the forward-looking statements included
in this Form 10-K, as more fully described under  Factors That May Affect Future
Operating Results. In light of the significant uncertainties inherent in the
forward-looking statements included in this Form 10-K, you should not consider the
inclusion of such information as a representation by us or anyone else that we will
achieve such results. Moreover, we assume no obligations to update these forward-looking
statements to reflect actual results, changes in assumptions or changes in other factors
affecting such forward-looking statements.

## OVERVIEW

In
1991, Dendrite succeeded a business co-founded in 1986 by John E. Bailye, the Companys
Chairman and Chief Executive Officer. The business was established to provide sales force
automation solutions, which has expanded into our current solutions offerings. These
solutions enable companies to manage, coordinate, and control the activities of large
sales forces in complex selling environments, primarily in the pharmaceutical industry.
Today, our solutions combine software products with a wide range of specialized support
services. These services include software implementation, technical and hardware support,
and sales force support. We develop, implement, and service sales force software products
through our own sales, support, and technical personnel located in 29 offices worldwide.

## CRITICAL
ACCOUNTING POLICIES

Financial Reporting Release No. 60, which was recently released by the Securities and Exchange Commission,
requires companies to include a discussion of critical accounting policies or methods used
in the preparation of financial statements.  A critical accounting policy is one that is both very important to the portrayal of the
companys financial position and results of operations, and requires managements most difficult, subjective or complex
judgments.  The Company believes its critical accounting policies to be revenue recognition, accounting for
restructuring and impairments and income taxes.  See Note 1 of the Notes
to Consolidated Financial Statements for a summary of the significant accounting policies and methods used in
the preparation of our Consolidated Financial Statements.

The Company charges customers license fees to use its proprietary computer software.
Customers generally pay one-time perpetual license fees based upon the number of users,
territory covered, and the particular software licensed by the customer. The Company
generally recognizes license fees as revenue using the percentage-of-completion method
over a period of time that commences with the execution of the license agreement and ends
when the product configuration is complete and ready for use in the field. This
period of time usually includes initial customization or configuration and concludes with
quality assurance and testing. When there is no initial customization or configuration,
the Company generally recognizes the license fees from those products upon delivery as
the services to be provided are not essential to the functionality of the software.
Additionally, license revenues will be recognized immediately when the user count for
previously delivered software increases. The Companys software maintenance usually
begins immediately after an initial warranty period. The portion of the license fee
associated with the warranty period is unbundled from the license fee and is recognized
as maintenance revenue ratably over the warranty period. The Company does not recognize
any license fees unless persuasive evidence of an arrangement exists, delivery has
occurred, the license amount is fixed or determinable and collectability is probable.

The
Company recognizes license fees as revenue from certain third party software products,
which are embedded into the Companys products. These license fees are recognized as
revenue using the percentage of completion method over a period of time that commences
with the execution of the license agreement and ends when the product configuration is
completed and ready for use by the customer. The cost of third party software is
included in cost of license fees in the accompanying consolidated statements of
operations.

Sales
force support services are generally provided under multi-year contracts. The contracts
specify the payment terms, which are generally over the term of the contract and
generally provide for termination in the event of breach, as defined in the respective
contract.

Service
revenues consist primarily of facilities management, configuration, training and software
maintenance. Facilities management represents charges for help desk, data center and
project management, and are recognized on a monthly basis as services are performed.
Configuration includes initial implementation services following sales of new software
products to customers, as well as revenues relating to work orders to perform
configuration services for previously purchased software. Configuration revenue is
recognized as services are performed, when the related billings are on a time and
materials basis, and using the percentage of completion method for fixed fee
configuration or implementation contracts. Training revenue is recognized as the services
are performed. Software maintenance revenue is recognized ratably over the term of the
contract, generally one year.

During 2001, the Company recognized costs in connection with a plan of restructuring which involved the resizing
of the Companys personnel and relocation of certain facilities.  The restructuring-related costs were based
upon formal plans approved by the Companys management using the information available at the time.  See Note 2 of
the Notes to Consolidated Financial Statements for further discussion of the restructuring and related charges.

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset might not be recoverable.  If indicators of impairment are present, we
evaluate the carrying value of our long lived assets, including intangibles and goodwill, in relation to
estimates of future undiscounted cash flows of the underlying business, which are based on judgment and assumptions.

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts
and the tax bases of assets and liabilities.  The Company regularly reviews its deferred tax assets for recoverability and
establishes a valuation allowance based on historical taxable income,
projected future taxable income, and the expected timing of the reversals of existing temporary
differences, all of which require significant management judgments.

Our
primary markets are currently in the United States, Japan, France and United Kingdom. We
bill services provided by our foreign branches and subsidiaries in local currencies.
Operating results generated in local currencies are translated into U.S. dollars at the
average exchange rate in effect for the reporting period. We generated approximately 19%
of our total revenues outside the United States during the year ended December 31, 2001;
approximately 23% of our total revenues outside the United States during the year ended
December 31, 2000; and approximately 24% during the year ended December 31, 1999. Our
operating profits by geographic segment are shown in Note 12 of Notes to
Consolidated Financial Statements.

## FISCAL 2001
DEVELOPMENTS

During
the year ended December 31, 2001, the Company began incurring certain non-recurring
costs. These include: 1) restructuring charges, or those costs and expenses associated
with resizing our business to a new lower expected revenue growth in the near term; 2)
asset impairments, which reflect the write-off of intangible and other non-current assets
due to changes in the Companys vision and product platform, as well as the decrease
in the fair value of the facility held for sale; and 3) other non-recurring charges,
which relate primarily to facility moves and related costs which are not classified as
restructuring charges. The total charges related to these three categories were
approximately $34,000,000, of which approximately $19,000,000 are expected to be from
cash expenditures.

During
the second quarter of fiscal 2001, we initiated a restructuring plan to resize the Companys
personnel as well to close its facility located in Stroudsburg, PA. This will result in a
reduction of 155 employees and the elimination of 35 independent contractors across
various departments in the United States and Europe as well as 192 additional personnel
associated with the closing of the Companys facility in Stroudsburg, PA. The
Stroudsburg, PA operations are being relocated to the Companys facilities in New
Jersey, Virginia and a new facility in Bethlehem, PA. The exit costs have been included
in the restructuring charge while the moving and other start-up costs are not included in
this restructuring charge and will continue to be expensed as incurred. These exit costs
are included with non-recurring charges as discussed herein. During the second quarter of
2001, the Company recorded a charge of $6,134,000 associated with this restructuring.
This charge was reduced by $24,000 to $6,110,000 in the fourth quarter of 2001 due to the
variance between the amounts recorded originally and managements current estimate
of the total costs of the restructuring. Of the restructuring charge, $2,950,000 related
primarily to severance has not been paid as of December 31, 2001 and, accordingly, is
classified as accrued restructuring charge in the Companys Consolidated Financial
Statements. The restructuring charges were based upon formal plans approved by the Companys
management using the information available at the time. Management of the Company
believes this provision will be adequate to cover the costs incurred relating to the
restructuring. The Company anticipates that the accrued restructuring balance of
$2,950,000 as of December 31, 2001 will be paid by mid 2002. See Note 2 to the Companys
Consolidated Financial Statements and Fiscal 2001 Developments.

During
the second quarter of 2001, the Company reviewed the carrying values of its long-lived
assets, including its minority investments in start-up ventures, identifiable intangibles
and goodwill. In connection with this review, the Company wrote off $3,450,000 of cost
method investments it had in two start-up ventures due to a permanent impairment in the
fair value of these investments. These entities experienced serious difficulty in raising the
additional capital necessary to fund their start-up activities.

In
connection with the Companys announcement on June 14, 2001, relative to its
partnership with Oracle Corporation to market an integrated customer relationship
management solution to meet the specialized needs of the worldwide pharmaceutical
industry, the Companys vision and product platform changed. The operations acquired
through the Companys acquisitions of Associated Business Computing, N.V. (ABC) and
Analytika, Inc. (Analytika) have been modified to keep pace with the developing needs of
the ethical pharmaceutical market. The projected undiscounted future cash flows of these
operations are substantially less than the carrying value of the related long-lived
assets, including identifiable intangibles and goodwill. The fair value of the long-lived
assets was determined based upon the discounted cash flows expected to be derived from
these operations. As a result of the Oracle relationship, management reviewed these
operations and concluded that they would generate negative cash flows over the next
several years due to higher administrative costs required to support the projected
revenue stream. Accordingly, the Company recorded an impairment charge of $8,787,000,
consisting of $2,614,000 of purchased capitalized software and $6,173,000 of related
goodwill. Relative to the operations acquired as a result of the Marketing Management
International, Inc. (MMI) acquisition, during 2002 the Company began offering the mid-tier
pharmaceutical industry a product which is more compatible with the Companys vision
of integrated CRM solutions. Accordingly, in the second quarter of 2001, the Company
reduced the remaining useful life of the purchased capitalized software related to the
MMI acquisition so that the balance was completely amortized by year end 2001. As the
operations of the business acquired in the MMI acquisition continue to be successful, no
impairment charge or reduction in life was necessary for the goodwill associated with
MMI. The Company will evaluate the realizability of this balance in accordance with SFAS
142.

In
April 2001, the Company paid $10,832,000 to purchase a 145,000 square foot building in
New Jersey for the purpose of establishing a new U.S. operations facility to accommodate
the Companys growth. In connection with its second quarter restructuring, the
Company made the decision to shift its operations to other existing facilities and therefore
decided to sell the new facility (see Notes 2 and 3). This building is classified as
facility held for sale in the accompanying consolidated balance sheets. This facility has
been actively for sale since the second quarter of 2001. Due to recent economic events,
and its impact on the value of real estate, the Company recorded an asset impairment of
$2,100,000 to reduce the carrying value of this facility to its estimated fair market
value during the fourth quarter of 2001. This write-down is included in the asset
impairment charge in the accompanying consolidated statements of operations. See Notes 1
and 3 of Notes to Consolidated Financial Statements.

The
Company incurred other non-recurring costs of approximately $12,033,000 during the year
ended December 31, 2001.  These costs resulted from our decision to relocate our
operations to multiple new facilities, including the start-up costs relating to our new
Chesapeake, VA and Bethlehem, PA facilities, and the transfer of our operations from
Stroudsburg, PA to these and other locations. Also included are duplicate lease costs,
relocation, retention, moving costs, the recognition of future losses on selected
contracts that were identified as we examined the relocation of help desk services to
Chesapeake, VA and consulting costs related to the reorganization of our business.

## MERGERS AND
ACQUISITIONS

We
regularly evaluate opportunities to acquire products or businesses that represent
strategic enhancements to our operations. Such acquisition opportunities, if they arise,
may involve the use of cash or equity instruments. The Company has made the following
acquisitions over the last three years:

On
January 6, 2000, the Company purchased all of the assets and assumed certain liabilities
of Analytika, Inc. (Analytika), a provider of advanced analytical products, consulting
services and outsourced operations services to the pharmaceutical industry. Under the
terms of the acquisition agreement, the Company paid $2,318,000 in cash, which includes
transaction costs, and $6,506,000 in Dendrite common stock. The acquisition has been
accounted for using the purchase method with the purchase price allocated to the fair
value of the assets acquired and liabilities assumed based on their respective fair
market values at the acquisition date. Of the purchase price, $2,890,000 was allocated to
purchased capitalized software development costs. The excess of the purchase price over
the fair value of the net assets acquired was allocated to goodwill ($5,979,000) based
upon an independent appraisal. Analytikas results of operations have been included
in the Companys consolidated financial statements from the date of acquisition. See
Fiscal 2001 Developments.

On
June 30, 1999, the Company purchased all of the assets and assumed certain liabilities
(as defined) of Marketing Management International, Inc. and certain affiliated companies
(collectively, MMI), providers of palm-top software and paper-based sales force
effectiveness solutions and consulting services to subsidiaries of multinational
pharmaceutical companies operating in emerging markets, such as Latin America, Eastern
Europe and Southeast Asia. Under the terms of the acquisition agreement, the Company paid
$6,640,000 in cash, which includes transaction costs, and $3,435,000 in Dendrite common
stock. The acquisition has been accounted for using the purchase method with the purchase
price allocated to the fair value of the assets acquired and liabilities assumed based on
their respective fair market values at the acquisition date. The excess of the purchase
price over the fair value of the net assets acquired, which included purchased
capitalized software development costs ($1,989,000) was allocated to goodwill
($7,235,000) based upon an independent appraisal. MMIs results of operations have
been included in the Companys consolidated financial statements from the date of
acquisition. See Fiscal 2001 Developments.

On May
27, 1999, the Company exchanged 2,220,807 shares of its common stock for all the
outstanding shares of common stock of CorNet International, Ltd. (CorNet), a provider of
sales force effectiveness solutions for the U.S. pharmaceutical, consumer and business to
business markets. The merger was accounted for under the pooling of interests method.
Accordingly, all prior historical consolidated financial statements contained herein have
been restated to reflect the acquisition of CorNet.

## RESULTS OF
OPERATIONS

The
following table sets forth our results of operations expressed as a percentage of total
revenues for the periods indicated:

`YEAR ENDED
                                                        DECEMBER 31,
                                               ----------------------------
                                                  2001       2000      1999
                                               ---------  --------- -------
Revenues:
    License fees...........................         8%        11%       14%
    Services...............................        92         89        86
                                                  ---        ---       ---
                                                  100        100       100
                                                  ---        ---       ---
Costs of Revenues:
    Cost of license fees...................         2          2         2
    Purchased software impairment..........         1         --        --
    Cost of services.......................        51         41        42
                                                  ---        ---       ---
                                                   54         43        44
                                                  ---        ---       ---
    Gross Margin...........................        46         57        56
                                                  ---        ---       ---
Operating Expenses:
    Selling, general and administrative....        42         32        33
    Research and development...............         5          5         4
   Mergers and acquisitions................        --         --         2
    Restructuring charge...................         3         --        --
    Asset impairments......................         5         --        --
                                                  ---        ---       ---
                                                   55         37        39
                                                  ---        ---       ---
     Operating income (loss) ..............        (9)        20        17
Interest and other income..................         1          2         1
                                                  ---        ---       ---
     Income (loss) before income taxes.....        (8)        22        18
Income tax (benefit) expense...............        (2)         8         7
                                                  ----       ---       ---
Net Income (loss)..........................        (6)%       14%       11%
                                                  ====       ===       ===`

## YEARS ENDED
DECEMBER 31, 2001 AND 2000

REVENUES.
Total revenues increased $10,321,000 to $224,647,000 in 2001, up 5% from $214,326,000 in
2000.

License
fee revenues decreased $5,271,000 to $18,695,000 in 2001, down 22% from $23,966,000 in
2000. License fee revenues as a percentage of total revenues were 8% in 2001 as compared
to 11% in 2000. License fees are, by nature, non-recurring items. The overall decrease
related to fewer licenses signed with customers. We expect that license revenues, as a
percentage of the total revenue, will remain at or slightly below its current level.

Service
revenues increased $15,592,000 to $205,952,000 in 2001, up 8% from $190,360,000 in 2000.
Service revenues as a percentage of total revenues were 92% in 2001 as compared to 89% in
2000. The increase in service revenues was the result of major client rollouts,
additional ongoing services and new service offerings.

COST
OF REVENUES. Cost of revenues increased $30,454,000 to $122,108,000 in 2001, up 33% from
$91,654,000 in 2000.

Cost
of license fees increased $1,477,000 to $4,897,000 in 2001, up 43% from $3,420,000 in
2000. Cost of license fees includes the amortization of capitalized software development
costs and third party vendor license fees. The costs associated with third party vendor
licenses increased due to an increase in the number of third party software products
embedded in our WebForce product suite. As of June 2001, the Company reduced the
remaining useful life of the purchased capitalized software related to the MMI
acquisition to seven months which resulted in an additional amortization expense of
approximately $819,000 during the year ended December 31, 2001 as compared to 2000. See
Fiscal 2001 Developments.

During
the second quarter of 2001, the Company recorded an impairment charge of $2,614,000
related to its purchased capitalized software costs from its acquisitions of Analytika
and Associated Business Computing, N.V. These operations have been modified to keep pace
with the developing needs of the ethical pharmaceutical market. The projected
undiscounted future cash flows of these operations were less than the carrying value of
the related long-lived assets, including identifiable intangibles and goodwill. The fair
value of the long-lived assets was determined based upon the discounted cash flows
expected to be derived from these operations. Management of the Company believes that
these operations will generate negative cash flows over the next several years due to
higher administrative costs required to support the projected revenue stream. See Note 3
to the Companys Consolidated Financial Statements and  Recent Developments above
and  Restructuring Charge and Asset Impairment below for a
discussion of the restructuring charges and asset impairments recorded in the year ended
December 31, 2001.

