SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)
[x] Annual  report under Section 13 or 15(d) of the  Securities  Exchange Act of
1934 for the fiscal year ended  September 30, 2000.

[ ] Transition  report under section 13 or 15(d) of the Securities  Exchange Act
of 1934 for the transition period from           to

Commission file number: 000-26555

                           ACCUIMAGE DIAGNOSTICS CORP.
                 (Name of Small Business Issuer in its Charter)

               Nevada                                  33-0713615
-------------------------------------   ---------------------------------------
 (State or other jurisdiction of        (I.R.S. Employer Identification Number)
  incorporation or organization)

400 Oyster Point Blvd., Suite 114, South San Francisco, California   94080-1917
-------------------------------------------------------------------------------
      (Address of principal executive offices)                       (Zip Code)

                    Issuer's telephone number: (650) 875-0192


Securities registered pursuant to Section 12(b) of the Act:  None

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

            Common Stock, $0.001 par value


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act  during the past 12 months (or for
such shorter period that the registrant was required to file such reports),  and
(2) has been subject to such filing  requirements  for the past 90 days. YES [X]
NO [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

Issuer's revenues for fiscal year ended September 30, 2000: $3,114,720

As of December 20, 2000,  non-affiliates of the issuer held voting stock with an
aggregate market value of $5,690,053 computed by reference to the average of the
bid and asked prices of such stock on such date.

As of December 20, 2000,  there were  10,981,534  shares of common stock, no par
value, outstanding.

Portions of the following document are incorporated by reference:

Parts  of  the  Proxy  Statement  for  the  Company's  2001  Annual  Meeting  of
Shareholders,  to be filed with the  Commission  on or before 120 days after the
end of the 2000 fiscal year, are incorporated by reference into Part III hereof.





<PAGE>


DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

     AccuImage   Diagnostics   Corp.   ("AccuImage"   or  "Company")   has  made
forward-looking  statements  in this annual report that are subject to risks and
uncertainties.  Forward-looking  statements include  information  concerning our
possible or assumed future results of  operations.  Also,  when the Company uses
such words as "believe,"  "expect,"  "anticipate,"  "plan," "could," "intend" or
similar expressions,  it is making forward-looking  statements.  You should note
that an investment in our securities  involves  certain risks and  uncertainties
that could affect our future financial results. The Company's actual results may
differ  materially as a result of certain factors,  including those set forth in
this Form 10-KSB.  Potential investors should consider carefully the stated risk
factors, as well as the more detailed information contained in this Form 10-KSB,
in evaluating the Company's business, financial condition, results of operations
and  prospects  before  making a decision  to invest in the common  stock of the
Company.


PART I

Item 1.  Description of Business

Business Development
--------------------

     AccuImage  was  incorporated  in Nevada on February 2, 1990 as Black Pointe
Holdings,  Inc. which was established in order to identify and acquire a medical
equipment leasing business. Early attempts to do this were unsuccessful, and the
company was inactive  for a number of years until new parties with  interests in
three-dimensional  medical technology invested. In 1996, the Company changed its
name to AccuImage Diagnostics Corp., and it entered into a licensing arrangement
with AccuImage Inc., a Nevada  corporation,  which owned the exclusive rights to
certain  computer  software  and  technology,  and began to develop  the medical
imaging  software that the Company sells today. On September 30, 1997,  pursuant
to a Stock  Exchange  Agreement,  the Company  obtained  all of the  outstanding
shares of AccuImage Inc.,  which was subsequently  dissolved.  On June 30, 1999,
the  Company  filed a Form  10-SB  to  become  a  reporting  company  under  the
Securities  Exchange Act of 1934. The Company's common stock is currently traded
on the NASD OTC Bulletin Board under the symbol "AIDP".

Business of Issuer
------------------

     AccuImage is engaged in the development,  marketing and support of software
for the  visualization,  analysis and  management of medical  imaging data.  The
software's  primary function is to enhance  physicians'  interpretation  of data
from medical imaging  modalities such as computed  tomography  ("CT"),  magnetic
resonance  ("MR") and ultrasound  through the  application of  three-dimensional
("3D")  computer  graphics  and image  processing  technologies.  This  enhanced
analysis can support  physicians in clinical  diagnosis,  surgical  planning and
medical  research.   Three-dimensional  visualization  allows  communication  of
findings in a form  readily  understood  by  physicians  and others  without the
specialized  training  otherwise  required for  interpreting  the native  images
generated by the medical imaging  modalities.  Efficiency gains and cost savings
may be realized through  automated  reporting tools and provision for electronic
distribution of the medical imaging data and post-processed results via internal
networks and the Internet.

     The  AccuImage  software was  conceived  and developed on the same hardware
platform that it is now distributed  on:  standard,  high-performance,  low cost
personal computer ("PC") workstations  running the Windows operating system from
Microsoft.  The software  interfaces  with medical  imaging  modalities  via the
standard  medical  imaging DICOM  protocol and uses the Internet and standard PC
networks  for  subsequent  distribution  of images and  post-processed  results.
Through  this  combination  of  standard   underlying  products  and  protocols,
AccuImage  is  able to  offer  to  physicians  cost-effective,  easy-to-use  yet
powerful visualization, analysis and laborsaving tools for everyday use.

     The Company markets its products to radiology departments,  imaging centers
and original equipment manufacturers ("OEMs") of diagnostic imaging systems both
through a direct sales force, a  non-exclusive  distributor in the United States
and independent distributors in international markets.


The Medical Imaging Industry Background
---------------------------------------

     The  application  of scanning and imaging  techniques  to medicine has been
responsible  for a revolution in medical  practices since the development of the
CT  scanner  in the  mid-1970's.  The CT scanner  provided  the  ability to view
anatomical  images  of the  interior  of  the  human  body  as a  collection  of
cross-sectional  "slices".  In addition to CT,  magnetic  resonance  imaging and
ultrasound  are  two  more  recently   developed   techniques   that  are  being
increasingly   applied.   These  processes  use  radio  and  ultra-sound  waves,
respectively,  to  non-invasively  image the  interior  of the body,  often with
greater effect than with X-ray technology. Positron Emission Tomography scanning
and Nuclear  Medicine cameras are also capable of imaging cross sectional slices
of the body.  These  innovative  technologies  have  been  rapidly  adopted  and
incorporated in new  physician-care  practices based on the imaging  information
they provide.

     The  cross-sectional  images from these imaging  devices are  traditionally
transferred in batches to large-format film for review (similar in appearance to
conventional x-ray film), but as computer and networking  technologies  improve,
companies  are  offering  systems that  provide for the  electronic  storage and
transmission  of  images as well as  providing  computerized  viewing  stations,
eliminating the need for film. Further technological advances have made possible
viewing   and   manipulation   of  the  data  as   complete,   three-dimensional
visualizations reconstructed by software from the cross-sectional data.

     In  parallel  with  the  development  of  these   cross-sectional   imaging
techniques,  conventional  X-ray imaging  increasingly  is being  performed in a
digital format.  Fluoroscopic  images are digitized into a digital video stream.
Conventional  X-ray  films  are  increasingly  scanned  and  stored in a digital
format.  New digital  image  sensors have been  developed  that replace film and
provide  the  digital   image  without  an   intervening   X-ray  film  (Digital
Radiography).  This  collection of techniques is known as Picture  Archiving and
Communications  Systems ("PACS").  It is believed that PACS will be the way that
modern hospitals in the near future manage radiological image review,  transport
and storage.

     This digital  revolution in medical imaging means that images can be shared
inside  and  outside  the  hospital  or imaging  center  with the aid of network
technology including the Internet and private Intranets. The American College of
Radiology,  the  National  Electrical   Manufacturers'   Association  and  other
professional  organizations  have in recent years sponsored the development of a
standard  image storage and  communication  protocol so that images from various
devices  can be shared in a common  display  format.  This  standard is known as
DICOM (Digital Imaging and Communications in Medicine).  The widespread adoption
of the DICOM standard creates the business  opportunity for AccuImage and others
to  participate  in the  developing  a market  for  applications  software  that
provides  visualization and analysis solutions for users of network  distributed
medical images.

     A number of trends are evident in the highly  competitive  medical  imaging
industry.  Successive  generations of scanning devices bring increased  scanning
speed and image detail,  and consequently  increasing numbers of cross-sectional
slices are being produced in a single study. This is tending to make the viewing
of printed images on x-ray-like  film  logistically  impractical  and expensive,
favoring a computerized  visualization  system that can rapidly browse the large
dataset and  integrate it directly  with  3-dimensional  reconstructions  of the
subject anatomy.

     Furthermore,  younger  generations of physicians are increasingly  familiar
and  confident  with  computerized  systems,  and there is  increasing  clinical
acceptance of  electronic  visualization  and analysis as teaching  institutions
rely more heavily on computerized review, storage and communications systems.

     In addition to the trends  observable in the medical imaging industry which
may benefit the Company in the future, the Company's advanced  visualization and
analysis  tools  already  offer   radiologists   enhanced   ability  to  analyze
radiological  studies,  with the potential to extract more  information  that is
available from the slice views alone. Three-dimensional reconstructions are also
easier for  untrained  personnel  to  understand,  enhancing  the  radiologist's
ability to communicate findings to others.

     Beyond  radiology,  enhanced  visualization  and analysis tools may provide
surgeons with valuable and useful information to aid with pre-surgical  planning
and post-surgical  follow-up.  In a similar fashion,  the oncologist may benefit
from   three-dimensional   visualization   of  planned   treatment   sites,  and
post-treatment follow-up of the same.

     Finally, the use of the global Internet to communicate medical imaging data
and findings brings the potential for enhanced  collaboration between physicians
and remote expert consultation and examination.