Cost
of services increased $26,363,000 to $114,597,000 in 2001, up 30% from $88,234,000 in
2000. This increase was due to a combination of factors, including non-recurring costs of
$1,434,000 which related to the recognition of future losses on selected contracts for
which we expect the costs of providing the future services will exceed the revenue to be
received from the performance of the services, which was identified while examining the
restructuring of our Stroudsburg, PA facility and $3,118,000 which related to other
non-recurring exit costs, primarily severance. The remaining increase in cost of services
was primarily due to overstaffing within our service areas in anticipation of higher
levels of growth than were realized during the first six months of 2001.

Total
gross margin for 2001 was 46%, down from 57% in 2000. The margin was impacted
significantly by the $2,614,000 asset impairment, $819,000 of accelerated amortization of
MMI purchased capitalized software costs and $4,552,000 of non-recurring costs within
cost of services that was recorded in 2001. If not for the effects of these items, the
gross margin would have been 49% for 2001. This was significantly lower than the gross
margin in 2000, primarily due to overstaffing within our service areas in anticipation of
higher levels of growth than were realized during the first six months of 2001.

SELLING,
GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES. SG&A expenses increased
$26,694,000 to $94,578,000 in 2001, up 39% from $67,884,000 in 2000. As a percentage of
revenues, SG&A expenses increased to 42% for the year ended 2001, as compared to 32%
in 2000. The increase in SG&A expenses was caused by several factors, most notably
$4,782,000 of costs associated with the Companys CRM launch in partnership with
Oracle Corporation, $6,205,000 of costs relating to the transition of services to new
facilities, $1,400,000 of outside consulting costs related to the reorganization of our
business and approximately $14,307,000 of costs including higher facility costs
principally due to the opening of a new facility, higher depreciation, and higher
salaries and related costs due to the addition of certain key management and changes in
our global sales organization.

RESEARCH
AND DEVELOPMENT (R&D) EXPENSES. R&D expenses increased $229,000 to $11,104,000
in 2001, up 2% from $10,875,000 in 2000. As a percentage of revenues, R&D expenses
remained constant at 5% in 2001 and 2000.

RESTRUCTURING
CHARGE. On June 14, 2001, the Company announced a restructuring of its business
operations to reflect a lower expected revenue growth model in the near term. The
restructuring plan consists of the resizing of the Companys personnel as well as
the closing of its facility located in Stroudsburg, PA. The Stroudsburg, PA operations
are being relocated to the Companys facilities in New Jersey, Virginia and a new
facility to be leased in Bethlehem, PA. The exit costs have been included in the
restructuring charge while the moving and other start-up costs are not included in this
restructuring charge and will continue to be expensed as incurred. These exit costs are
included within non-recurring charges as discussed herein.

During
the year ended December 31, 2001, the Company recorded a charge of $6,110,000 associated
with its restructuring. The restructuring charges were determined based upon formal plans
approved by the Companys management using the information available at the time.
Management of the Company believes this provision will be adequate to cover any costs
incurred relating to the restructuring. See Note 2 of Notes to the Companys
Consolidated Financial Statements and "Fiscal 2001 Developments".

ASSET
IMPAIRMENT. During the second quarter of 2001, the Company reviewed the carrying
values of its long-lived assets, including its minority investments in start-up ventures,
identifiable intangibles and goodwill and wrote off $3,450,000 of cost method investments
it had in two start-up ventures due to a permanent impairment in the fair value of these
investments. These entities experienced difficulty in raising the additional capital
necessary to fund their start-up activities and the situation at both became particularly
severe in the second quarter.

In
connection with the Companys announcement on June 14, 2001, relative to its
partnership with Oracle Corporation to market an integrated CRM solution to meet the
specialized needs of the worldwide pharmaceutical industry, the Companys vision and
product platform changed. The operations acquired through the Companys acquisitions
of ABC and Analytika have been modified to keep pace with the developing needs of the
ethical pharmaceutical market. The projected undiscounted future cash flows of these
operations are substantially less than the carrying value of the related long-lived
assets, including identifiable intangibles and goodwill. The fair value of the long-lived
assets was determined based upon the discounted cash flows expected to be derived from
these operations. As a result of the Oracle relationship, management reviewed these
operations and concluded that they would generate negative cash flows over the next
several years due to higher administrative costs required to support the projected
revenue stream. Accordingly, the Company recorded an impairment charge of $8,787,000,
consisting of $2,614,000 of purchased capitalized software and $6,173,000 of related
goodwill. Relative to the operations acquired as a result of the MMI acquisition, during 2002 the
Company began offering the mid-tier pharmaceutical market a product which is more compatible
with the Companys vision of integrated CRM solutions. Accordingly, in the second
quarter of 2001, the Company reduced the remaining useful life of the purchased
capitalized software related to the MMI acquisition to seven months as of June 2001,
which resulted in an additional expense of approximately $819,000 during the year ended
December 31, 2001. As the operations of the business acquired in the MMI acquisition
continue to be successful, no impairment charge or reduction in life was necessary for
the goodwill associated with MMI. The Company will evaluate the realizability of this
balance in accordance with SFAS 142. See Note 3 of Notes to Consolidated Financial
Statements.

During
the fourth quarter of 2001, the Company recorded an asset impairment of $2,100,000 to
reduce the carrying value of its facility held for sale to its estimated fair market
value. In connection with its second quarter restructuring, the Company made the decision
to shift its operations to other existing facilities and has therefore decided to sell
the new facility. A planned sale, scheduled to close in the fourth quarter did not occur
and the Company wrote down the building to its fair market value. See Notes 1 and 3 of
Notes to Consolidated Financial Statements and Fiscal 2001 Developments..

PROVISION
FOR INCOME TAXES. The effective tax benefit recorded for the year ended December 31,
2001 was 32.7%, as compared with an effective tax rate of 35.5% for the year ended
December 31, 2000. The difference in rates resulted primarily from the write-off of
certain goodwill amounts which are not deductible for tax purposes.

## YEARS ENDED
DECEMBER 31, 2000 AND 1999

REVENUES.
Total revenues increased $41,641,000 to $214,326,000 in 2000, up 24% from $172,685,000 in
1999.

License
fee revenues decreased $278,000 to $23,966,000 in 2000, down 1% from $24,244,000 in 1999.
License fee revenues as a percentage of total revenues were 11% in 2000 as compared to
14% in 1999 due in part to the 28% growth in service revenues, as discussed below. The
lack of change in license fee revenue was the result of fewer sales to new pharmaceutical
customers in the U.S.

Service
revenues increased $41,919,000 to $190,360,000 in 2000, up 28% from $148,441,000 in 1999.
Service revenues as a percentage of total revenues were 89% in 2000 as compared to 86% in
1999. The increase in service revenues was primarily the result of an increase in the
number of installed users of Dendrite sales force software products at both new and
existing customers, as well as the provision of additional services for our existing
customers.

COST
OF REVENUES. Cost of revenues increased $16,914,000 to $91,654,000 in 2000, up 23% from
$74,740,000 in 1999.

Cost
of license fees increased $1,060,000 to $3,420,000 in 2000, up 45% from $2,360,000 in
1999. Cost of license fees, as a percentage of license revenues, were 14% in 2000 as
compared to 10% in 1999. Cost of license fees includes the amortization of capitalized
software development costs and third party vendor license fees. The increase in the costs
in 2000 was primarily due to the increase in purchased capitalized software associated
with the acquisitions of MMI in May 1999 and Analytika in January 2000.

Cost
of services increased $15,854,000 to $88,234,000 in 2000, up 22% from $72,380,000 in
1999. This increase was primarily due to an increase in staff required to support greater
client activity. As a percentage of service revenues, cost of services decreased from 49%
of service revenues in 1999 to 46% in 2000. This decrease was primarily the result of
increased operational efficiencies in 2000.

Total
gross margin remained relatively consistent at 57% in 2000 and 56% in 1999.

SELLING,
GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES. SG&A expenses increased
$10,957,000 to $67,884,000 in 2000, up 19% from $56,927,000 in 1999. As a percentage of
revenues, SG&A expenses decreased to 32% in 2000 from 33% in 1999. The increase in SG&A
expenses was primarily attributable to an increase in sales and marketing expenses from
both our existing businesses and our newly acquired businesses, due in part to an
increase in the number of worldwide employees.

RESEARCH
AND DEVELOPMENT (R&D) EXPENSES. R&D expenses increased $3,206,000 to
$10,875,000 in 2000, up 42% from $7,669,000 in 1999. The increase in research and
development expenses was primarily attributable to increased spending on development of
internet initiatives, along with R&D spending from acquisitions. As a percentage of
revenues, R&D expenses increased to 5% in 2000 from 4% in 1999.

MERGERS AND
ACQUISITIONS. During the second quarter of 1999, the Company acquired CorNet in a
transaction accounted for as a pooling of interests and incurred a one-time expense for
the costs related to the acquisition and the cancellation of a proposed common stock
offering.

PROVISION
FOR INCOME TAXES. The effective tax rate was reduced to 35.5% in 2000 as compared to
36%, excluding one-time charges, in 1999. This slight decrease was the result of tax
planning strategies.

## QUARTERLY
RESULTS OF OPERATIONS

The
following table sets forth certain unaudited consolidated statement of operations data
expressed in U.S. dollars for 2001 and 2000. Our quarterly results have varied
considerably in the past and are likely to vary from quarter to quarter in the future.

`QUARTERS ENDED
                                                                           --------------
                                  MARCH 31,   JUNE 30,    SEPT. 30,    DEC. 31,     MARCH 31,   JUNE 30,      SEPT. 30,    DEC. 31,
                                    2001        2001        2001         2001         2000        2000          2000         2000
                                -----------  ---------  -----------  -----------  -----------  ---------    -----------  --------
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                               -----------------------------------
Statement of Operations Data:
Revenues:
    License fees............      $  3,003   $  4,273     $  8,635     $  2,784     $  5,609   $  6,050       $  8,599     $  3,708
    Services................        48,876     47,689       48,478       60,909       41,453     45,681         47,434       55,792
                                  --------   --------     --------     --------     --------   --------       --------     --------
                                    51,879     51,962       57,113       63,693       47,062     51,731         56,033       59,500
Costs of Revenues:
    Cost of license fees....           963      1,198        1,531        1,205          745      1,130            835          710
    Purchased software
      impairment............            --      2,614           --           --           --         --           --           --
    Cost of services........        26,166     31,042       26,665       30,724       19,584     20,950         21,701       25,999
                                  --------   --------     --------     --------     --------   --------       --------     --------
                                    27,129     34,854       28,196       31,929       20,329     22,080         22,536       26,709
                                  --------   --------     --------     --------     --------   --------       --------     --------
    Gross margin............        24,750     17,108       28,917       31,764       26,733     29,651         33,497       32,791

Operating Expenses:
    Selling, general, and
      administrative........        20,462     28,632       22,875       22,609       15,438     16,146         18,752       17,548
    Research and development         2,867      2,968        2,689        2,580        2,639      2,701          2,703        2,832
    Restructuring charge....            --      6,134           --          (24)          --         --             --           --
    Asset impairment........            --      9,623           --        2,100           --         --             --           --
                                  --------   --------     --------     --------     --------   ------------   --------     --------
                                    23,329     47,357       25,564       27,265       18,077     18,847         21,455       20,380
                                  --------   --------     --------     --------     --------   --------       --------     --------
      Operating income (loss)        1,421    (30,249)       3,353        4,499        8,656     10,804         12,042       12,411
Interest income.............           926        671          496          346          760        757            917        1,107
Other income (expense)......           (26)       (58)          (9)          96           --        (25)           (17)          47
                                  ---------  ---------    ---------    --------     --------   ---------      ---------    --------
      Income (loss) before
      income tax expense
        (benefit)...........         2,321    (29,636)       3,840        4,941        9,416     11,536         12,942       13,565
Income tax expense (benefit)           836    (10,060)       1,383        1,778        3,390      4,153          4,660        4,645
                                  --------   ---------    --------     --------     --------   --------       --------     --------
Net income (loss)...........      $  1,485   $(19,576)    $  2,457     $  3,163     $  6,026   $  7,383       $  8,282     $  8,920
                                  ========   =========    ========     ========     ========   ========       ========     ========
Net income (loss) per share:
    Basic...................      $   0.04   $   (0.50)   $   0.06     $   0.08     $   0.16   $    0.19      $   0.21     $   0.22
                                  ========   ==========   ========     ========     ========   =========      ========     ========
    Diluted.................      $   0.04   $   (0.50)   $   0.06     $   0.08     $   0.15   $    0.18      $   0.20     $   0.22
                                  ========   ==========   ========     ========     ========   =========      ========     ========
Shares used in computing net
   income (loss) per share:
    Basic...................        40,249     39,537       39,568       39,508       38,818     39,137         39,509       39,934
                                  ========   ========     ========     ========     ========   ========       ========     ========
    Diluted.................        41,159     39,537       39,985       39,983       41,210     41,151         41,638       41,355
                                  ========   ========     ========     ========     ========   ========       ========     ========`

## LIQUIDITY AND
CAPITAL RESOURCES

We
finance our operations primarily through cash generated by operating activities. Net cash
provided by operating activities was $39,891,000 for 2001, compared to $23,262,000 for
2000. Net income excluding non-cash items of $32,272,000 was $19,801,000 for 2001
compared to $41,671,000 in 2000. Changes in working capital, primarily accounts
receivable, caused the overall increase of $16,629,000 in cash flow from operating
activities.

Cash
used in investing activities was $33,997,000 for 2001 as compared to $8,798,000 in 2000.
The significant increase was due primarily to our purchase of a new facility which is
currently held for sale, and tenant improvements made to our new data center facility
during the year ended December 31, 2001, as well as the change in our short-term
investments activity in 2000, partially offset by cash used for acquisitions in 2000.

Cash
used in financing activities was $13,047,000 in 2001 as compared to cash provided by
financing activities of $8,828,000 in 2000. The change was due to purchases of common
stock under the stock repurchase program announced on January 31, 2001, and an overall
decrease in the level of stock option exercises during the year ended December 31, 2001.
During the year ended December 31, 2001, the Company purchased 1,343,700 shares of its
common stock at a cost of $17,480,000 under the existing stock repurchase program.

We
maintain a $15.0 million revolving line of credit agreement with The Chase Manhattan
Bank, N.A. The agreement is available to finance working capital needs and possible
future acquisitions. The terms of this agreement require us to maintain a minimum
consolidated net worth, among other covenants, measured quarterly, which is equal to
$105,000,000, plus 50% of our net income earned after January 1, 2002 and 75% of the net
proceeds to us of any stock offerings after September 30, 2001 (as defined in the
agreement). This covenant effectively limits the amount of cash dividends we may pay. The
credit facility expires on November 30, 2002. At December 31, 2001, there were no
borrowings outstanding under the agreement and we were in compliance with all of our
covenant obligations.

Our
working capital was approximately $84,989,000 at December 31, 2001 and $113,738,000 at
December 31, 2000, a decrease of $28,749,000. This decrease relates primarily to our
purchase of a building for $10,832,000 and our purchases of treasury stock for
$17,480,000. We believe that available funds, anticipated cash flows from operations and
our line of credit will satisfy our currently projected working capital and capital
expenditure requirements, exclusive of cash required for possible acquisitions of
businesses, products and technologies, for the foreseeable future.

## RECENT
ACCOUNTING PRONOUNCEMENTS

On January 1, 2001, the Company adopted Statement of Financial Accounting Standard
 (SFAS) No. 133 Accounting for Derivative
Instruments and Hedging Activities as amended by SFAS No. 138, which requires that
all derivatives be recorded on the balance sheet at fair value.  The adoption of SFAS No. 133
did not have a material impact on the Companys consolidated financial position,
results of operations or cash flows.

In
June 2001, the Financial Accounting Standards Board issued SFAS  No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141
prohibits the pooling of interests method of accounting for business combinations
initiated after June 30, 2001. SFAS No. 142 requires companies to cease amortizing
goodwill that existed at December 31, 2001. SFAS No. 142 also established a new method of testing
 goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would reduce the
fair value of a reporting unit below its carrying value. The adoption of SFAS No. 142
will result in the Companys discontinuation of amortization of its goodwill which
was $4,830,000 as of January 1, 2002; however, the Company will be required to test its
goodwill for impairment under the new standard beginning in the first half of 2002.
The Company is currently evaluating the impact of these statements but does not expect that
they will have a material impact on the Companys financial position, results of operations,
or cash flows. The Company does not currently believe that this test will result in any material impairment.  The
discontinuation of amortization of goodwill related to the MMI acquisition will result in
a decrease in annual amortization expense of $1,072,000. This asset would have continued
to amortize through June 2006.

In
October 2001, the FASB issued SFAS 144, which is effective for fiscal years beginning
after December 15, 2001. SFAS 144 supersedes certain 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 (APB 30) and supersedes SFAS No. 121 Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (SFAS
121). Although retaining many of the fundamental recognition and measurement
provisions of SFAS 121, the new rules significantly change the criteria that would have
to be met to classify an asset as held-for-sale. The Company is currently evaluating this
statement but does not expect that it will have a material impact on the Companys
financial position, results of operations, or cash flows.