The AccuImage Technology
------------------------

     The core technology of the AccuImage  software is a special  application of
three-dimensional   computer  graphics  known  as  "Volume  Rendering".   Volume
Rendering  applies the power of modern computer  systems to the  cross-sectional
image data in order to create three-dimensional visualizations of the subject of
the original scan.  Often  semi-transparent  and colorful images are produced to
enhance the  understanding  of the graphics.  Volume  rendering can display some
parts  of the  data to  allow  hard,  solid  tissue  such  as bone to be  viewed
"through" and "behind" softer tissue such as muscle, which can be made to appear
as semi-transparent. This allows the physician to rapidly view inaccessible body
areas  and  look for the  abnormal  details  necessary  for a  reliable  medical
diagnosis. This can be done safely, painlessly and with no side effects.

     The Company's  software  development team successfully  implemented  Volume
Rendering technology in software developed exclusively for the Microsoft Windows
operating  system  using  Intel  Processors,  to take  advantage  of the  latest
multi-processor systems with ever-increasing clock speeds and enhanced processor
features such as SSE (Streaming SIMD Extensions). This technology in conjunction
with  sophisticated  analysis and review software forms the technology "core" of
the AccuImage product line.

     In support of the  visualization  and  analysis  technology  the  AccuImage
software provides, the software also features data communication and management,
which is  crucial  to the  efficient  workflow  of a modern  imaging  center  or
radiology department. The DICOM standard is used for transfer of images within a
facility,  with web-based  Internet  distribution  provided for secure and rapid
remote  access,  transfer and review.  Automated  reporting  and database  tools
complete the suite of capabilities offered by the AccuImage product line.


Target Markets for AccuImage Products
-------------------------------------

     AccuImage  seeks  to  place  its  products  in the  developing  market  for
computerized  medical  imaging  review,  visualization  and  communication.  The
customers  in this market  specialize  in a range of  activities  from  advanced
visualization and analysis, to imaging center management, filmless operation and
image  distribution.  The  market  is  developing  to  include  centralized  and
distributed radiology (i.e.  Teleradiology),  remote diagnosis and consultation,
pre-surgical  planning  and  post-surgical  follow-up,   cancer  assessment  and
treatment  planning,  as well as educational  applications  for the  technology.
Hence the  customers  for these  applications  include  radiology,  surgery  and
oncology  departments of hospitals,  leading research centers,  imaging centers,
clinics and physician groups.


The AccuImage Marketing Strategy
--------------------------------

     The Company's main strategy for marketing its technology is direct sales to
radiology  professionals through its sales force and distribution network. Since
radiologists  represent the physician base closest to and most actively involved
in  medical  imaging,   the  Company  believes  they  will  represent  the  best
opportunity for placement of the Company's products in the short to medium term.
Radiology  represents  a  developing  market  for both  advanced  visualization/
analysis  techniques  and  networked   distribution  and  efficiency   enhancing
products.  In order to develop the AccuImage  brand in the radiology  community,
the Company will continue to place demonstration units with leading research and
teaching  institutions  involved  in the  development  and  research  of  future
techniques  and  procedures,  while  selling  directly to  institutions  through
advertising, trade show presence and direct sales.

     In the long term,  the  Company  seeks to expand its market to the  broader
physician  base,  beyond  radiology,  through an active  program  of  education,
sponsorship and participation in media coverage of the emerging opportunities to
enhance patient care offered by the technology the Company markets.  The Company
plans to develop its  website to provide a  comprehensive  and active  forum for
physicians  to  use  for  education  and  collaboration  on the  application  of
three-dimensional imaging in general. Through this program, the Company hopes to
expand knowledge and acceptance of its products, expanding its target market and
supporting its sales force in direct sales.

     In  order to help  establish  the  Company's  product  line in the  medical
community,  an  aggressive  program of  web-based  marketing  of free review and
low-cost  basic 3D browsing  software will be launched to help rapidly  increase
the number of physicians involved in the Company's technology.

     Finally,  the Company will continue to develop its strong OEM  relationship
and seek other such  relationships as well as other  distribution  channels both
domestically and abroad.


Products and Development
------------------------

     AccuImage has completed the initial  development  phase of its product line
and is proceeding  with  distribution.  However since the Company  operates in a
fiercely  competitive  software  market,   further  deployment  of  considerable
resources  for  continued  development  and  product  enhancement  is an ongoing
requirement.  The Company's  main products are the  eStation3D  web-based  image
distribution system and the scalable AccuView workstation for advanced analysis,
postprocessing and image management.

     o  AccuView   Workstation:   A  scalable   solution  for  medical   imaging
        applications.

     The product is  supplied  either as a  software-only  item or together as a
hardware and software  item.  In the latter case,  the Company buys  standard PC
equipment and combines them with the software to make a complete workstation. In
the former case,  the buyer  installs the  workstation  software on their own PC
equipment.  The  workstation  consists  of several  software  modules  which are
capable of functioning  independently.  The Company occasionally  supplies these
modules individually, either as software-only items, or as software and hardware
items combined, where the hardware is standard PC equipment. In order to support
its  workstation   business,   the  Company  offers  on-site   training  by  its
applications  personnel,  and in the cases where it supplies  the  hardware,  it
generally provides  unlimited  telephone support for one year along with on-site
and  return-to-base  support  options.  Software-only  sales  generally  include
telephone support for one year.

     The  complete  workstation  configuration  features  full-color,  3D volume
rendering,  fly-through/fly-around  path  planning and coronary  artery  calcium
scoring software, with an emphasis on ease of use and procedural workflow.