## FACTORS THAT
MAY AFFECT FUTURE OPERATING RESULTS

## OUR BUSINESS IS HEAVILY
DEPENDENT ON THE PHARMACEUTICAL INDUSTRY

Most
of our CRM and SFE products and services are currently used in connection with the
marketing and sale of prescription-only drugs. This market is undergoing a number of
significant changes. These include:

| |  |  | the
significant consolidation of the pharmaceutical industry as well as the timing and
sequencing of sales to our customers may reduce the number of our existing and potential
customers;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | regulatory
changes that permit the over-the-counter sale of formerly prescription-only drugs; and
| | - |  | -------------------------------------------------------------------------------------------------

| |  |  | competitive
pressure on the pharmaceutical industry resulting from the continuing shift to delivery
of healthcare through managed care organizations.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

We
cannot assure you that we can respond effectively to any or all of these and other
changes in the marketplace. Our failure to do so could have a material adverse effect on
our business, operating results or financial condition.

## OUR QUARTERLY RESULTS
OF OPERATIONS MAY FLUCTUATE SIGNIFICANTLY AND MAY NOT MEET MARKET EXPECTATIONS

Our
results of operations may vary from quarter to quarter due to lengthy sales and
implementation cycles for our products, our fixed expenses in relation to our fluctuating
revenues and variations in our customers budget cycles, each of which is discussed
below. As a result, you should not rely on quarter-to-quarter comparisons of our results
of operations as an indication of future performance. It is also possible that in some
future period our results of operations may be below our targeted goals and the
expectations of the public market analysts and investors. If this happens, the price of
our common stock may decline.

## OUR LENGTHY SALES AND
IMPLEMENTATION CYCLES MAKE IT DIFFICULT TO PREDICT OUR QUARTERLY REVENUES

The
selection of a CRM solution generally entails an extended decision-making process by our
customers because of the strategic implications and substantial costs associated with a
customers license of the solution. Given the importance of the decision, senior
levels of management of our customers often are involved and, in some instances, its
board of directors may be involved in this process. As a result, the decision-making
process typically takes nine to eighteen months, and in certain cases even longer.
Accordingly, we cannot control or predict the timing of our execution of contracts with
customers.

In
addition, an implementation process of three to six or more months before the software is
rolled out to a customers sales force is customary. However, if a customer were to
delay or extend its implementation process, our quarterly revenues may decline below
expected levels and could adversely affect our results of operations.

## OUR FIXED COSTS MAY
LEAD TO FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS IF REVENUES FALL BELOW
EXPECTATIONS

We
establish our expenditure levels for product development, sales and marketing and some of
our other operating expenses based in large part on our expected future revenues and
anticipated competitive conditions. In particular, we frequently add staff in advance of
new business to permit adequate time for training. If the new business is subsequently
delayed, canceled or not awarded, we will have incurred expenses without the associated
revenues. In addition, we may increase sales and marketing expenses if competitive
pressures become greater than originally anticipated. Since only a small portion of our
expenses varies directly with our actual revenues, our operating results and
profitability are likely to be adversely and disproportionately affected if our revenues
fall below our targeted goals or expectations.

## OUR BUSINESS IS
AFFECTED BY VARIATIONS IN OUR CUSTOMERS BUDGET CYCLES

We
have historically realized a greater percentage of our license fees and service revenues
in the second half of the year than in the first half because, among other things, our
customers typically spend more of their annual budget authorization for CRM and SFE
solutions in the second half of the year. However, the relationship between the amounts
spent in the first and second halves of a year may vary from year to year and from
customer to customer. In addition, changes in our customers budget authorizations
may reduce the amount of revenues we receive from the license of additional software or
the provision of additional services. As a result, our operating results could be
adversely affected.

## WE DEPEND ON A FEW
MAJOR CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR REVENUES

Historically,
a limited number of customers have contributed a significant percentage of the Companys
revenues. The Company anticipates that its operating results in any given period will
continue to depend significantly upon revenues from a small number of customers. The loss
of any of these customers could have a materially adverse effect on the Companys
business. While we have lost some customers to software products and/or services offered
by our competitors or by our customers in-house staff, such events have not to-date
had a material adverse impact on the Company. We cannot, however, make any assurances
that we will retain our existing customers or attract new customers that would replace
the revenue that could be lost if one or more of these customers failed to renew its
agreement(s) with the Company.

## WE MAY BE UNABLE TO
SUCCESSFULLY INTRODUCE NEW PRODUCTS OR RESPOND TO TECHNOLOGICAL CHANGE

The
market for CRM and SFE products changes rapidly because of frequent improvements in
computer hardware and software technology. Our future success will depend, in part, on
our ability to:

| |  |  | use
available technologies and data sources to develop new products and services and to
enhance our current products and services;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------

| |  |  | introduce
new solutions that keep pace with developments in our target markets; and
| | - |  | -----------------------------------------------------------------------------------

| |  |  | address
the changing and increasingly sophisticated needs of our customers.
| | - |  | ---------------------------------------------------------------------------

We
cannot assure you that we will successfully develop and market new products or product
enhancements that respond to technological advances in the marketplace, or that we will
do so in a timely fashion. We also cannot assure you that our products will adequately
and competitively address the needs of the changing marketplace.

Competition
for software products has been characterized by shortening product cycles. We may be
materially and adversely affected by this trend if the product cycles for our products
prove to be shorter than we anticipate. If that happens, our business, operating results
or financial condition could be adversely affected.

To
remain competitive, we also may have to spend more of our revenues on product research
and development than we have in the past. As a result, our results of operations could be
materially and adversely affected.

Further,
our software products are technologically complex and may contain previously undetected
errors or failures. Such errors have occurred in the past and we cannot assure you that,
despite our testing, our new products will be free from errors. Software errors could
cause delays in the commercial release of products until the errors have been corrected.
Software errors may cause damage to our reputation and cause us to commit significant
resources to their correction. Errors that result in losses or delays could have a
material adverse effect on our business, operating results or financial condition.

## INCREASED COMPETITION
MAY RESULT IN PRICE REDUCTIONS AND DECREASED DEMAND FOR OUR PRODUCTS AND SERVICES

There
are a number of other companies that sell CRM and SFE products and related services that
specifically target the pharmaceutical industry, including:

| |  |  | certain
competitors that are actively selling CRM and SFE software products in more than one
country; and
| | - |  | ---------------------------------------------------------------------------------------------------------

| |  |  | certain
competitors that also offer CRM and SFE support services.
| | - |  | -----------------------------------------------------------------

We
believe, however, that the SFE and CRM software products and/or services offered by most
of our competitors do not address the variety of pharmaceutical customer needs that our
solutions address.

We
also face competition from many vendors that market and sell SFE and CRM solutions in the
Consumer Product Group (CPG) market. In addition, we also compete with various companies
that provide support services similar to our services. We believe our ability to compete
depends on many factors, some of which are beyond our control, including:

| |  |  | the
number and success of new market entrants supplying competing CRM products or support
services;
| | - |  | ---------------------------------------------------------------------------------------------------

| |  |  | expansion
of product lines by, or consolidation among, our existing competitors; and
| | - |  | ------------------------------------------------------------------------------------

| |  |  | development
and/or operation of in-house CRM software products or services by our customers and
potential customers.
| | - |  | --------------------------------------------------------------------------------------------------------------------

Some
of our competitors and potential competitors are part of large corporate groups and have
significantly greater financial, sales, marketing, technology and other resources than we
have. We cannot assure you that we will be able to compete successfully with these
companies or that competition will not have a material adverse effect on our business,
operating results or financial condition.

## OUR INTERNATIONAL
OPERATIONS HAVE RISKS THAT OUR DOMESTIC OPERATIONS DO NOT

The
sale of our products and services in foreign countries accounts for, and is expected in
the future to account for, a material part of our revenues. These sales are subject to
risks inherent in international business activities, including:

| |  |  | any
adverse change in the political or economic environments in these countries;
| | - |  | --------------------------------------------------------------------------------

| |  |  | any
adverse change in tax, tariff and trade or other regulations;
| | - |  | -----------------------------------------------------------------

| |  |  | the
absence or significant lack of legal protection for intellectual property rights;
| | - |  | -------------------------------------------------------------------------------------

| |  |  | exposure
to exchange rate risk for service revenues which are denominated in currencies other than
U.S. dollars; and
| | - |  | --------------------------------------------------------------------------------------------------------------------

| |  |  | difficulties
in managing an organization spread over various jurisdictions.
| | - |  | ---------------------------------------------------------------------------

## WE MAY FACE RISKS
ASSOCIATED WITH ACQUISITIONS

Our
business could be materially and adversely affected as a result of the risks associated
with acquisitions. As part of our business strategy, we have acquired businesses that
offer complementary products, services or technologies. These acquisitions are
accompanied by the risks commonly encountered in an acquisition of a business, including:

| |  |  | the
effect of the acquisition on our financial and strategic position;
| | - |  | ----------------------------------------------------------------------

| |  |  | the
failure of an acquired business to further our strategies;
| | - |  | --------------------------------------------------------------

| |  |  | the
difficulty of integrating the acquired business;
| | - |  | ----------------------------------------------------

| |  |  | the
diversion of our management's attention from other business concerns;
| | - |  | -------------------------------------------------------------------------

| |  |  | the
impairment of relationships with customers of the acquired business;
| | - |  | ------------------------------------------------------------------------

| |  |  | the
potential loss of key employees of the acquired company; and
| | - |  | ----------------------------------------------------------------

| |  |  | the
maintenance of uniform, company-wide standards, procedures and policies.
| | - |  | ----------------------------------------------------------------------------

These
factors could have a material adverse effect on our revenues and earnings. We expect that
the consideration paid for future acquisitions, if any, could be in the form of cash,
stock, rights to purchase stock, or a combination of these. To the extent that we issue
shares of stock or other rights to purchase stock in connection with any future
acquisition, existing shareholders will experience dilution and potentially decreased
earnings per share.

## WE MAY FACE RISKS
ASSOCIATED WITH EVENTS WHICH MAY AFFECT THE U.S. AND WORLD ECONOMIES

The
terrorist attacks of September 11, 2001 and subsequent world events created weakness in
the U.S. and world economies. While we did not experience any material impact to our
business during the time period immediately following the events of September 11, 2001,
we cannot assure you that the impact of these events, the threat of future terrorist
activity in the U.S. and other parts of the world, and any related U.S. military action
on the U.S. and world economies will not adversely affect our business or the businesses
of our customers.

## OUR SUCCESS DEPENDS ON
RETAINING OUR KEY SENIOR MANAGEMENT TEAM AND ON ATTRACTING AND RETAINING QUALIFIED
PERSONNEL

Our
future success depends, to a significant extent, upon the contributions of our executive
officers and key sales, technical and customer service personnel. Our future success also
depends on our continuing ability to attract and retain highly qualified technical and
managerial personnel. Competition for such personnel is intense. We have at times
experienced difficulties in recruiting qualified personnel and we may experience such
difficulties in the future. Any such difficulties could adversely affect our business,
operating results or financial condition.

## OUR INABILITY TO MANAGE
OUR GROWTH COULD ADVERSELY AFFECT OUR BUSINESS

To
manage our growth effectively we must continue to strengthen our operational, financial
and management information systems and expand, train and manage our work force. However,
we may not be able to do so effectively or on a timely basis. Failure to do so could have
a material adverse effect upon our business, operating results or financial condition.

## OUR BUSINESS DEPENDS ON
PROPRIETARY TECHNOLOGY THAT WE MAY NOT BE ABLE TO PROTECT COMPLETELY

We
rely on a combination of trade secret, copyright and trademark laws, non-disclosure and
other contractual agreements and technical measures to protect our proprietary
technology. We cannot assure you that the steps we take will prevent misappropriation of
this technology. Further, protective actions we have taken or will take in the future may
not prevent competitors from developing products with features similar to our products.
In addition, effective copyright and trade secret protection may be unavailable or
limited in certain foreign countries. In response to a request by our customer, we have
also on occasion entered into agreements which require us to place our source code in
escrow to secure our service and maintenance obligations.

Further,
while we believe that our products and trademarks do not infringe upon the proprietary
rights of third parties, third parties may assert infringement claims against us in the
future that may result in the imposition of damages or injunctive relief against us. In
addition, any such claims may require us to enter into royalty arrangements. Any of these
results could materially and adversely affect our business, operating results or
financial condition.

## THERE ARE
CHARACTERISTICS IN THE CONSUMER PACKAGED GOODS MARKET THAT DIFFER FROM THE PHARMACEUTICAL
MARKET

We
market and sell CRM solutions to companies in the CPG market. The selling environment in
this market has unique characteristics that differentiate it from the pharmaceutical
market. In addition, we believe that the CPG market is composed of sub-markets, each of
which may have unique characteristics. Accordingly, we cannot assure you that we will be
able to replicate in this market the success we have achieved in the ethical
pharmaceutical market.

## PROVISIONS OF OUR
CHARTER DOCUMENTS AND NEW JERSEY LAW MAY DISCOURAGE AN ACQUISITION OF DENDRITE

Provisions
of our Restated Certificate of Incorporation, as amended, our By-laws, as amended, and
New Jersey law may make it more difficult for a third party to acquire us. For example,
the Board of Directors may, without the consent of the stockholders, issue preferred
stock with rights senior to those of the common stock. In addition, the Company has a
Shareholder Rights Plan which may limit the ability of a third party to attempt a hostile
acquisition of the Company.

## OUR COMMON STOCK MAY BE
SUBJECT TO PRICE FLUCTUATIONS

The
market price of our common stock may be significantly affected by the following factors:

| |  |  | the
announcement or the introduction of new products by us or our competitors;
| | - |  | ------------------------------------------------------------------------------

| |  |  | quarter-to-quarter
variations in our operating results or changes in revenue or earnings estimates or
failure to meet or exceed revenue or earnings estimates;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | market
conditions in the technology, healthcare and other growth sectors; and
| | - |  | -----------------------------------------------------------------------------

| |  |  | general
consolidation in the healthcare information industry which may result in the market
perceiving us or other comparable companies as potential acquisition targets.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Further,
the stock market has experienced on occasion extreme price and volume fluctuations. The
market prices of the equity securities of many technology companies have been especially
volatile and often have been unrelated to the operating performance of such companies.
These broad market fluctuations may have a material adverse effect on the market price of
our common stock.

## WE MAY NOT BE ABLE TO
COMPETE EFFECTIVELY IN THE INTERNET-RELATED PRODUCTS AND SERVICES MARKET NOR CAN WE
PROVIDE ASSURANCES THAT THE DEMAND FOR INTERNET-RELATED PRODUCTS AND SERVICES WILL
INCREASE

The
success of parts of our business will depend, in part, on our ability to continue
developing Internet-related products and responding to technological advances and
changing commercial uses of the Internet. We cannot assure you that our Internet-related
products and services will adequately respond to such technological advances and changing
uses. Nor can we assure you that the demand for Internet-related products and services
will increase.

## IF OUR THIRD PARTY
VENDORS ARE UNABLE TO SUCCESSFULLY RESPOND TO TECHNOLOGICAL CHANGE OR IF WE DO NOT
MAINTAIN OUR RELATIONSHIPS WITH THIRD-PARTY VENDORS, INTERRUPTIONS IN THE SUPPLY OF OUR
PRODUCTS MAY RESULT

Some
of our software is provided by third-party vendors. If our third-party vendors are unable
to successfully respond to technological change or if our relationships with certain
third-party vendors are terminated we may experience difficulty in replacing the
functionality provided by the third-party software currently offered with our products.
Although we believe there are other sources for all of our third-party software, any
significant interruption in the supply of these products could adversely impact our sales
unless and until we can secure another source. The absence of or any significant delay in
the replacement of functionality provided by third-party software in our products could
materially and adversely affect our sales.

## CATASTROPHIC
EVENTS COULD NEGATIVELY AFFECT OUR INFORMATION TECHNOLOGY INFRASTRUCTURE

The
efficient operation our business, and ultimately our operating performance, depends on
the uninterrupted use of our critical business and information technology systems. Many
of these systems require the use of specialized hardware and other equipment that is not
readily available. Although we maintain these systems at more than one location, a
natural disaster, a fire or other catastrophic event at any of these locations could
result in the destruction of these systems. In such an event, the replacement of these
systems and restoration of the archived data and normal operation of our business could
take several days to several weeks. During the intervening period when our critical
business and information technology systems are fully or partially inoperable, our
ability to conduct normal business operations could be significantly and adversely
impacted and as a result our business, operating results and financial conditions could
be adversely affected.