     The  AccuView  Workstation  is  capable  of taking a CT  dataset  of hollow
vessels (such as the windpipe) and generating a 3D view which simulates what one
might see from "inside" the vessel,  looking down its length or up at its walls.
The effect is similar to the view  generated by an endoscope,  a medical  device
which is  physically  placed  inside a patient  with a small  camera and a light
attached at the end. The image from the camera is then displayed on a TV screen.
The  AccuView  approach is more  comfortable  for the  patient  since no medical
instruments need be inserted.

     The modular,  scalable  architecture of the AccuView workstation allows the
Company to market the product in one form which can later be upgraded,  offering
continuing  sales  prospects  and a  continuing  revenue  stream.

     o eStation3D web-based distribution system.

     The eStation3D  provides a simple approach for web-based image distribution
and remote image  management.  Ideally  suited to imaging  centers and radiology
departments wishing to provide competitive service to a referring physician base
or reading  physician staff. The eStation3D server receives images from scanners
or PACS systems using the standard DICOM protocol,  then compresses and encrypts
them for publication on the Internet external to the facility's private network.
The  facility   administrator  assigns  the  study  to  a  particular  receiving
physician,  who then later logs in via a standard  web browser to  download  the
images and associated reports.

     The  downloadable  eStation3D  image review  software  supports basic slice
review and simple 3D  browsing of the  dataset,  and can be upgraded to the full
AccuView  workstation  capability,  again  representing  sales  prospects  and a
continuing revenue stream.


Marketing and Distribution
--------------------------

     AccuImage   markets  its  products   through   direct  sales  to  radiology
professionals  in  hospitals  and  independent  imaging  centers.   The  Company
maintains an advertising  presence in major radiology  periodicals and journals,
and  ensures  that the Company  web site is always  vibrant and up to date.  The
Company also  actively  courts  related  press in order to develop a presence in
editorial comment on subjects related to the Company's  activities.  In order to
enhance its marketing  capability,  the Company seeks to develop an active forum
for 3D imaging on its website where any  interested  physician can come to learn
and  discuss  the  benefits  of 3D imaging  and  medical  imaging  communication
technology.

     The Company's products are primarily  distributed directly by its own sales
and installation  staff,  with the rest of the product  distribution  managed by
Imatron  Inc.   ("Imatron"),   a  non-exclusive   US  distributor  of  AccuImage
workstations, and several international distributors.

     In April  1999,  Imatron  entered  into a five-year  non-exclusive  product
development and distribution  agreement with the Company.  Under this agreement,
Imatron agreed to distribute  fully-configured  AccuView  workstations  with new
sales of the Imatron EBT scanner,  a special type of high-speed  CT scanner,  in
the US and abroad. The Company successfully met all the target milestones in the
development  schedule  and  has  entered  into  the  distribution  phase  of the
agreement.

     The  Company  has  distributors  in  Italy,  Germany,   India  and  Taiwan.
Distributors  are sold the software at a substantial  discount off our published
MSRP and then  install it on  hardware  they  purchase  themselves.  The Company
supplies the distributors with marketing materials and responds to distributors'
requests for minor  improvements  and enhancements as required to ensure success
in particular sales.

     The  majority  of  AccuImage  sales to  end-users  and  distributors  are a
combination of "off-the-shelf"  hardware and the Company's software product. The
Company purchases standard hardware products such as computer system and related
peripherals and integrates its software  product,  performing  quality assurance
and testing of the  completed  workstation  prior to shipping to the customer or
distributor.

     A second  mode of  distribution  that the  Company  is  seeking  to develop
further  is  software-only  distribution  where the  Company  delivers  only the
software  and  the  accompanying  license,  with  the  end-user  or  distributor
integrating or installing the software on their own hardware.  This distribution
channel is compatible with Internet  marketing of the product  enabling the user
to download the software directly from the Company's website.

        Effective February 17, 1997, the Company entered into a five year
license agreement with the National Electronics and Computer Technology Center
(NECTEC) in Bangkok, Thailand.  This agreement allows the Company to act as
authorized reseller for its software known as CalScore 1.0 in Thailand.


Manufacturing, Installation, Training, Service and Support
----------------------------------------------------------

     The only  manufacturing  activity the Company undertakes is the integration
of its software with  off-the-shelf  computer systems.  AccuImage staff performs
Service and support by telephone,  remote system administration,  and on-site or
return-to-base arrangements with customers.

     The Company handles all installation for direct sales of its  workstations.
Complete  systems  are  integrated  and  tested  for  quality  assurance  at the
AccuImage premises, then shipped to the customer.  AccuImage personnel travel to
the customer  site (usually for 2-3 days) to install the system and integrate it
with the customer's local network and medical imaging devices.  The cost of this
training is factored into the price of each workstation.

     For software-only  sales, the software is sent to the customer on CD-ROM or
downloaded  by the  customer  over  the  Internet.  Installation  can  often  be
performed from the instructions  provided with the software,  although AccuImage
staff generally  provides  telephone support during the installation  process in
this situation.