# ITEM 7A.  QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

## FOREIGN
CURRENCY RISK

Because
we have operations in a number of countries and our service agreements in such countries
are denominated in a foreign currency, we face exposure to adverse movements in foreign
currency exchange rates. As currency rates change, translation of the income statements
of our international entities from local currencies to U.S. dollars affects
year-over-year comparability of operating results. We do not hedge translation risks
because we generally reinvest the cash flows from international operations.

Management
estimates that a 10% change in foreign exchange rates would impact reported operating
profit by less than $500,000. This sensitivity analysis disregards the possibility that
rates can move in opposite directions and that losses from one area may be offset by
gains from another area.

## INTEREST RATE
RISK

We
earn interest income from our balances of cash and short-term investments. This interest
income is subject to market risk related to changes in interest rates, which primarily
affects our investment portfolio. We invest in instruments that meet high credit quality
standards, as specified in our investment policy. The policy also limits the amount of
credit exposure to any one issue, issuer and type of investment.

As of
December 31, 2001, our short-term investments consisted primarily of commercial paper
maturing over the following three months. Due to the average maturity and conservative
nature of our investment portfolio, a sudden change in interest rates would not have a
material effect on the value of the portfolio. Management estimates that if the average
yield of the Companys investments decreased by 100 basis points, our interest
income for the year ended December 31, 2001 would have decreased by less than $700,000.
This estimate assumes that the decrease occurred on the first day of 2001 and reduced the
yield of each investment instrument by 100 basis points. The impact on our future
interest income, of future changes in investment yields will depend largely on the gross
amount of our investments.

# ITEM 8.  FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.

The
Companys 2001 Financial Statements, together with the report thereon of Arthur
Andersen LLP, are included in Item 14. The supplementary financial information
required by this Item is included in the Managements Discussion and Analysis
of Financial Conditions and Results of Operations under Item 7 above.

# ITEM 9.  CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

# PART III

# ITEM 10.  DIRECTORS AND
EXECUTIVE OFFICERS OF THE REGISTRANT.

Information
required by this item regarding directors of the Company will be set forth in the Companys
Proxy Statement for the 2002 Annual Meeting of Shareholders, which information is
incorporated herein by reference. Information regarding executive officers of the Company
is set forth under Item 1 herein.

# ITEM 11.  EXECUTIVE
COMPENSATION.

Information
required by this item regarding the Companys compensation of its directors and
executive officers will be set forth in the Companys Proxy Statement for the 2002
Annual Meeting, which information is incorporated herein by reference.

# ITEM 12.  SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Information
required by this item regarding security ownership of certain beneficial owners and
management will be set forth in the Companys Proxy Statement for the 2002 Annual
Meeting, which information is incorporated herein by reference.

# ITEM 13.  CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.

Information
required by this item regarding transactions with the Companys directors and
executive officers will be set forth in the Companys Proxy Statement for the 2002
Annual Meeting, which information is incorporated herein by reference.

# PART IV

# ITEM 14.  EXHIBITS,
FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

| | (a)     The
following documents are filed as part of this report:
| | -----------------------------------------------------------------

| | 1.
Financial Statements:
| | ------------------------

| | Report
of Independent Public Accountants
     Consolidated Balance Sheets
     Consolidated Statements of Operations
     Consolidated Statements of Stockholders Equity
     Consolidated Statements of Cash Flows
     Notes to Consolidated Financial Statements
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. 
Financial Statement Schedules:
| | ----------------------------------

| | None.
| | -----

| | 3. 
Exhibits:
| | -------------

| | Articles of Incorporation and By-Laws:
| | --------------------------------------

|3.1 |  | Restated Certificate of Incorporation of the Company (incorporated herein by reference to
Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q, filed with the
Securities and Exchange Commission (the Commission) on August 14, 1996)
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1(a) |  | Certificate
of Amendment to the Restated Certificate of Incorporation of the Company (incorporated
herein by reference to Exhibit 3.1(a) to the Companys Current Report on Form 8-K,
filed with the Commission on March 30, 2001)
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1(b) |  | Certificate of Amendment to the Restated Certificate of Incorporation of the
Company (incorporated herein by reference to Exhibit 3.1 (b) to the Companys
Current Report on Form 8-K, filed with the Commission on March
30, 2001)
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1(c) |  | Certificate of Amendment to the Restated Certificate of Incorporation of the Company
Setting Forth the Terms of Series A Junior Participating Preferred Stock (incorporated
herein by reference to Exhibit 3.1 (c) to the Companys Current Report on Form 8-K,
filed with the Commission on March 30, 2001)
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.2 |  | Amended and Restated By-laws of the Company (incorporated herein by reference to Exhibit
3 to the Companys Current Report on Form 8-K, filed with the Commission on February
21, 2001)
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Instruments
Defining Rights of Security Holders, including Indentures:
| | ----------------------------------------------------------------------

|4.1 |  | Specimen of Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the
Companys Registration Statement on Form S-1, filed with the Commission on May 17,
1995)
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.2 |  | Registration Rights Agreement dated October 2, 1991 between the several purchasers named
therein and the Company (incorporated herein by reference to Exhibit 4.2 to the Companys
Registration Statement on Form S-1, filed with the Commission on May 17, 1995)
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.3 |  | Amendment to Registration Rights Agreement dated April 23, 1992 between the Company and
the parties named therein as shareholders of the Company (incorporated herein by
reference to Exhibit 4.3 of Amendment 1 to the Companys Registration Statement on
Form S-1, filed with the Commission on May 17, 1995)
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.4 |  | Rights Agreement dated as of February 20, 2001 between Dendrite International, Inc. and
Registrar and Transfer Company, as Rights Agent, which includes, as Exhibit A the Form of
Certificate of Amendment to Restated Certificate of Incorporation, as Exhibit B the Form
of Rights Certificate and as Exhibit C the Form of Summary of Rights (incorporated herein
by reference to Exhibit 4 of the Companys Current Report on Form 8-K, filed with
the Commission on February 21, 2001)
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Material
Contracts and Compensatory Plans and Arrangements:
| | -----------------------------------------------------------

|10.1 |  | 1992 Stock Plan, as amended (incorporated herein by reference to Exhibit 10.36 to the
Companys Registration Statement on Form S-1, filed with the Commission on May 17,
1995)*
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 |  | 1992 Senior Management Stock Option Plan, as amended (incorporated herein by reference to
Exhibit 10.37 to the Companys Registration Statement on Form S-1, filed with the
Commission on May 17, 1995)*
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 |  | 1997 Stock Incentive Plan, as amended (incorporated herein by reference to Exhibit 10.2
to the Companys Quarterly Report on Form 10-Q, filed with the Commission on
November 14, 1997; Exhibit 4.2 to the Companys Post Effective Amendment No. 2 to
Registration Statement on Form S-8 filed with the Commission on April 21, 1998; and
Exhibit A to the Companys Proxy Statement for the 1999 Annual Meeting of
Shareholders, filed with the Commission on April 16, 1999)*
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 |  | 1997 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 4.2 to the
Companys Registration Statement on Form S-8, filed with the Commission on April 1,
1997)*
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 |  | Lease of 1200 Mount Kemble Avenue, Morristown, New Jersey (incorporated herein by
reference to Exhibit 10.40 to the Companys Registration Statement on Form S-1,
filed with the Commission on May 17, 1995)
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 |  | Form of Indemnification Agreement dated as of October 28, 1998 (incorporated herein by
reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q, filed with
the Commission on November 18, 1998)1
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 |  | Amended and Restated Credit Agreement, entered into as of November 30, 1998, between the
Company and The Chase Manhattan Bank, N.A. (incorporated herein by reference to Exhibit
10.7 to the Companys Annual Report on Form 10-K, filed with the Commission on March
26, 1999)
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.8 |  | Employment Agreement dated March 25, 1997 with John E. Bailye (incorporated herein by
reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q/A, filed
with the Commission on May 16, 1997)*
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9 |  | Employment Agreement dated June 2, 1997 with George T. Robson (incorporated herein by
reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q, filed with
the Commission on August 14, 1997)*
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.10 |  | Employment Agreement dated June 9, 1997 with Mark Cieplik incorporated herein by
reference to Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q, filed with
the Commission on August 14, 1997)1*
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.11 |  | Employment Agreement dated October 1, 1991 with Teresa F. Winslow (incorporated herein by
reference to Exhibit 10.50 to the Companys Registration Statement on Form S-1,
filed with the Commission on February 5, 1996)2*
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.12 |  | Consulting Agreement dated as of January 5, 1998 with Edward Kfoury (incorporated herein
by reference to Exhibit 10.1 of the Companys Quarterly Report on Form 10-Q, filed
with the Commission on May 15, 1998)
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13 |  | Deferred Compensation Plan dated as of September 1, 1998 (incorporated herein by
reference to Exhibit 10.1 of the Companys Quarterly Report on Form 10-Q, filed with
the Commission on August 14, 1998)*
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.14 |  | Deferred Compensation Plan Trust Agreement dated as of September 1, 1998 (incorporated
herein by reference to Exhibit 10.2 of the Companys Quarterly Report on Form 10-Q,
filed with the Commission on August 14, 1998)*
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.15 |  | Employment Agreement dated January 22, 1996 with Christopher J. French (incorporated
herein by reference to Exhibit 10.51 of the Companys Annual Report on Form 10-K,
filed with the Commission on March 31, 1997)1*
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.16 |  | Employment Agreement dated September 20, 2000 with Michael G. Atieh (incorporated herein
by reference to Exhibit 10.12 of the Company's Quarterly Report on Form 10-Q, filed with
the Commission on November 14, 2000)1*
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.17 |  | Employment Agreement dated August 7, 1997
 with Kathleen Donovan (incorporated herein by
reference to Exhibit 10.17 of the Companys Current Report on Form 8-K, filed with
the Commission on March 30, 2001)*
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.18 |  | Employment Agreement dated September 8, 1998
with Christine Pellizzari (incorporated
herein by reference to Exhibit 10.18 of the Companys Current Report on Form 8-K,
filed with the Commission on March 30, 2001)*
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.19 |  | Amendment to Employment Agreement
 dated May 26, 1999 with Mark Cieplik (incorporated
herein by reference to Exhibit 10.19 of the Companys Current Report on Form 8-K,
filed with the Commission on March 30, 2001)1*
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.20 |  | Amendment to Employment Agreement dated
 May 26, 1999 with Teresa Winslow (incorporated
herein by reference to Exhibit 10.20 of the Companys Current Report on Form 8-K,
filed with the Commission on March 30, 2001)2*
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.21 |  | Amendment to Employment Agreement dated May 26, 1999 with Christopher French
(incorporated herein by reference to Exhibit 10.21 of the Companys Current Report
on Form 8-K, filed with the Commission on March 30, 2001)1*
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.22 |  | Amendment to Employment Agreement dated May 26, 1999 with George T. Robson (incorporated
herein by reference to Exhibit 10.22 of the Companys Current Report on Form 8-K,
filed with the Commission on March 30, 2001)*
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.23 |  | Amendment to Employment Agreement dated January 25, 2000 with Kathleen Donovan
(incorporated herein by reference to Exhibit 10.23 of the Companys Current Report
on Form 8-K, filed with the Commission on March 30, 2001)*
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.24 |  | Amendment to Employment Agreement dated August 1, 2000 with Christine Pellizzari
(incorporated herein by reference to Exhibit 10.24 of the Companys Current Report
on Form 8-K, filed with the Commission on March 30, 2001)*
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.25 |  | Employment Agreement dated as of August 7, 2000 with Marc Kustoff (incorporated herein by
reference to Exhibit 10.25 of the Companys Current Report on Form 8-K, filed with
the Commission on March 30, 2001)1*
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.26 |  | Agreement of Purchase and Sale between Dendrite International, Inc. and Townsend Property
Trust Limited Partnership dated January 5, 2001 (incorporated herein by reference to
Exhibit 10.26 of the Company's Current Report on Form 8-K, filed with the Commission on
March 30, 2001)*
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.27 |  | Deed of Lease between Liberty Property Limited Partnership and Dendrite International,
Inc. for Dendrite Building I of the Liberty Executive Park in Chesapeake, Virginia
(incorporated herein by reference to Exhibit 10.27 of the Companys Current Report
on Form 8-K, filed with the Commission on March 30, 2001)
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.28 |  | Deed of Lease between Liberty Property Limited Partnership and Dendrite International,
Inc. for Dendrite Building II of the Liberty Executive Park in Chesapeake, Virginia
(incorporated herein by reference to Exhibit 10.28 of the Companys Current Report
on Form 8-K, filed with the Commission on March 30, 2001)
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.29 |  | Employment Agreement (including Amendment), dated as of May 16, 2001, between Dendrite
International, Inc. and Paul Zaffaroni (incorporated herein by reference to Exhibit 10.29
of the Companys Current Report on Form 8-K, filed with the Commission on March 19,
2002).*
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.30 |  | Indemnification Agreement, dated as of October 1, 2001, between Dendrite International,
Inc. and Paul Zaffaroni (incorporated herein by reference to Exhibit 10.30 of the Companys
Current Report on Form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.31 |  | Employment Agreement, dated as of December 10, 2001, between Dendrite International, Inc.
and Luke Beshar (incorporated herein by reference to Exhibit 10.31 of the Companys
Current Report on Form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.32 |  | Indemnification Agreement, dated as of January 22, 2002, between Dendrite International,
Inc. and Luke Beshar (incorporated herein by reference to Exhibit 10.32 of the Companys
Current Report on Form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.33 |  | Employment Agreement, dated as of June 19, 1997, between Dendrite International, Inc. and
Brent Cosgrove (incorporated herein by reference to Exhibit 10.33 of the Companys
Current Report on Form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.34 |  | Amendment to Employment Agreement, dated as of November 8, 2001, between Dendrite
International, Inc. and Brent Cosgrove (incorporated herein by reference to Exhibit 10.34
of the Companys Current Report on Form 8-K, filed with the Commission on March 19,
2002).*
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.35 |  | Indemnification Agreement, dated as of November 8, 2001, between Dendrite International,
Inc. and Brent Cosgrove (incorporated herein by reference to Exhibit 10.35 of the Companys
Current Report on Form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.36 |  | Agreement of Lease, dated as of February 12, 2001, between SCC II, L.L.C. and Dendrite
International, Inc. (incorporated herein by reference to Exhibit 10.36 of the Companys
Current Report on Form 8-K, filed with the Commission on March 19, 2002).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.37 |  | First Amendment to Lease, dated as of August 17, 2001, between 1200 Mount Kemble Limited
Partnership and Dendrite International, Inc. (incorporated herein by reference to Exhibit
10.37 of the Companys Current Report on Form 8-K, filed with the Commission on
March 19, 2002).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.38 |  | November 2001 Amendment to Credit Agreement, dated as of November 6, 2001 between
Dendrite International, Inc. and The Chase Manhattan Bank, N.A. (incorporated herein by
reference to Exhibit 10.38 of the Companys Current Report on Form 8-K, filed with
the Commission on March 19, 2002).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.39 |  | Indemnification Agreement, dated as of October 28, 1998, between Dendrite International,
Inc. and John Bailye (incorporated herein by reference to Exhibit 10.39 of the Companys
Current Report on form 8-K, filed with the Commission on March 19, 2002). *
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.40 |  | Indemnification Agreement, dated as of October 28, 1998, between Dendrite International,
Inc. and George Robson (incorporated herein by reference to Exhibit 10.40 of the Companys
Current Report on form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.41 |  | Indemnification Agreement, dated as of January 25, 2001 between Dendrite International,
Inc. and Christine Pellizzari (incorporated herein by reference to Exhibit 10.41 of the
Companys Current Report on form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.42 |  | Indemnification Agreement, dated as of January 25, 2001 between Dendrite International,
Inc. and Kathleen Donovan (incorporated herein by reference to Exhibit 10.42 of the
Companys Current Report on form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Subsidiaries:
| | -------------

|21 |  | Subsidiaries of the Registrant
|-- |  | ------------------------------

| | Consent
of Independent Public Accountants:
| | ------------------------------------------

|23.1 |  | Consent of Arthur Andersen LLP
|---- |  | ------------------------------

---

|* |  | Management contract or compensatory plan.
|- |  | -----------------------------------------

|1 |  | In connection with management structure reorganization, individuals position no longer
deemed executive officer position beginning fiscal 2002.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------

|2 |  | Ceased as executive officer.
|- |  | ----------------------------

|(b) |  | Reports on Form 8-K.
|--- |  | --------------------

| |  | None
| |  | ----

---

# SIGNATURES

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

|Date:  March 29, 2002 |  | DENDRITE INTERNATIONAL, INC.By: JOHN E. BAILYE
     John E. Bailye     Chairman of the Board and Chief
     Executive Officer
|--------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------

PURSUANT
TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED
BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON
THE DATES INDICATED.