     Customer  training  in the use of the  software  is  performed  on-site  by
AccuImage  staff and is  separately  quoted at the time of purchase.  Additional
training days can be purchased subsequent to the initial installation.

     The Company budgets for  approximately  8% of sale price in annual warranty
support liability,  and new systems are sold with one year's service and support
included. The sales of subsequent support contracts to its existing customers do
not yet make up a large part of the Company's revenue.


Intellectual Property and Market Protection
-------------------------------------------

     The Company acquired the initial framework technology for its product under
a contract from a German developer. Subsequently, the Company performed in-house
product  development for the majority of the product it currently  markets.  The
Company has relied upon the secret and proprietary source code in protecting its
special  technology from the competition.  It has plans to, but at this time has
not,  filed for  copyright  protection  in the U.S. as well as other  countries.
Nonetheless, such protection does not prevent competitors from producing digital
displays similar to those of the AccuImage proprietary software.

     The  Company  has not filed  patent  applications  with  respect to certain
aspects of its technology,  and it generally does not rely on patent  protection
with respect to its products and  technologies.  Instead,  the Company relies on
trade  secrets  and  proprietary  know-how  that it seeks to  protect,  in part,
through appropriate employee and third-party confidentiality, non-disclosure and
proprietary information agreements.  These agreements generally provide that all
confidential  information  developed  or made  known  to the  individual  by the
Company during the course of the individual's  relationship  with the Company is
not to be disclosed to third parties, except in specific circumstances, and that
all inventions  conceived by the individual in the course of rendering  services
to the  Company  shall be the  Company's  exclusive  property.  There  can be no
assurance  that such  agreements  will not be  breached,  that  remedies for any
breach would be adequate, or that the Company's trade secrets will not otherwise
become known to, or independently developed by, competitors.  Furthermore,  such
measures may not provide meaningful protection of its trade secrets, know-how or
other   intellectual   property   in  the   event  of  any   unauthorized   use,
misappropration  or  disclosure.   Others  may  independently   develop  similar
technologies or duplicate any technology  developed by the Company. In addition,
to the extent that any patents are applied for, such applications may not result
in issued patents or, if issued,  such patents may not be valid or of value. The
Company's   products  and   technologies   may  infringe   existing  patents  or
intellectual  property  rights  of third  parties.  The  costs of  defending  an
intellectual property claim could be substantial and could adverseldy affect the
business,  even if the Company were ultimately  successful in defending any such
claims.  If its products or technologies  were found to infringe the rights of a
third party, the Company could be required to pay significant damages or license
fees or cease  production,  which  could have a material  adverse  effect on its
business.

     A significant  corollary to the above comments,  however,  is the fact that
the  Company's  competitive  position  is largely  influenced  by its ability to
maintain  responsiveness  to the developing market in which it is engaged and to
ensure  continuing  development  of its  software in order to keep pace with the
competition  and developing  market trends and needs.  Due to this aspect of the
market  in which  the  Company  operates,  the risk of  negative  impact  on the
Company's  operations due to potentially  inadequate  protection of intellectual
property is perhaps reduced.


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

     AccuImage's 3D  visualization  and analysis  products face competition from
the  manufacturers  of  imaging  equipment,  other  companies  offering  similar
software  products,  and  in-house  development  projects  at  Universities  and
hospitals to which the Company  would  otherwise  be able to sell its  products.
Nearly  all  manufactures  of  CT  and  MRI  scanners  offer  some  form  of  3D
visualization  workstation  as an optional  accessory  for their  scanners.  The
principal companies include GE Medical Systems,  Philips Medical Systems, Picker
International,  Siemens Medical Systems, and Toshiba Medical Systems,  which all
supply a workstation as an option on their imaging device. Independent suppliers
of 3D visualization  products include ISG Technologies  Inc., Vital Images Inc.,
and  Voxar,  which,  similar to the  Company,  act as third  party  vendors of a
workstation  product. In addition,  ultrasound imaging is beginning to enter the
3D  visualization  market with  companies such as Medison Co., Ltd, Life Imaging
Systems Inc, and Hewlett-Packard Co. offering products.

     Many of these competitors have substantially  greater financial,  marketing
and  technical  resources  than  the  Company,  and  should  one or  more of the
diagnostic  imaging system suppliers  distribute more competitive  visualization
products than the ones offered by the Company, the Company's business, financial
condition and results of operations could be materially adversely affected.  The
Company  believes  that  continuing  quality of service  and  ability to respond
rapidly to customer needs and market trends  represent its best defense  against
such  developments.  Additionally,  because  it uses a  windows-based  PC as its
platform,  the  Company  has lower  costs and  higher  margins  than many of its
competitors who are committed to more expensive,  less widely available hardware
platforms.


Governmental Regulation
-----------------------

     Within the United  States,  the use of  devices  in medical  procedures  is
restricted  to  those  that  have  been  granted  approval  by the Food and Drug
Administration  ("FDA")  under the Federal  Food,  Drug and Cosmetic  Act.  This
approval is known as Pre Market Approval ("PMA"). Although limited marketing for
use of products on an experimental  basis is possible without full approval,  no
material  commercial  demand  may exist  unless the  device  has  received  full
approval.  Furthermore,  medical  providers will be hesitant to acquire  devices
that utilize unapproved procedures.

     The FDA either grants or refuses  approval after a formal written  request,
known as the Pre Market  Notification,  is made for a specific device to be used
for a specific  procedure.  Ordinarily,  the applicant must demonstrate,  to the
satisfaction of the FDA, that the use of that device for the proposed  procedure
or product  would be  reliable  and safe and, if  applicable,  will have no side
effects currently or in the future.  This process can require extensive testing,
often  lasting over an extended  period and costing  large sums.  However,  if a
substantially  similar device has previously  received  approval for the same or
similar  applications,  Section 510(k) of the Food, Drug and Cosmetic Act allows
the FDA to grant PMA without extensive testing and data.  AccuImage has received
510(k) clearance to market its products from the FDA.

     Nonetheless,  even if the Company obtains regulatory approvals from the FDA
to market a product,  these  approvals may entail  limitations  on the indicated
uses of the product.  Product  approvals by the FDA can also be withdrawn due to
failure to comply with  regulatory  standards or the  occurrence  of  unforeseen
problems  following  initial  approval.  The FDA could also limit or prevent the
distribution  of the Company's  products and has the power to require the recall
of  such   products.   FDA   regulations   depend  heavily  on   administrative
interpretation,  and future  interpretations made by the FDA or other regulatory
bodies may  adversely  affect the  Company's  business.  The FDA may inspect its
business and its facilities  from time to time to determine  whether the Company
is  in  compliance   with  various   regulations   relating  to   specification,
development,  documentation,  validation,  testing,  quality control and product
labeling.  If the FDA  determines  that  the  Company  is in  violation  of such
regulations,  it could impose civil penalties,  including fines, recall or seize
products and, in extreme cases, impose criminal sanctions.

     Outside  the U.S.,  there is no  uniform  method of  approval  for  medical
devices.  International  regulatory bodies have established  varying regulations
governing  product  standards,  packaging  and  labeling  requirements,   import
restrictions,  tariff  regulations,  duties and tax requirements.  The Company;s
inability or failure to comply with the varying  regulations,  or the imposition
of  new   regulations,   could   restrict  its  ability  to  sell  its  products
internationally.  The  Company  plans  to apply  for and  obtain  the  necessary
approvals  from those  countries in which the projected  volume of sales warrant
the effort.  In certain  instances,  those  applications may be arranged through
existing  sales  representative  organizations  in the countries  with which the
Company develops relationships.


Third Party Re-Imbursement
--------------------------

     The federal  governmental  and certain states have enacted cost containment
measures  such as the  establishment  of maximum fee  standards in an attempt to
limit the extent and cost of  governmental  reimbursement  of allowable  medical
expenses under Medicare, Medicaid and similar governmental programs. A number of
states have adopted or are  considering the adoption of similar  measures.  Such
limitations  have led to a reduction in, and may further  limit funds  available
for,  diagnostic  testing,  and as a result  may  inhibit  or  reduce  demand by
healthcare  providers for the Company's  products.  Additionally,  hospitals may
continue to face other capital  constraints  that prevent them from investing in
such  equipment.  While the Company  cannot  predict what effect the policies of
governmental  entities and other third-party payers will have on future sales of
the  Company's  products,  there can be no assurance  that such policy would not
have a material adverse impact on the business of the Company.


Cost of Research and Development Activities
-------------------------------------------

     During the last two years the Company has engaged in extensive research and
development  activities.  The  Company  estimates  that it  spent  approximately
$385,000 on such research and development in 2000 and $300,000 in 1999.


Personnel
---------

     The Company  currently has ten full time employees.  The Company is engaged
in attempts to recruit sales, support and technical staff to expand its software
development  team. The Company  competes for such personnel with other companies
and  organizations  that  in  many  cases  can  offer  superior  facilities  and
resources.  In its favor, the Company is able to offer prospective employees the
opportunity  to make a large  contribution  in an exciting,  growing and dynamic
environment. Robert Taylor stepped down as the Company's Chief Executive Officer
on  December  6, 2000 to resume his prior role as Chief  Technology  Officer.  A
Management  Committee  led by Chairman of the Board Douglas P. Boyd and Director
John C. Klock is overseeing the Company while the Board searches for a new Chief
Executive Officer.


Historical Operating Losses
---------------------------

     The Company had operating  losses for the fiscal years ended  September 30,
1999  and  1998,  but the year  2000 was the  first  year the  Company  posted a
positive net income.  While the Company is optimistic  that it will increase its
revenues in fiscal year 2001,  there can be no  assurance  that the Company will
continue to be profitable in the future.