|Name | Title | Date
|---- | ----- | ----

| | JOHN E. BAILYE

John E. Bailye | Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer) | March 29, 2002
| | ------------------------------------------ | ------------------------------------------------------------------------------- | --------------

| | LUKE M. BESHAR

Luke M. Beshar | Senior Vice President and
Chief Financial Officer
(Principal Financial Officer) | March 29, 2002
| | ------------------------------------------ | ------------------------------------------------------------------------------- | --------------

| | BRENT J. COSGROVE

Brent J. Cosgrove | Vice President and
Corporate Controller
(Principal Accounting Officer) | March 29, 2002
| | ------------------------------------------------ | ---------------------------------------------------------------------- | --------------

| | BERNARD M. GOLDSMITH

Bernard M. Goldsmith | Director | March 29, 2002
| | ------------------------------------------------------ | -------- | --------------

| | EDWARD J. KFOURY

Edward J. Kfoury | Director | March 29, 2002
| | ---------------------------------------------- | -------- | --------------

| | PAUL A. MARGOLIS

Paul A. Margolis | Director | March 29, 2002
| | ---------------------------------------------- | -------- | --------------

| | JOHN H. MARTINSON

John H. Martinson | Director | March 29, 2002
| | ------------------------------------------------ | -------- | --------------

| | TERENCE H. OSBORNE

Terence H. Osborne | Director | March 29, 2002
| | -------------------------------------------------- | -------- | --------------

| | PATRICK J. ZENNER

Patrick J. Zenner | Director | March 29, 2002
| | ------------------------------------------------ | -------- | --------------

---

# REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Dendrite International, Inc.:

We
have audited the accompanying consolidated balance sheets of Dendrite International, Inc.
(a New Jersey corporation) and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of operations, stockholdersequity and cash flows
for each of the three years in the period ended December 31, 2001. These financial
statements are the responsibility of the Companys management. Our responsibility is
to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the
United States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our
opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of Dendrite International, Inc. and subsidiaries as of
December 31, 2001 and 2000, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States.

| |  | /s/ Arthur Andersen LLP
| |  | -----------------------

Philadelphia, Pa.,
 February 1, 2002

---

`DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)


                                                                         DECEMBER 31,
                                                                         ------------
                                                                      2001              2000
                                                                ----------------  ------------
                           ASSETS
CURRENT ASSETS:
     Cash and cash equivalents..............................        $ 65,494          $ 73,230
     Short-term investments.................................           6,383             4,143
     Accounts receivable, net of allowance for doubtful
      accounts of $736,000 and $590,000.....................          35,009            48,182
     Prepaid expenses and other current assets..............           5,258             6,987
     Prepaid taxes..........................................           3,888             1,564
     Deferred taxes.........................................           6,106             1,160
                                                                    --------          --------
          Total current assets..............................         122,138           135,266
PROPERTY AND EQUIPMENT, net.................................          23,594            15,924
FACILITY HELD FOR SALE......................................           8,732                --
OTHER ASSETS................................................             100             3,872
GOODWILL, net...............................................           4,830            12,305
PURCHASED CAPITALIZED SOFTWARE, net.........................              --             4,144
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, net.................           5,518             4,392
DEFERRED TAXES..............................................           1,571                --
                                                                    --------          --------
                                                                    $166,483          $175,903
                                                                    ========          ========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable.......................................        $  2,455          $  5,120
     Accrued compensation and benefits......................           6,024             4,271
     Other accrued expenses.................................          16,241             8,085
     Accrued restructuring charge...........................           2,950                --
     Deferred revenues......................................           9,479             4,052
                                                                    --------          --------
          Total current liabilities.........................          37,149            21,528
                                                                    --------          --------
OTHER NON-CURRENT LIABILITIES...............................             487                25
DEFERRED TAXES..............................................              --             1,052
COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' EQUITY:
     Preferred stock, no par value, 10,000,000 shares
     authorized, none issued or outstanding.................              --                --
     Common stock, no par value, 150,000,000 shares
     authorized; 41,598,923 and 40,729,212 shares issued;
     39,653,723 and 40,127,712
     shares outstanding.....................................          89,613            33,370
     Retained earnings......................................          61,478            73,949
     Deferred compensation..................................            (133)             (405)
     Accumulated other comprehensive loss...................          (2,704)           (1,689)
     Less treasury stock, at cost...........................         (19,407)           (1,927)
                                                                    ---------         ---------
          Total stockholders' equity........................         128,847           153,298
                                                                    --------          --------
                                                                    $166,483          $175,903
                                                                    ========          ========

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

---

`DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                                                     YEAR ENDED DECEMBER 31,
                                                                   ---------------------------------------------------
                                                                          2001               2000               1999
                                                                   ------------------ ------------------ -------------
REVENUES:
     License fees..............................................         $  18,695          $  23,966          $ 24,244
     Services..................................................           205,952            190,360           148,441
                                                                        ---------          ---------          --------
                                                                          224,647            214,326           172,685
                                                                        ---------          ---------          --------
COSTS OF REVENUES:
     Cost of license fees......................................             4,897              3,420             2,360
     Purchased software impairments............................             2,614                 --                --
     Cost of services..........................................           114,597             88,234            72,380
                                                                        ---------          ---------          --------
                                                                          122,108             91,654            74,740
                                                                        ---------          ---------          --------
          Gross margin.........................................           102,539            122,672            97,945
                                                                        ---------          ---------          --------

OPERATING EXPENSES:
     Selling, general and administrative.......................            94,578             67,884            56,927
     Research and development..................................            11,104             10,875             7,669
     Restructuring charge......................................             6,110                 --                --
     Asset impairments.........................................            11,723                 --                --
     Mergers and acquisitions..................................                --                 --             3,466
                                                                        ---------          ---------          --------
                                                                          123,515             78,759            68,062
                                                                        ---------          ---------          --------
          Operating (loss) income..............................           (20,976)            43,913            29,883
INTEREST INCOME................................................             2,439              3,541             1,880
OTHER INCOME (EXPENSE).........................................                 3                  5              (189)
                                                                        ---------          ---------          --------
          (Loss) income  before income tax (benefit) expense...           (18,534)            47,459            31,574
INCOME TAX (BENEFIT) EXPENSE...................................            (6,063)            16,848            12,234
                                                                        ----------         ---------          --------
NET (LOSS) INCOME..............................................         $ (12,471)         $  30,611          $ 19,340
                                                                        ==========         =========          ========
NET (LOSS) INCOME PER SHARE:
     Basic.....................................................         $   (0.31)         $    0.78          $    0.51
                                                                        ==========         =========          =========
     Diluted...................................................         $   (0.31)         $    0.74          $    0.48
                                                                        ==========         =========          =========
SHARES USED IN COMPUTING NET (LOSS) INCOME PER SHARE:
     Basic.....................................................            39,681             39,354            37,725
                                                                        =========          =========          ========
     Diluted...................................................            39,681             41,344            40,599
                                                                        =========          =========          ========

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

---

`DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)


                                                                                 Accumulated
                                                                                    Other
                                   Common Stock     Retained       Deferred      Comprehensive
                                 Shares    Dollars  Earnings     Compensation       Loss
                                 ------    -------  --------     -------------   -------------

BALANCE, JANUARY 1, 1999 ......   36,644   $41,442   $23,998        $ (1,970)    $   (494)
    Issuance of common stock ..    1,797    11,621        __              __           __
    Changes in deferred
      compensation ............       __        __        __           1,193           __
    Stock option
      tax benefits ............       __     8,487        __              __           __
  Comprehensive income:
    Net income ................       __        __    19,340              __           __
    Currency translation
     adjustment ...............       __        __        __              __         (574)
  Comprehensive income ........       __        __        __              __            __
                                  =======  =======   =======        ========     ========

BALANCE, DECEMBER 31, 1999 ....   38,441    61,550    43,338          (777)        (1,068)
   Acquisition of Analytika ...      216     6,506        __            __             __
    Issuance of common stock ..    1,471     9,050        __            __             __
    Changes in deferred
      compensation ............       __        __        __           372             __
    Stock option
      tax benefits ............       __     6,264        __            __             __
  Comprehensive income:
    Net income ................       __        __    30,611            __             __
    Currency translation
     adjustment ...............       __        __        __            __           (621)
  Comprehensive income ........       __        __        __            __             __
                                  =======  =======   =======        ======       =========

BALANCE, DECEMBER 31, 2000 ....   40,128    83,370    73,949          (405)        (1,689)
   Purchase of treasury shares    (1,344)       __        __                           __
    Issuance of common stock ..      870     4,309        __            __             __
    Changes in deferred
      compensation ............       __        __        __           272             __
    Stock option
      tax benefits ............       __     1,934        __            __             __
  Comprehensive loss:
    Net loss ..................       __        __   (12,471)           __             __
    Currency translation
     adjustment ...............       __        __        __            __         (1,015)
  Comprehensive loss ..........       __        __        __            __             __
                                  ======   =======   =======        ======       ========
BALANCE, DECEMBER 31, 2001 ....   39,654   $89,613   $61,478         (133)       $(2,704)
                                  ======   =======   =======        =====        ========`

`Total
                               Comprehensive  Treasury   Stockholders'
                                Income (Loss)  Stock       Equity
                               -------------- --------   -------------

BALANCE, JANUARY 1, 1999 ......        __   $ (1,927)   $  61,049
    Issuance of common stock ..        __         __       11,621
    Changes in deferred
      compensation ............        __         __        1,193
    Stock option
      tax benefits ............        __         __        8,487
  Comprehensive income:
    Net income ................    19,340         __       19,340
    Currency translation
     adjustment ...............      (574)        __         (574)
  Comprehensive income ........    18,766         __           __
                                  =======   ========    =========

BALANCE, DECEMBER 31, 1999 ....        __     (1,927)     101,116
   Acquisition of Analytika ...        __         __        6,506
    Issuance of common stock ..        __         __        9,050
    Changes in deferred
      compensation ............        __         __          372
    Stock option
      tax benefits ............        __         __        6,264
  Comprehensive income:
    Net income ................    30,611         __       30,611
    Currency translation
     adjustment ...............      (621)        __         (621)
  Comprehensive income ........    29,990         __           __
                                  =======   ========    =========

BALANCE, DECEMBER 31, 2000 ....        __     (1,927)     153,298
   Purchase of treasury shares         __    (17,480)     (17,480)
    Issuance of common stock ..        __         __        4,309
    Changes in deferred
      compensation ............        __         __          272
    Stock option
      tax benefits ............        __         __        1,934
  Comprehensive loss:
    Net loss ..................   (12,471)        __      (12,471)
    Currency translation
     adjustment ...............    (1,015)        __       (1,015)
  Comprehensive loss ..........   (13,486)        __           __
                                  =======   ========    =========
BALANCE, DECEMBER 31, 2001 ....        __   $(19,407)   $ 128,847
                                  =======   ========    =========


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

`DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (IN THOUSANDS)
                                                                                     YEAR ENDED DECEMBER 31,
                                                                      -------------------------------------------------
                                                                            2001              2000              1999
                                                                      ----------------  ----------------  -------------
    OPERATING ACTIVITIES:
      Net (loss) income...........................................      $  (12,471)        $  30,611         $  19,340
      Adjustments to reconcile net (loss) income to net cash
         provided by
         operating activities:
         Depreciation and amortization............................          14,984            11,060             6,118
         Asset impairments........................................          14,337                --                --
         Restructuring charge.....................................           6,110                --                --
         Amortization of deferred compensation....................             150               309               688
         Deferred income taxes (benefit)..........................          (6,648)             (501)
                                                                                                                    24
         Tax benefit from exercise of employee stock options......           1,934             6,264             8,487
           Changes in assets and liabilities, net of effect
             from acquisitions:
           Decrease (increase) in accounts receivable.............          12,847           (20,058)           (4,947)
           Decrease (increase) in prepaid expenses and other
            current assets.........................................          1,778            (2,250)           (1,471)
           Increase in other assets...............................              --               (76)               --
          (Increase) decrease in prepaid income taxes............           (3,416)           (1,481)            1,052
           Increase (decrease) in accounts payable and accrued
             expenses.............................................           7,420              (752)            3,136
           Payments relating to restructuring charge..............          (3,160)               --                --
           Decrease in income taxes payable.......................              --                --            (2,219)
           Increase in deferred revenues..........................           5,551               111             1,995
           Increase (decrease) in other non-current liabilities...             475                25              (392)
                                                                        ----------        ----------        ----------
              Net cash provided by operating activities...........          39,891            23,262            31,811
                                                                        ----------        ----------        ----------
    INVESTING ACTIVITIES:
      Purchases of short-term investments.........................         (20,230)          (19,840)          (39,341)
      Sales of short-term investments.............................          17,990            30,920            33,804
      Acquisitions, net of cash acquired..........................              --            (2,318)           (6,640)
      Increase in other non-current assets........................              --            (3,550)               --
      Purchases of property and equipment.........................         (17,727)          (11,656)           (7,512)
      Investment in facility held for sale........................         (10,832)               --                --
      Additions to capitalized software development costs.........          (3,198)           (2,354)           (2,227)
                                                                      -------------       -----------     -------------
              Net cash used in investing activities...............         (33,997)           (8,798)          (21,916)
                                                                       ------------       -----------      ------------
    FINANCING ACTIVITIES:
      Payments on capital lease obligations.......................              --              (285)             (788)
      Purchase of treasury shares.................................         (17,480)               --                --
     Issuance of common stock.....................................            4,433            9,113             8,691
                                                                      -------------      -----------       -----------
              Net cash (used in) provided by financing activities.         (13,047)            8,828             7,903
                                                                      -------------      -----------       -----------
    EFFECT OF EXCHANGE RATE CHANGES ON CASH.......................            (583)              (86)             (329)
                                                                      ---------------    -------------     ------------
    NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS..........          (7,736)           23,206            17,469
    CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR..................          73,230            50,024            32,555
                                                                      --------------     -----------       -----------
    CASH AND CASH EQUIVALENTS, END OF YEAR........................         $65,494           $73,230       $    50,024
                                                                      ==============     ===========       ===========

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

---

# DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES

# NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## 1.  THE COMPANY
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

## THE COMPANY

Dendrite
International, Inc. and its subsidiaries (the Company) provide a comprehensive range of
customer relationship management software products and support services to the
pharmaceutical industry. The Company also markets its products to the consumer packaged
goods industry.

## SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

## Principles of
Consolidation

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

## Foreign
Currency

The
functional currency of the Companys foreign operations are deemed to be the local
countrys currency. As a result, assets and liabilities of the Companys
wholly-owned international subsidiaries are translated at their respective year-end
exchange rates and revenues and expenses are translated at average currency exchange
rates for the period. The resulting translation adjustments are included in Other
Comprehensive Income (Loss)"and are reflected as a separate component of stockholdersequity.
Foreign currency transaction gains and losses are included in other expense on the
accompanying statements of operations and are immaterial in each year. To date, the
Company has not engaged in any hedging activities.

## Use of
Estimates

The
preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those
estimates.  The Company believes its critical accounting policies to be revenue recognition,
accouning for restructuring and impairments and income taxes.

## Revenue
Recognition

The
Company charges customers license fees to use its proprietary computer software.
Customers generally pay one-time perpetual license fees based upon the number of users,
territory covered, and the particular software licensed by the customer. The Company
generally recognizes license fees as revenue using the percentage-of-completion method
over a period of time that commences with the execution of the license agreement and ends
when the product configuration is complete and it is ready for use in the field. This
period of time usually includes initial configuration and concludes with quality
assurance and testing. When there is no initial configuration, the Company generally
recognizes the license fees from those products upon delivery as the services to be
provided are not essential to the functionality of the software. Additionally, license
revenues will be recognized immediately when the user count for previously delivered
software increases. The Companys software maintenance usually begins immediately
after an initial warranty period. The portion of the license fee associated with the
warranty period is unbundled from the license fee and is recognized as maintenance
revenue ratably over the warranty period. The Company does not recognize any license fees
unless persuasive evidence of an arrangement exists, delivery has occurred, the license
amount is fixed or determinable and collectability is probable.

The
Company recognizes license fees as revenue from certain third party software products,
which are embedded into the Companys products. These license fees are recognized as
revenue using the percentage of completion method over a period of time that commences
with the execution of the license agreement and ends when the product configuration is
completed and ready for use by the customer. The cost of third party software is
included in cost of license fees in the accompanying consolidated statements of
operations.

Sales
force support services are generally provided under multi-year contracts. The contracts
specify the payment terms, which are generally over the term of the contract and
generally provide for termination in the event of breach, as defined in the respective
contract.

Service
revenues consist primarily of facilities management, configuration, training and software
maintenance. Facilities management represents charges for help desk, data center and
project management, and are recognized on a monthly basis as services are performed.
Configuration includes initial implementation services following sales of new software
products to customers, as well as revenues relating to work orders to perform
configuration services for previously purchased software. Configuration revenue is
recognized as services are performed, when the related billings are on a time and
materials basis, and using the percentage of completion method for fixed fee
configuration or implementation contracts. Training revenue is recognized as the services
are performed. Software maintenance revenue is recognized ratably over the term of the
contract, generally one year.