Short Operating History.
------------------------

     Although  the Company was  incorporated  in  February  1990,  it has had no
significant operations or business assets until just recently, and is yet in its
early,  development  stage.  The Company has been in actual  operation under its
current  management  for a  relatively  short  time.  It faces  all of the risks
inherent  in a new  business  and  those  risks  specifically  inherent  in  the
development  and  operation of a new business.  The  likelihood of the Company's
success must be considered in light of the problems,  expense,  difficulties and
delays frequently encountered in connection with a new business,  including, but
not  limited  to,  uncertainty  as to the  ability to develop a market for a new
product in a new area.  The purchase of the  securities  offered  hereby must be
regarded as the placing of funds at risk in a new or "start-up" venture with all
of the  unforeseen  costs,  expenses,  problems and  difficulties  to which such
ventures are subject.


Market Dependence
-----------------

     The  Company's  operations  are currently  focused  entirely in the medical
imaging industry, and the market for the Company's products is still developing,
led by advances in technology,  as well as education and marketing  performed by
the Company and its  competitors.  There can be no  assurance  that the industry
will continue to develop in the manner it has to date, or in the manner expected
by the Company.  Hence there can be no assurance  that the Company will continue
to enjoy growth opportunities and a viable market for its products.  The success
of the Company's products will depend on its ability to successfully  market its
products, its ability to maintain competitive and responsive product support and
development, and the ability and willingness of the medical community to embrace
the  benefits  offered  by the  visualization,  analysis  and  image  management
capabilities  of the  Company's  software  products.  Of this,  there  can be no
guarantee.  In an effort to limit its  exposure to this risk,  the Company  will
continue to seek  alternative  applications of its technology in order to retain
the option of diversifying should unfavorable  conditions develop in its current
marketplace.


Capital Requirements
--------------------

     In  1999,  the  Company   successfully   completed  its   transition   from
distributing  third-party  software to  distributing  its own product  developed
internally.   Additionally,  the  Company  successfully  completed  the  initial
development  phase of it product  development  and  distribution  agreement with
Imatron.  The Company ended the year with accounts  receivable of  approximately
$525,000 and nearly $102,000 in inventory.

     If AccuImage's operations progress as anticipated, of which there can be no
assurance,  the Company believes that cash flows should be sufficient to satisfy
its cash  requirements  for the next  twelve  months.  Nonetheless,  the Company
believes that a faster rate of growth will be possible with  additional  capital
contributions.  The Company's actual future capital requirements,  however, will
depend on the ability of the Company to  successfully  market its products,  the
impact of competition  in the  marketplace  in which the Company  operates,  the
ability of the Company to build and maintain  effective  sales and  distribution
channels,  and the  ability  of the  Company  to  maintain  a  development  team
responsive to the evolving market. To the extent that AccuImage's  operations do
not progress as anticipated,  additional  capital may be required sooner.  There
can be no assurance that such additional capital will be available on acceptable
terms, or at all, and the failure to obtain any such required capital would have
a material adverse effect on the Company's business.  The issuance of additional
equity  capital  may  result in  dilution  of  current  shareholder  voting  and
ownership interests


Competitive Marketplace and Technological Obsolescence Risk
-----------------------------------------------------------

     The  evolving   marketplace   in  which  the  Company   operates  has  been
characterized to date by rapid innovation and technological  change. The Company
expects this trend to continue and hence the Company's  success will be strongly
dependent on its ability to keep pace with the advancing  technology.  This task
requires continual  research and development by the Company's  development team,
which the Company must maintain and improve.

     There can be no  assurance  that the Company  will be able to achieve  this
task and compete  effectively in the  marketplace,  and it may come to pass that
products  developed by its competitors  will outshine its own products,  pushing
them towards obsolescence or rendering them non-competitive.

     Certain   companies   competing  with  AccuImage  are  large,   established
manufacturers of medical imaging  equipment.  While these companies do not apply
the same  corporate  focus on advanced  visualization  and analysis  products as
AccuImage,  they  nevertheless have  significantly  greater capital and staffing
resources  for  research  and   development  so  critical  to  success  in  this
marketplace.  Such companies also have  established  marketing and  distribution
networks and may have a competitive  advantage in marketing  products similar to
the  Company's.   Furthermore,   competition  in  the  broader   marketplace  of
computerized  medical  image  management  exists in the form of PACS vendors and
internal projects at universities and hospitals.  There can be no assurance that
the Company will be able to compete effectively with these entities.


Dependence on Major Customers
-----------------------------

     For the fiscal year ended  September 30, 2000,  sales to Imatron  accounted
for almost  sixty-seven  percent of the Company's  revenue.  In April 1999,  the
Company entered into a five-year product development and distribution  agreement
with  Imatron   whereby   Imatron  agreed  to  distribute   complete   AccuImage
workstations with new sales of its EBT scanner.

     An advanced visualization and analysis workstation such as the Company's is
generally required as an integral part of the EBT scanner  installation,  so the
Company  believes  that sales to Imatron  will  continue  to  represent  a large
portion of the Company's  revenue while other  distribution  channels and direct
sales are  developing  and  maturing.  However  there can be no assurance of the
success of Imatron's own marketing and distribution  channels,  and no guarantee
of revenue under the distribution agreement.  Furthermore,  there is competition
from other  independent  vendors of visualization  and analysis products even in
the  Imatron  EBT  scanner  market,  and  the  Company  will  need  to  maintain
competitive  development and marketing in the EBT market in the same way that it
maintains competitive development and marketing in the market at large.