## Deferred
Revenues

Deferred
revenues represent amounts collected from, or invoiced to, customers in excess of
revenues recognized. This predominantly occurs in two situations a) annual billings of
software maintenance fees; and b) upfront billings of license fees that are recognized
over time. The value of deferred revenue will increase and decrease based on the timing
of invoices and recognition of license revenues.

## Cash and Cash
Equivalents

The
Company considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.

## Supplemental
Cash Flow Information

For
the year ended December 31, 2001, the Company did not incur any interest expense. For the
years ended December 31, 2000 and 1999, the Company paid interest of $13,000 and $42,000,
respectively. For the years ended December 31, 2001, 2000 and 1999, the Company paid
income taxes of $3,622,000, $11,840,000 and $5,828,000 respectively.

The
following table lists noncash assets that were acquired and liabilities that were assumed
as a result of the acquisitions discussed in Note 4:

`YEAR ENDED DECEMBER 31,
                                                  -----------------------------
                                                       2000           1999
                                                       ----           ----
Noncash assets:
  Accounts receivable......................          $   396,000   $ 1,826,000
  Prepaid expenses and other current assets              381,000            --
  Property and equipment...................              410,000            --
  Capitalized Software development costs...            2,890,000     1,989,000
  Goodwill.................................            5,979,000     7,235,000
                                                     -----------   -----------
                                                      10,056,000    11,050,000
Assumed liabilities:.......................
  Accounts payable.........................            (656,000)     (243,000)
  Income taxes payable.....................                   --      (39,000)
  Other accrued expenses...................            (400,000)     (300,000)
  Deferred revenues........................            (176,000)     (393,000)
  Deferred taxes...........................                   --            --
                                                     -----------   -----------
     Net noncash assets acquired...........            8,824,000    10,075,000
Purchase price paid in stock...............          (6,506,000)   (3,435,000)
                                                     -----------   -----------
Cash paid, net of cash acquired............          $ 2,318,000   $ 6,640,000
                                                     -----------   -----------`

---

## Short-Term
Investments

The
Company holds investments in highly rated corporate and municipal bonds. These
investments are carried at cost which approximates fair value.

## Impairment of
Long-Lived Assets

The
Company follows Statement of Accounting Standards (SFAS) No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The
Company reviews its long-lived assets, including property and equipment, capitalized
software development costs, and goodwill for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully
recoverable. To determine the recoverability of its long-lived assets, the Company
evaluates the probability that future undiscounted net cash flows, without interest
charges, will be less than the carrying amount of the assets. If the undiscounted cash
flows are determined to be less than the carrying value of the long-lived asset, an
impairment charge is recorded for the difference between the fair value as determined by
discounting the anticipated future cash flows and the carrying value of the asset. See
Note 3.

## Property and
Equipment

Fixed
assets are stated at cost. Depreciation and amortization are provided on a straight-line
basis over the estimated useful lives of the respective assets, which range from three to
ten years. Leasehold improvements are amortized on a straight-line basis over the
estimated useful life of the asset or the lease term, whichever is shorter. Maintenance,
repairs and minor replacements that do not extend the life or functionality of the
related assets are charged to expense as incurred.

## Capitalized
Software Development Costs

In
accordance with SFAS No. 86, Accounting for the Costs of Computer Software to be
Sold, Leased or Otherwise Marketed, the Company capitalizes certain costs related to
the development of new software products or the enhancement of existing software products
for sale or license. These costs are capitalized from the point in time that
technological feasibility has been established, as evidenced by a working model or a
detailed working program design, to the point in time that the product is available for
general release to customers. Capitalized software development costs are amortized on a
straight-line basis over the estimated economic lives of the products (no longer than
four years), beginning with the release to the customer. Research and development costs
incurred prior to establishing technological feasibility and costs incurred subsequent to
general product release to customers are charged to expense as incurred. The Company
continually evaluates whether events or circumstances have occurred that indicate that
the remaining useful lives of the capitalized software development costs should be
revised or that the remaining balance of such assets may not be recoverable. As of
December 31, 2001, management believes that no revisions to the remaining useful lives or
write-down of capitalized development costs is required.

Capitalized
software development costs are presented in the accompanying consolidated balance sheets
net of accumulated amortization of $9,348,000 and $7,275,000 at December 31, 2001 and
2000, respectively. Amortization of capitalized software development costs for the years
ended December 31, 2001, 2000 and 1999 was $2,072,000, $1,627,000 and $1,285,000,
respectively, and is included in cost of license fees in the accompanying consolidated
statements of operations.

In
connection with certain business acquisitions (see Note 4), the Company purchased
software that was determined to have reached technological feasibility. The amount of
purchased capitalized software remaining as of December 31, 2001 and 2000 is as follows:

`DECEMBER 31,
                                          ------------------------------
                                              2001               2000
                                          -----------        -----------
ABC.................................      $   850,000        $   850,000
MMI.................................        1,989,000          1,989,000
Analytika...........................        2,890,000          2,890,000
                                          -----------        -----------
                                            5,729,000          5,729,000
Less -- Accumulated  amortization...       (5,729,000)        (1,585,000)
                                          -----------        -----------
                                          $         -        $ 4,144,000
                                          ===========        ===========`

During
the second quarter of 2001, the Company recorded an impairment charge relating to
purchased capitalized software costs. See Note 3.

Relative
to the operations acquired as a result of the Marketing Management International, Inc. (MMI)
acquisition, during 2002 the Company began offering
the mid-tier pharmaceutical market a product which is more compatible with the Companys
vision of integrated customer relationship management (CRM) solutions. Accordingly, during the second quarter, the Company
reduced the remaining useful life of the purchased capitalized software related to the
MMI acquisition so that this asset was fully amortized as of December 31, 2001.
Amortization expense of purchased capitalized software for the years ended December 31,
2001, 2000 and 1999 was $1,530,000, $1,145,000 and $369,000, respectively, and is
included in cost of license fees in the accompanying consolidated statement of
operations. Amortization for the year ended December 31, 2001 included $819,000 of
accelerated amortization relating to the purchased capitalized software of MMI. See Note
3.

## Goodwill

Goodwill
represents the excess of the purchase price over the fair value of net assets acquired
(see Note 4) and is amortized on a straight-line basis over a period of seven years.

In the
second quarter of 2001, the Company determined that the future undiscounted cash flows
from goodwill associated with its acquisitions of Associated Business Computing (ABC) and Analytika, Inc.
(Analytika) would be negative,
due primarily to the amount of administrative and other costs required to support the
projected revenue stream (see Note 3). Accordingly, the Company recorded an impairment
charge of $6,173,000 relating to the goodwill of ABC and Analytika to reduce the
respective net intangible assets to zero. This impairment charge is included within asset
impairment in the accompanying consolidated statements of operations.

As of
December 31, 2001 and 2000, goodwill at historical cost was $16,302,000. Accumulated
amortization, as of December 31, 2001 and 2000, was $11,472,000 and $3,997,000,
respectively. Amortization of goodwill for the years ended December 31, 2001, 2000 and
1999 was $1,302,000, $2,390,000, and $1,015,000, respectively and is included within
selling, general and administrative expenses in the accompanying consolidated statements
of operations.

## Facility Held
for Sale

In
April 2001, the Company paid $10,832,000 to purchase a 145,000 square foot building in
New Jersey for the purpose of establishing a new U.S. operations facility to accommodate
the Companys growth. In connection with its second quarter restructuring, the
Company made the decision to shift its operations to other existing facilities and therefore decided to sell the new facility (see Note 2). This building is classified as
facility held for sale in the accompanying consolidated balance sheets. This facility has
been actively for sale since the second quarter of 2001. Due to recent economic events,
and its impact on the value of real estate, the Company recorded an asset impairment of
$2,100,000 to reduce the carrying value of this facility to its estimated fair market
value during the fourth quarter of 2001. This write-down is included in the asset
impairment charge in the accompanying consolidated statements of operations. See Note 3.

## Income Taxes

The
Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income
Taxes. Under SFAS No. 109, deferred tax assets and liabilities are based on differences
between the financial reporting and tax bases of assets and liabilities and are measured
using enacted tax rates that are expected to be in effect when the differences reverse.

At December 31, 2001, there were
approximately $1,023,000 of undistributed earnings of non-U.S.
subsidiaries that are considered to be reinvested indefinitely. If such earnings
were remitted to the Company, applicable United States federal income and
foreign withholding taxes may be partially offset by foreign tax credits.

## Concentration
of Credit Risk

Financial
instruments that potentially subject the Company to concentration of credit risk consist
principally of cash and short-term investment balances and trade accounts receivable. The
Company invests its excess cash with large banks. The Companys customer base
principally comprises companies within the ethical pharmaceutical industry. As a result,
the Company derives its revenues from a limited number of large pharmaceutical companies.
The Company performs evaluations of its customers financial condition. The Company
does not require collateral from its customers (see Note 12).

## Net (Loss)
Income Per Share

The
Company calculates net (loss) income per share pursuant to SFAS No. 128, Earnings Per
Share.

Basic
net (loss) income per share was computed by dividing the net (loss) income for each year
by the weighted average number of shares of common stock outstanding for each year.
Diluted net income per share was computed by dividing net income for each year by the
weighted average number of shares of common stock and common stock equivalents
outstanding during each year. For the year ended December 31, 2001, 601,000 common stock
equivalents were anti-dilutive and were, therefore, excluded from the computation of net
loss per share.

The
computation of basic and diluted net (loss) income per share is as follows:

`YEAR ENDED DECEMBER 31,
                     --------------------------------------------------------------------------------------------------
                                            2001                                               2000
                     -------------------------------------------------  -----------------------------------------------
                          LOSS              SHARES         PER  SHARE        INCOME            SHARES         PER SHARE
                        (NUMERATOR)      (DENOMINATOR)       AMOUNT        (NUMERATOR)      (DENOMINATOR)       AMOUNT
                     ---------------  ------------------ -------------  ---------------  ------------------  ----------
                                                    (In Thousands, Except Per Share Data)

Net (loss) income....    $(12,471)                                          $ 30,611
Basic net (loss)
  income per share...                        39,681          $(0.31)                           39,354            $ 0.78
                                                             ======                                              ======
Effect of dilutive
  stock options......                           --                                              1,990
                                            ------                                             ------
Diluted net (loss)
  income per share...                       39,681           $(0.31)                           41,344            $ 0.74
                                            ======           =======                           ======            ======


                                YEAR ENDED DECEMBER 31, 1999
                     ----------------------------------------------
                          INCOME            SHARES        PER SHARE
                        (NUMERATOR)      (DENOMINATOR)      AMOUNT
                     ---------------  ------------------ ----------
                           (In Thousands, Except Per Share Data)

Net income......          $19,340
Basic net income
  per share.....                            37,725           $ 0.51
                                                             ======
Effect of dilutive
  stock options...                           2,874
                                             -----
Diluted net income
  per share.....                            40,599           $ 0.48
                                            ======           ======`

## Recent
Accounting Pronouncements

In
June 2001, the Financial Accounting Standards Board issued SFAS No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS
No. 141 prohibits the pooling of interests method of accounting for
business combinations initiated after June 30, 2001. SFAS No. 142 requires companies to
cease amortizing goodwill that existed at December 31, 2001. SFAS No. 142 also established a new method of
testing goodwill for impairment on an annual basis or on an interim basis if an event
occurs or circumstances change that would reduce the fair value of a reporting unit below
its carrying value. The adoption of SFAS No. 142 will result in the Companys
discontinuation of amortization of its goodwill, which was $4,830,000 as of January 1,
2002; however, the Company will be required to test its goodwill for impairment under the
new standard beginning in 2002. The Company is currently evaluating the impact of these statements but
does not expect that they will have a material impact on the Companys financial position, results of
operations, or cash flows.  The discontinuation of amortization of goodwill related to the MMI acquisition will result in a decrease in annual amortization expense of
$1,072,000. This asset would have continued to be amortized through June 2006.

In
October 2001, the FASB issued SFAS No. 144, which was effective in fiscal 2002. SFAS 144 supersedes certain 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 (APB 30) and supersedes SFAS No. 121 Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Although retaining many of the fundamental recognition and measurement
provisions of SFAS No. 121, the new rules significantly change the criteria that would have
to be met to classify an asset as held-for-sale. The Company is currently evaluating this
statement but does not expect that it will have a material impact on the Companys
financial position, results of operations, or cash flows.

## Reclassifications

Certain
reclassifications have been made to prior year amounts to conform with current year
presentation.

## 2.  RESTRUCTURING CHARGE:

On
June 14, 2001, the Company announced a restructuring of its business operations to
reflect a lower expected revenue growth model in the near term. The restructuring plan
consisted of the resizing of the Companys personnel by a reduction of 155 employees
and the elimination of 35 independent contractors across various departments in the
United States and Europe as well as 192 additional personnel associated with the closing
of the Companys facility in Stroudsburg, PA. The Stroudsburg, PA operations are
being relocated to the Companys facilities in New Jersey, Virginia and a new
facility in Bethlehem, PA. The exit costs have been included in the restructuring charge
while the moving and other start-up costs are not included in this restructuring charge
and are being expensed as incurred.

During
the second quarter of 2001, the Company recorded a charge of $6,134,000 associated with
this restructuring. This charge was reduced by $24,000 to $6,110,000 in the fourth
quarter of 2001 due to the variance between the amounts originally recorded and managements
current estimate of the total costs of the restructuring. This reduction of $24,000 was
recorded within restructuring charge on the accompanying consolidated statements of
operations. Of the restructuring charge, $2,950,000 related primarily to severance has
not been paid as of December 31, 2001 and, accordingly, is classified as accrued
restructuring charge in the accompanying consolidated balance sheet. The restructuring
charges were based upon formal plans approved by the Companys management using the
information available at the time. Management of the Company believes this provision will
be adequate to cover the costs incurred relating to the restructuring. The Company
anticipates that the accrued restructuring balance of $2,950,000 as of December 31, 2001
will be paid by mid 2002. The activity on the accrued restructuring charge balance as of
December 31, 2001 is summarized in the table below:

`Accrued Restructuring
                                                 Restructuring Charge     Cash Payments in 2001   as of December 31, 2001
                                                 ---------------------  -----------------------  ------------------------
Termination payments to employees                          $5,064,000               $2,846,000                $2,218,000
Facility exit costs                                           623,000                  128,000                   495,000
Contract termination and other restructuring
costs                                                         423,000                  186,000                   237,000
                                                 ---------------------  -----------------------  ------------------------
                                                           $6,110,000               $3,160,000                $2,950,000
                                                 =====================  =======================  ========================`

## 3.  ASSET
IMPAIRMENTS:

During
the second quarter of 2001, the Company reviewed the carrying values of its long-lived
assets, including its minority investments in start-up ventures, identifiable intangibles
and goodwill. In connection with this review, the Company wrote off $3,450,000 of cost
method investments it had in two start-up ventures due to a permanent impairment in the
fair value of these investments. These entities experienced difficulty in raising the
additional capital necessary to fund their start-up activities and the situation at both
became particularly severe in the second quarter of 2001.

In
connection with the Companys announcement on June 14, 2001, relative to its
partnership with Oracle Corporation to market an integrated CRM solution to meet the specialized needs of the worldwide pharmaceutical
industry, the Companys vision and product platform changed. The operations acquired
through the Companys acquisitions of ABC and
Analytika have been modified to keep pace with the developing needs of
the ethical pharmaceutical market. The projected undiscounted future cash flows of these
operations were less than the carrying value of the related long-lived assets, including
identifiable intangibles and goodwill. The fair value of the long-lived assets was
determined based upon the discounted cash flows expected to be derived from these
operations. As a result of the Oracle relationship, management reviewed these operations
and concluded that they would generate negative cash flows due to higher administrative
costs required to support the projected revenue stream. Accordingly, the Company recorded
an impairment charge of $8,787,000, consisting of $2,614,000 of purchased capitalized
software and $6,173,000 of related goodwill. Relative to the operations acquired as a
result of the MMI acquisition, during 2002 the Company began
offering the mid-tier pharmaceutical industry a product which is more compatible with the
Companys vision of integrated CRM solutions. Accordingly, in the second quarter of
2001, the Company reduced the remaining useful life of the purchased capitalized software
related to the MMI acquisition so that the balance was completely amortized by December
31, 2001. As the operations of the business acquired in the MMI acquisition continue to
be successful, no impairment charge or adjustment to the amortization period was
necessary for the goodwill associated with MMI.

During
the fourth quarter of 2001, the Company recorded an asset impairment of $2,100,000
related to a facility held for sale. See Note 1.

## 4.  ACQUISITIONS:

On
January 6, 2000, the Company purchased all of the assets and assumed certain liabilities
of Analytika, Inc., a provider of advanced analytical products, consulting services and
outsourced operations services to the pharmaceutical industry. Under the terms of the
acquisition agreement, the Company paid $2,318,000 in cash, which included transaction
costs, and $6,506,000 in the Dendrite common stock. The acquisition was accounted for
using the purchase method with the purchase price allocated to the assets acquired and
liabilities assumed based on their respective fair market values at the acquisition date.
Of the purchase price, $2,890,000 was allocated to purchased capitalized software
development costs. The excess of the purchase price over the fair value of the net assets
acquired was allocated to goodwill ($5,979,000) based upon an independent appraisal. See
Note 3. Analytikas results of operations have been included in the Companys
consolidated financial statements from the date of acquisition.

On
June 30, 1999, the Company purchased all of the assets and assumed certain liabilities of
MMI, a provider of palm-top software and paper-based sales force effectiveness solutions
and consulting services to subsidiaries of multinational pharmaceutical companies
operating in emerging markets, such as Latin America, Eastern Europe and Southeast Asia.
Under the terms of the acquisition agreement, the Company paid $6,640,000 in cash, which
included transaction costs, and $3,435,000 in Dendrite common stock. The acquisition was
accounted for using the purchase method with the purchase price allocated to the assets
acquired and liabilities assumed based on their respective fair market values at the
acquisition date. The excess of the purchase price over the fair value of the net assets
acquired, which included purchased capitalized software development costs ($1,989,000)
was allocated to goodwill ($7,235,000) based upon an independent appraisal. See Note 3.
MMIs results of operations have been included in the Companys consolidated
financial statements from the date of acquisition.

On May
27, 1999, the Company exchanged 2,220,807 shares of its common stock for all the
outstanding shares of common stock of CorNet International, Ltd. (CorNet).
The merger was accounted for under the pooling-of-interests method. Accordingly, all
prior historical consolidated financial statements were restated to reflect the
acquisition of CorNet.

Separate
results of the Company and CorNet for the 1999 period, prior to the consummation of the
merger, are as follows:

`Dendrite           Cornet           Combined
                                            ------------        -----------      ------------
Three months ended March 31, 1999
(unaudited)
Total revenue                               $32,402,000         $ 5,232,000      $ 37,634,000
Net income                                  $ 3,688,000         $   511,000      $  4,199,000`

## 5.  PROPERTY AND EQUIPMENT:

`DECEMBER 31,
                                       ---------------------------------
                                              2001               2000
                                       -----------------  --------------
Computer hardware and other equipment..  $ 32,971,000       $ 25,716,000
Furniture and fixtures.................     3,917,000          3,863,000
Leasehold improvements.................    10,839,000          3,727,000
                                         ------------       ------------
                                           47,727,000         33,306,000
Less -- Accumulated depreciation and
  amortization........................    (24,133,000)       (17,382,000)
                                         -------------      -------------
                                         $ 23,594,000       $ 15,924,000
                                         =============      =============`

## 6.  REVOLVING LINE OF CREDIT:

In
2001, the Company amended its revolving line of credit agreement with The Chase Manhattan
Bank, N.A., which provides for borrowings of up to $15,000,000 and is available to
finance working capital needs and possible future acquisitions. The agreement requires,
among other covenants, that the Company maintain a minimum consolidated net worth,
measured quarterly, equal to $105,000,000 plus 50% of the Companys net income
earned after January 1, 2002, and 75% of the net proceeds to the Company of any stock
offerings after September 30, 2001. This covenant has the effect of limiting the amount
of cash dividends the Company may pay. As of December 31, 2001, approximately $60,647,000
was available for the payment of dividends under this covenant. The line of credit
expires on November 30, 2002. The Company has never had any borrowings under this
revolving line of credit.  The revolving line of credit also provides for the issuance
of letters of credit.  As of December 31, 2001, letters of credit for approximately $500,000 were
outstanding.

## 7.  INCOME TAXES:

The
components of income before income taxes were as follows:

`YEAR ENDED DECEMBER 31,
               --------------------------------------------------------
                    2001                  2000                 1999
               ----------------   -------------------  ----------------
Domestic....    $(18,259,000)         $ 46,227,000         $ 29,663,000
Foreign.....        (275,000)            1,232,000            1,911,000
                -------------         ------------         ------------
                $(18,534,000)         $ 47,459,000         $ 31,574,000
                =============         ============         ============`

The
components of income taxes were as follows:

`YEAR ENDED DECEMBER 31,
                             -----------------------------------------------------------
                                     2001                  2000                  1999
                             --------------------  --------------------  ---------------
Current Provision (Benefit):
  Federal.................        $ (1,034,000)         $ 14,588,000          $  9,528,000
  State...................             256,000             1,453,000             1,612,000
  Foreign.................           2,495,000             1,075,000             1,070,000
                                  ------------          ------------          ------------
                                     1,717,000            17,116,000            12,210,000
Deferred Provision
(Benefit):
  Federal.................          (5,195,000)             (777,000)              524,000
  State...................          (1,320,000)             (307,000)               (8,000)
  Foreign.................          (1,265,000)              816,000              (492,000)
                                  -------------         ------------          ------------
                                    (7,780,000)             (268,000)               24,000
                                  -------------         ------------          ------------
                                  $ (6,063,000)         $ 16,848,000          $ 12,234,000
                                  =============         ============          ============`

The
reconciliation of the statutory Federal income tax rate to the Companys effective
income tax rate is as follows:

`YEAR ENDED DECEMBER 31,
                                                       ---------------------------------------
                                                            2001           2000           1999
                                                       -------------  -------------  ---------
Federal statutory tax rate........................         (35.0%)        35.0%          35.0%
Difference between U.S. and non-U.S. rates........           4.8            0.8           (0.3)
State income taxes, net of Federal tax benefit....          (3.5)           1.6            2.4
Nondeductible expenses............................           2.9            0.7            0.8
Nondeductible pooling costs.......................            --             --            2.2
Tax credits utilized..............................          (2.7)          (1.3)          (1.7)
Other.............................................            .8           (1.3)          (0.3)
                                                            ----           ----           ----
                                                           (32.7%)         35.5%          38.7%
                                                            ====           ====           ====`

The
tax effect of temporary differences as established in accordance with SFAS No. 109 that
give rise to deferred income taxes is as follows:

`DECEMBER 31,
                                       --------------------------------
                                             2001              2000
                                       ----------------  --------------
Gross deferred tax asset:
  Depreciation and amortization.....      $ 2,165,000       $ 1,343,000
  Foreign net operating losses......        2,984,000         1,278,000

  State net operating losses........        1,651,000                --

  Accruals and reserves not currently
     deductible.....................        4,360,000         1,297,000
  Other.............................        2,398,000           165,000
                                          -----------       -----------
                                           13,558,000         4,083,000
Less:  Valuation Allowance                 (2,180,000)               --
                                          ------------      -----------
                                          $11,378,000       $ 4,083,000
                                          ===========       ===========
Gross deferred tax liability:
  Capitalized software development
   costs............................      $(1,949,000)      $(1,809,000)
  Other.............................       (1,752,000)       (2,166,000)
                                          ------------      ------------
                                          $(3,701,000)      $(3,975,000)
                                          ===========       ===========`

As of December 31,
2001, the Company had a valuation allowance of $2,180,000, primarily due to foreign and
state net operating losses. The Company has recorded a full valuation allowance against its state net operating
loss carryforwards. The Company has recorded a deferred tax asset of $2,455,000
(net of a $529,000 valuation allowance) reflecting the benefit of approximately
$8,005,000 in foreign loss carryforwards, which expire in varying amounts commencing in
2003. Realization is dependent on generating sufficient foreign taxable
income prior to the expiration of the loss carryforwards. Although realization is not
assured, management believes it is more likely than not that the recorded net deferred
tax asset will be realized. The amount of the deferred tax asset is considered
realizable, however, could be reduced in the near term if estimates of future taxable
income during the carryforward period are reduced.

## 8.  STOCKHOLDERS EQUITY:

## STOCK OPTION PLANS

The
Company has three stock option plans (the Plans) that provide for the
granting of options, the awarding of stock and the purchase of stock. Under the plans,
the total number of shares of common stock that may be granted is 14,050,002. Options
granted under the three stock option plans generally vest over a four-year period and are
exercisable over a period not to exceed ten years as determined by the Board of
Directors. Incentive stock options are granted at fair value. Nonqualified options are
granted at exercise prices determined by the Board of Directors.

Information
with respect to the options under the three stock option plans is as follows:

`WEIGHTED
                                               EXERCISE PRICE         AVERAGE
                                  SHARES         PER SHARE        EXERCISE PRICE
                                -----------    -----------------  --------------
 Outstanding December 31, 1998   5,971,662      $0.14  - $15.15      $     6.51
   Granted....................   2,116,202      10.97  - $27.88           17.52
   Exercised..................  (1,551,242)      0.14  - $14.92           (4.70)
   Canceled...................    (278,467)      1.45  - $19.79           (9.13)
                                ----------      ---------------      -----------
 Outstanding December 31, 1999   6,258,155       0.98  - $27.88           10.56
   Granted....................   2,531,396      12.06  - $33.88           24.91
   Exercised..................  (1,569,016)      1.45  - $23.33           (7.10)
   Canceled...................    (671,509)      2.09  - $33.19          (16.72)
                                ----------      ---------------      -----------
 Outstanding December 31, 2000   6,549,026       0.98  - $33.88           16.54
   Granted....................   2,474,754       7.59  - $22.12           12.46
   Exercised..................    (785,285)      0.98  - $19.79           (5.57)
   Canceled...................    (666,820)      1.45  - $33.19          (22.58)
                                 ----------     ---------------      -----------
 Outstanding December 31, 2001   7,571,675      $2.09  - $33.88      $    15.88
                                 =========      ===============      ===========`

At
December 31, 2001, there were 3,361,772 options exercisable at $2.08-$33.88 per share.
The aggregate exercise price of the exercisable options was $50,171,758 as of December
31, 2001.

The
Company has adopted the disclosure requirements of SFAS No. 123, Accounting for
Stock-Based Compensation. The Company applies Accounting Principles Board Opinion
No. 25 and related interpretations in accounting for stock options granted under the
Plans. Accordingly, compensation cost has been computed for the Plans based on the
intrinsic value of the stock option at the date of grant, which represents the difference
between the exercise price and the fair value of the Companys stock. As the
exercise price of all stock options granted equaled the fair value of the Companys
stock at the date of option issuance, no compensation cost has been recorded in the
accompanying statements of operations. Had compensation cost for the Plans and the
employee stock purchase plan been determined consistent with SFAS No. 123, the Companys
net (loss) income and net (loss) income per share would have been adjusted to the
following pro forma amounts:

`YEAR ENDED DECEMBER 31,
                                -------------------------------------------------------------
                                        2001                  2000                  1999
                                --------------------  --------------------  -----------------
Net (loss) income:
  As reported...............        $(12,471,000)         $30,611,000           $19,340,000
  Pro forma.................        $(25,338,000)         $22,552,000           $11,483,000
Basic net (loss) income per
share:
  As reported...............        $     (0.31)          $      0.78           $      0.51
  Pro forma.................        $     (0.64)          $      0.57           $      0.30
Diluted net (loss) income per share:
  As reported...............        $     (0.31)          $      0.74           $      0.48
  Pro forma.................        $     (0.64)          $      0.55           $      0.28`

The
fair value of each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following assumptions used for grants in 2001, 2000 and
1999: risk-free interest rates ranging from 4.0% to 6.9% based on the rate in effect on
the date of grant; no expected dividend yield; expected lives of 4.0 to 6.0 years for the
options; and expected volatility of 70% to 80%.

The
weighted average fair value of options granted was $8.96, $17.26 and $12.01 for the years
ended December 31, 2001, 2000 and 1999, respectively.

Information
with respect to the options outstanding under the three stock option plans at December
31, 2001 is as follows:

`WEIGHTED
                                  WEIGHTED          AVERAGE
                                   AVERAGE         REMAINING       NUMBER
  EXERCISE PRICE                  EXERCISE        CONTRACTUAL     OF VESTED
     PER SHARE          SHARES      PRICE       LIFE (IN YEARS)    SHARES
--------------------  --------- ------------  -----------------  ----------
   $2.08-$2.65          125,869  $     2.35          2.8           101,069
   $3.47-$6.42          737,237  $     5.54          5.5           736,487
  $7.59-$12.51        2,301,488  $     9.59          8.5           638,636
 $13.18-$14.92          468,429  $    14.05          6.1           281,408
 $15.08-$18.38        1,176,964  $    16.75          7.7           713,230
 $19.06-$27.88        2,197,818  $    22.20          8.6           629,334
 $29.38-$33.88          563,870  $    33.13          8.1           261,608
                      ---------  ----------          ---         ---------
                      7,571,675  $    15.88          7.8         3,361,772
                      =========  ==========          ===         =========`

## EMPLOYEE STOCK
PURCHASE PLAN

In
1997, the Company established an employee stock purchase plan that provides full-time
employees the opportunity to purchase shares at 85% of fair value on dates determined by
the Board of Directors, up to a maximum 10% of their eligible compensation or $21,250,
whichever is less. There were 450,000 shares available for purchase under this plan, of
which 156,876, 93,687 and 72,122 were purchased in 2001, 2000 and 1999, respectively.  There
were 77,315 and 59,191 shares available for issuance under the plan as of December 31, 2001
and December 31, 2000, respectively.

## ANNIVERSARY
STOCK PLAN

The
Company grants 200 shares of the Companys common stock to all employees who
commenced employment prior to December 31, 1998 in July following their fifth anniversary
of employment. The cost of the anniversary stock plan is accrued over the employment
period of the employees.

## COMMON STOCK
REPURCHASE PROGRAM

On
January 31, 2001, the Company announced that its Board of Directors authorized a stock
repurchase program of up to $20,000,000 of its outstanding common stock over a two-year
period (the 2001 Stock Repurchase Plan). The Company has and will continue to
repurchase shares on the open market or in privately negotiated transactions from time to
time. Under the 2001 Stock Repurchase Plan, repurchases of stock have and will continue
to be at managements discretion, depending upon price and availability. The
repurchased shares will be held as treasury stock, which may be used to satisfy the
Companys current and near term requirements under its equity incentive and other
benefit plans and for other corporate purposes. As of December 31, 2001, the Company has
repurchased a total of 1,343,700 shares under the 2001 Stock Repurchase Plan for a total
value of $17,480,000.

## SHAREHOLDER
RIGHTS PLAN

On
February 16, 2001, the Companys Board of Directors adopted a shareholder rights
plan (the Rights Plan). The Rights Plan is designed to deter coercive or
unfair takeover tactics and to prevent a person or group from acquiring control of the
Company without offering a fair price to all shareholders. The adoption of the Rights
Plan was not in response to any known effort to acquire control of the Company.

Under
the Rights Plan, each shareholder of record on March 5, 2001 received a distribution of
one Right for each share of common stock of the Company (Rights). At present,
the Rights are represented by the Companys common stock certificates, are not
traded separately from the common stock and are not exercisable. The Rights will become
exercisable only if a person acquires, or announces a tender offer that would result in
ownership of 15% or more of the Companys common stock, at which time each Right
would enable the holder to buy one one-hundredth of a share of the Companys Series
A preferred stock at an exercise price of $120, subject to adjustment. Following the
acquisition of 15% or more of the Companys common stock, the holders of Rights
(other than the acquiring person or group) will be entitled to purchase shares of the
Companys common stock at one-half of the market price, and in the event of a
subsequent merger or other acquisition of the Company, to buy shares of common stock of
the acquiring entity at one-half of the market price of those shares.

The
Company may redeem the Rights for $0.01 per Right, subject to adjustment, at any time
before the acquisition by a person or group of 15% or more of the Companys ordinary
shares. The Rights will expire on February 20, 2011.

## 9.  SAVINGS AND
DEFERRED COMPENSATION PLANS:

The
Company maintains Employee Savings Plans (the Plans) that cover substantially
all of its full-time U.S., U.K. and Belgium employees. All eligible employees may elect
to contribute a portion of their wages to the Plans, subject to certain limitations. In
addition, the Company contributes to the plans at the rate of 50% of the employees
contributions up to a maximum of 3% of the employees salary. The Companys
contributions to the Plans were $1,191,000, $773,000 and $492,000 in the years ended
December 31, 2001, 2000 and 1999, respectively.

The
Company also maintains a noncontributory pension plan that covers substantially all of
its full-time Japanese employees. All contributions to this pension plan are made by the
Company in accordance with prescribed statutory requirements. The Companys
contributions to the plan were $24,000, $421,000 and $41,000 for the years ended December
31, 2001, 2000 and 1999, respectively.

In
1998, the Company created a deferred compensation plan. Under the plan, eligible, highly
compensated employees (as defined) can elect to defer a portion of their compensation and
determine the nature of the investments, which will be used to calculate earnings on the
deferred amounts.

## 10.  COMMITMENTS AND CONTINGENCIES:

The
Company leases office facilities and equipment under various operating leases with
remaining noncancelable lease terms generally in excess of one year. Rent expense was
$10,547,000, $8,410,000 and $7,390,000 for the years ended December 31, 2001, 2000 and
1999, respectively. Future minimum rental payments on these leases are as follows:

`2002                    $8,629,000
2003                     7,599,000
2004                     6,069,000
2005                     3,943,000
2006                     3,944,000
Thereafter              11,601,000
                       -----------
                       $41,785,000
                       ===========`

From
time to time, the Company is involved in certain legal actions arising in the ordinary
course of business. In the Companys opinion, the outcome of such actions will not
have a material adverse effect on the Companys financial position or results of
operations.

The
Company has employment agreements with certain officers that provide for, among other things,
salary, bonus, severance and change in control provisions.

## 11.  RELATED-PARTY TRANSACTIONS:

For
the years ended December 31, 2001, 2000 and 1999, the Company incurred approximately
$304,000, $257,000 and $179,000, respectively, of costs for rental and use of aircraft for Company business payable to certain
third party charter companies.  While none of these third party charter companies are affiliated with the Company or any of its officers or directors, in some instances, the aircraft
provided by these third party companies were leased from an entity whose members are the
Chairman and Chief Executive Officer and his spouse.

For the years ended December 31, 2001, 2000 and 1999,
the Company also incurred approximately $592,000, $338,000 and $15,000, respectively, of costs
for air travel for Company business payable to the entity owned by the Chairman and Chief Executive Officer and his spouse.  These costs, which were incurred either directly or indirectly through
expense reimbursements, were charged to the Company on a reimbursement rate basis, in accordance with
FAA expense reimbursement rates.

During
the year ended December 31, 2001, the Company paid $1,432,000 to a subcontractor for
certain outsourcing activities related to its clinical services. The Chairman and Chief
Executive Officer of the Company and a member of the Companys Board of Directors
serve on the Board of Directors of this subcontractor. The Companys Director is
also the Managing Partner of a venture fund which is a 52% shareholder of this
subcontractor.

For the years ended December 31, 2001,
2000, and 1999, the Company paid approximately $851,000, $459,000 and $136,000, respectively, to a third party contractor
that provides consultants for computer programming services.  The father of the Chairman and Chief Executive Officer
of the Company is a 43% shareholder of this contractor.

## 12.  CUSTOMER AND GEOGRAPHIC INFORMATION:

For
the year ended December 31, 2001, the Company derived approximately 41% and 10% of its
revenue from its two largest customers. In the year ended December 31, 2000, the Company
derived approximately 31%, 11% and 10% of its revenues from its three largest customers.
In the year ended December 31, 1999, the Company derived approximately 26% and 11% of its
revenues from its two largest customers.

See
Note 1 for a brief description of the Companys business. The Company is organized
by geographic locations and has one reportable segment. All transfers between geographic
areas have been eliminated from consolidated revenues. Operating income consists of total
revenues recorded in the location less operating expenses and does not include interest
income, other expense or income taxes. This data is presented in accordance with SFAS No.
131, Disclosure About Segments of an Enterprise and Related Information.

`YEAR ENDED DECEMBER 31,
                          ----------------------------------------------------
                                 2001              2000               1999
                          ----------------- -----------------  ---------------
Revenues:
United States.........    $    182,034,000  $     163,998,000     $132,259,000
All Other.............          42,613,000         50,328,000       40,426,000
                          ----------------  -----------------     ------------
                          $    224,647,000  $     214,326,000     $172,685,000
                          ================  =================     ============
Identifiable assets:
United States.........    $    145,321,000  $     155,843,000     $ 94,805,000
All Other.............          21,162,000         20,060,000       29,915,000
                          ----------------  -----------------     ------------
                          $    166,483,000  $     175,903,000     $124,720,000
                          ================  =================     ============`

For segment reporting purposes, license revenues have been allocated to the sales office of
the respective country in which the sale is made, although the actual contract is with
the U.S. entity for legal and tax purposes.

---

# EXHIBIT INDEX

| | Articles of Incorporation and By-Laws:
| | --------------------------------------

|3.1 |  | Restated Certificate of Incorporation of the Company (incorporated herein by reference to
Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q, filed with the
Securities and Exchange Commission (the Commission) on August 14, 1996)
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1(a) |  | Certificate
of Amendment to the Restated Certificate of Incorporation of the Company (incorporated
herein by reference to Exhibit 3.1(a) to the Companys Current Report on Form 8-K,
filed with the Commission on March 30, 2001)
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1(b) |  | Certificate of Amendment to the Restated Certificate of Incorporation of the
Company (incorporated herein by reference to Exhibit 3.1 (b) to the Companys
Current Report on Form 8-K, filed with the Commission on March
30, 2001)
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1(c) |  | Certificate of Amendment to the Restated Certificate of Incorporation of the Company
Setting Forth the Terms of Series A Junior Participating Preferred Stock (incorporated
herein by reference to Exhibit 3.1 (c) to the Companys Current Report on Form 8-K,
filed with the Commission on March 30, 2001)
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.2 |  | Amended and Restated By-laws of the Company (incorporated herein by reference to Exhibit
3 to the Companys Current Report on Form 8-K, filed with the Commission on February
21, 2001)
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Instruments
Defining Rights of Security Holders, including Indentures:
| | ----------------------------------------------------------------------

|4.1 |  | Specimen of Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the
Companys Registration Statement on Form S-1, filed with the Commission on May 17,
1995)
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.2 |  | Registration Rights Agreement dated October 2, 1991 between the several purchasers named
therein and the Company (incorporated herein by reference to Exhibit 4.2 to the Companys
Registration Statement on Form S-1, filed with the Commission on May 17, 1995)
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.3 |  | Amendment to Registration Rights Agreement dated April 23, 1992 between the Company and
the parties named therein as shareholders of the Company (incorporated herein by
reference to Exhibit 4.3 of Amendment 1 to the Companys Registration Statement on
Form S-1, filed with the Commission on May 17, 1995)
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.4 |  | Rights Agreement dated as of February 20, 2001 between Dendrite International, Inc. and
Registrar and Transfer Company, as Rights Agent, which includes, as Exhibit A the Form of
Certificate of Amendment to Restated Certificate of Incorporation, as Exhibit B the Form
of Rights Certificate and as Exhibit C the Form of Summary of Rights (incorporated herein
by reference to Exhibit 4 of the Companys Current Report on Form 8-K, filed with
the Commission on February 21, 2001)
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Material
Contracts and Compensatory Plans and Arrangements:
| | -----------------------------------------------------------

|10.1 |  | 1992 Stock Plan, as amended (incorporated herein by reference to Exhibit 10.36 to the
Companys Registration Statement on Form S-1, filed with the Commission on May 17,
1995)*
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 |  | 1992 Senior Management Stock Option Plan, as amended
(incorporated herein by reference to
Exhibit 10.37 to the Companys Registration Statement on Form S-1, filed with the
Commission on May 17, 1995)*
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 |  | 1997 Stock Incentive Plan, as amended (incorporated herein by reference to Exhibit 10.2
to the Companys Quarterly Report on Form 10-Q, filed with the Commission on
November 14, 1997; Exhibit 4.2 to the Companys Post Effective Amendment No. 2 to
Registration Statement on Form S-8 filed with the Commission on April 21, 1998; and
Exhibit A to the Companys Proxy Statement for the 1999 Annual Meeting of
Shareholders, filed with the Commission on April 16, 1999)*
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 |  | 1997 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 4.2 to the
Companys Registration Statement on Form S-8, filed with the Commission on April 1,
1997)*
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 |  | Lease of 1200 Mount Kemble Avenue, Morristown, New Jersey (incorporated herein by
reference to Exhibit 10.40 to the Companys Registration Statement on Form S-1,
filed with the Commission on May 17, 1995)
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 |  | Form of Indemnification Agreement dated as of October 28, 1998 (incorporated herein by
reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q, filed with
the Commission on November 18, 1998)1
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 |  | Amended and Restated Credit Agreement, entered into as of November 30, 1998, between the
Company and The Chase Manhattan Bank, N.A. (incorporated herein by reference to Exhibit
10.7 to the Companys Annual Report on Form 10-K, filed with the Commission on March
26, 1999)
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.8 |  | Employment Agreement dated March 25, 1997 with John E. Bailye (incorporated herein by
reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q/A, filed
with the Commission on May 16, 1997)*
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9 |  | Employment Agreement dated June 2, 1997 with George T. Robson (incorporated herein by
reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q, filed with
the Commission on August 14, 1997)*
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.10 |  | Employment Agreement dated June 9, 1997 with Mark Cieplik incorporated herein by
reference to Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q, filed with
the Commission on August 14, 1997)1*
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.11 |  | Employment Agreement dated October 1, 1991 with Teresa F. Winslow (incorporated herein by
reference to Exhibit 10.50 to the Companys Registration Statement on Form S-1,
filed with the Commission on February 5, 1996)2*
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.12 |  | Consulting Agreement dated as of January 5, 1998 with Edward Kfoury (incorporated herein
by reference to Exhibit 10.1 of the Companys Quarterly Report on Form 10-Q, filed
with the Commission on May 15, 1998)
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13 |  | Deferred Compensation Plan dated as of September 1, 1998 (incorporated herein by
reference to Exhibit 10.1 of the Companys Quarterly Report on Form 10-Q, filed with
the Commission on August 14, 1998)*
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.14 |  | Deferred Compensation Plan Trust Agreement dated as of September 1, 1998 (incorporated
herein by reference to Exhibit 10.2 of the Companys Quarterly Report on Form 10-Q,
filed with the Commission on August 14, 1998)*
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.15 |  | Employment Agreement dated January 22, 1996 with Christopher J. French (incorporated
herein by reference to Exhibit 10.51 of the Companys Annual Report on Form 10-K,
filed with the Commission on March 31, 1997)1*
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.16 |  | Employment Agreement dated
September 20, 2000 with Michael G. Atieh (incorporated herein
by reference to Exhibit 10.12 of the Company's Quarterly Report on Form 10-Q, filed with
the Commission on November 14, 2000)1*
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.17 |  | Employment Agreement dated August 7, 1997 with Kathleen Donovan (incorporated herein by
reference to Exhibit 10.17 of the Companys Current Report on Form 8-K, filed with
the Commission on March 30, 2001) *
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.18 |  | Employment Agreement dated September 8, 1998 with Christine Pellizzari (incorporated
herein by reference to Exhibit 10.18 of the Companys Current Report on Form 8-K,
filed with the Commission on March 30, 2001)*
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.19 |  | Amendment to Employment Agreement dated May 26, 1999 with Mark Cieplik (incorporated
herein by reference to Exhibit 10.19 of the Companys Current Report on Form 8-K,
filed with the Commission on March 30, 2001)1*
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.20 |  | Amendment to Employment Agreement dated May 26, 1999 with Teresa Winslow (incorporated
herein by reference to Exhibit 10.20 of the Companys Current Report on Form 8-K,
filed with the Commission on March 30, 2001)2*
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.21 |  | Amendment to Employment Agreement dated May 26, 1999 with Christopher French
(incorporated herein by reference to Exhibit 10.21 of the Companys Current Report
on Form 8-K, filed with the Commission on March 30, 2001)1*
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.22 |  | Amendment to Employment Agreement dated May 26, 1999 with George T. Robson (incorporated
herein by reference to Exhibit 10.22 of the Companys Current Report on Form 8-K,
filed with the Commission on March 30, 2001)*
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.23 |  | Amendment to Employment Agreement dated January 25, 2000 with Kathleen Donovan
(incorporated herein by reference to Exhibit 10.23 of the Companys Current Report
on Form 8-K, filed with the Commission on March 30, 2001)*
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.24 |  | Amendment to Employment Agreement dated August 1, 2000 with Christine Pellizzari
(incorporated herein by reference to Exhibit 10.24 of the Companys Current Report
on Form 8-K, filed with the Commission on March 30, 2001)*
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.25 |  | Employment Agreement dated as of August 7, 2000 with Marc Kustoff (incorporated herein by
reference to Exhibit 10.25 of the Companys Current Report on Form 8-K, filed with
the Commission on March 30, 2001)1*
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.26 |  | Agreement of Purchase and Sale between Dendrite International, Inc. and Townsend Property
Trust Limited Partnership dated January 5, 2001 (incorporated herein by reference to
Exhibit 10.26 of the Company's Current Report on Form 8-K, filed with the Commission on
March 30, 2001)*
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.27 |  | Deed of Lease between Liberty Property Limited Partnership and Dendrite International,
Inc. for Dendrite Building I of the Liberty Executive Park in Chesapeake, Virginia
(incorporated herein by reference to Exhibit 10.27 of the Companys Current Report
on Form 8-K, filed with the Commission on March 30, 2001)
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.28 |  | Deed of Lease between Liberty
Property Limited Partnership and Dendrite International,
Inc. for Dendrite Building II of the Liberty Executive Park in Chesapeake, Virginia
(incorporated herein by reference to Exhibit 10.28 of the Companys Current Report
on Form 8-K, filed with the Commission on March 30, 2001)
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.29 |  | Employment Agreement (including Amendment), dated as of May 16, 2001, between Dendrite
International, Inc. and Paul Zaffaroni (incorporated herein by reference to Exhibit 10.29
of the Companys Current Report on Form 8-K, filed with the Commission on March 19,
2002).*
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.30 |  | Indemnification Agreement, dated as of October 1, 2001, between Dendrite International,
Inc. and Paul Zaffaroni (incorporated herein by reference to Exhibit 10.30 of the Companys
Current Report on Form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.31 |  | Employment Agreement, dated as of December 10, 2001, between Dendrite International, Inc.
and Luke Beshar (incorporated herein by reference to Exhibit 10.31 of the Companys
Current Report on Form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.32 |  | Indemnification Agreement, dated as of January 22, 2002, between Dendrite International,
Inc. and Luke Beshar (incorporated herein by reference to Exhibit 10.32 of the Companys
Current Report on Form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.33 |  | Employment Agreement, dated as of June 19, 1997, between Dendrite International, Inc. and
Brent Cosgrove (incorporated herein by reference to Exhibit 10.33 of the Companys
Current Report on Form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.34 |  | Amendment to Employment Agreement, dated as of November 8, 2001, between Dendrite
International, Inc. and Brent Cosgrove (incorporated herein by reference to Exhibit 10.34
of the Companys Current Report on Form 8-K, filed with the Commission on March 19,
2002).*
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.35 |  | Indemnification Agreement, dated as of November 8, 2001, between Dendrite International,
Inc. and Brent Cosgrove (incorporated herein by reference to Exhibit 10.35 of the Companys
Current Report on Form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.36 |  | Agreement of Lease, dated as of February 12, 2001, between SCC II, L.L.C. and Dendrite
International, Inc. (incorporated herein by reference to Exhibit 10.36 of the Companys
Current Report on Form 8-K, filed with the Commission on March 19, 2002).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.37 |  | First Amendment to Lease, dated as of August 17, 2001, between 1200 Mount Kemble Limited
Partnership and Dendrite International, Inc. (incorporated herein by reference to Exhibit
10.37 of the Companys Current Report on Form 8-K, filed with the Commission on
March 19, 2002).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.38 |  | November 2001 Amendment to Credit Agreement, dated as of November 6, 2001 between
Dendrite International, Inc. and The Chase Manhattan Bank, N.A. (incorporated herein by
reference to Exhibit 10.38 of the Companys Current Report on Form 8-K, filed with
the Commission on March 19, 2002).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.39 |  | Indemnification Agreement, dated as of October 28, 1998, between Dendrite International,
Inc. and John Bailye (incorporated herein by reference to Exhibit 10.39 of the Companys
Current Report on form 8-K, filed with the Commission on March 19, 2002). *
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.40 |  | Indemnification Agreement, dated as of October 28, 1998, between Dendrite International,
Inc. and George Robson (incorporated herein by reference to Exhibit 10.40 of the Companys
Current Report on form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.41 |  | Indemnification Agreement, dated as of January 25, 2001 between Dendrite International,
Inc. and Christine Pellizzari (incorporated herein by reference to Exhibit 10.41 of the
Companys Current Report on form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.42 |  | Indemnification Agreement, dated as of
 January 25, 2001 between Dendrite International,
Inc. and Kathleen Donovan (incorporated herein by reference to Exhibit 10.42 of the
Companys Current Report on form 8-K, filed with the Commission on March 19, 2002).*
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Subsidiaries:
| | -------------

|21 |  | Subsidiaries of the Registrant
|-- |  | ------------------------------

| | Consent of Independent Public Accountants:
| | ------------------------------------------

|23.1 |  | Consent of Arthur Andersen LLP
|---- |  | ------------------------------

---

|* |  | Management contract or compensatory plan.
|- |  | -----------------------------------------

|1 |  | In connection with management
structure reorganization, individuals position no longer
deemed executive officer position beginning fiscal 2002.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------

|2 |  | Ceased as executive officer.
|- |  | ----------------------------