     A strong competitive  advantage enjoyed by the Company in the EBT market in
particular is that through the development and distribution agreement, Imatron's
support,  training,  sales and  marketing  networks are working in the Company's
favor. In turn, the Company is gaining invaluable feedback on the performance of
its product in a highly  demanding,  day-to-day  workflow  environment.  This is
enabling  the  Company  to  rapidly  mature  the  software  in a  well-supported
environment that would otherwise not be available to a Company this size.

     Nevertheless,  a  reduction  in orders  from  Imatron  or any other  future
significant  customers  could have a material  adverse  effect on the  Company's
operating results.


Need for Additional Personnel
-----------------------------

     The  Company's  ability  to grow will  depend in part upon its  ability  to
attract and retain experienced professionals to staff a significant expansion of
its  activities.  The Board is  currently  searching  for a new Chief  Executive
Officer to replace Robert Taylor, who resigned on December 6, 2000. There can be
no assurance  that the Company will not need to hire  additional  management and
other personnel which meets its long-term goals or that the Company will be able
to find and attract qualified persons to fill such additional positions.


Management of Growth
--------------------

     The Company's business strategy involves rapid expansion during the next 18
months.  This  growth  will  place  significant  strain  on the  administrative,
operational  and financial  resources of AccuImage  and increase  demands on its
systems and controls.  The Company's  ability to manage its growth  successfully
will  require it to develop  improved  systems and  controls.  If the  Company's
management  is unable to manage  growth  effectively,  the  Company's  operating
results and financial condition could be adversely affected.


Product Liability
-----------------

     The Company's  business  exposes it to potential  product  liability claims
that are inherent in the  manufacture and sale of medical  devices,  and as such
the Company may face  substantial  liability to patients  for damages  resulting
from the faulty design or manufacture of products. The Company is in the process
of obtaining product liability insurance coverage, however it does not currently
maintain such coverage.  There can be no assurance that product liability claims
will not exceed  coverage  limits or that such  insurance  will  continue  to be
available at commercially  reasonable rates, if at all. Consequently,  a product
liability claim or other claim in excess of insured  liabilities or with respect
to uninsured liabilities could have a material adverse effect on the Company.


Product Recalls
---------------

     Complex medical  devices,  such as the Company's  products,  can experience
performance  problems in the field that require  review and possible  corrective
action by the manufacturer. The Company periodically receives reports from users
of its products  relating to  performance  difficulties  they have  encountered.
While no serious issues have arisen to date,  these or future  product  problems
could result in market  withdrawals  or recalls of products,  which could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.


Item 2. Description Of Property

     The Company's  principal office is located at 400 Oyster Point Blvd., Suite
114, South San Francisco,  California  94080. The property is a seven-room suite
of approximately  1,500 square feet. The property is leased from an unaffiliated
third party for a period of two years ending  January 2001 for an annual  rental
of $45,000,  payable  monthly in the amount of $3,750.  The  Company  expects to
renew the lease,  increasing the monthly payment to $7,258 beginning February 1,
2001. A second office is located at 384 Oyster Point Blvd, # 12. The property is
a mixed-use  facility  composed of 1,000  square feet of office space along with
2,040 square feet of  warehouse/manufacturing  space.  The lease for this second
office ends in October  2003 and the current rent is  $3,648.00  per month.  The
Company maintains tenant fire and casualty  insurance on its property located in
both buildings in an amount deemed adequate by the Company.


Item 3. Legal Proceedings

     The  Company  is not a  party  to any  pending  legal  proceeding.


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

     No matter was submitted to the vote of security  holders  during the fourth
quarter of the fiscal year ended September 30, 2000.


PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

     (a)   Market information

     The  Company's  common stock is  currently  traded on the NASD OTC Bulletin
Board under the symbol  "AIDP".  From August 1999 through  September  2000,  the
Company's  stock was traded on the  National  Quotation  Bureau's  Pink  Sheets.
Before August 1999, it was trading on the OTC Bulletin Board. The price range of
high and low sale price of the  Company's  common stock for the periods shown is
set forth below:

                Period                    High                  Low
                ------                    ----                  ---
         07/01/00 - 09/30/00             1.2000               .4500
         04/01/00 - 06/30/00             1.2500               .9000
         01/01/00 - 03/31/00             1.1250               .2000
         10/01/99 - 12/31/99             1.1250               .1250
         07/01/99 - 09/30/99              .8750               .1250
         04/01/99 - 06/30/99              .6250               .2800
         01/01/99 - 03/31/99              .8125               .2500
         10/01/98 - 12/31/99              .9375               .1875

(b)   Stockholders

     As of December 20, 2000, there were approximately 91 listed shareholders of
record of AccuImage  common stock, not including an unknown number of beneficial
holders in street name. No shares of preferred stock have been issued.

(c)   Dividends

     The Company has never declared a cash dividend and does not intend to do so
in the foreseeable  future.  Nevada Revised  Statutes  section 78.288 limits the
Company's  ability to pay  dividends  on its common  stock if any such  dividend
would render the Company insolvent.


Item 6.  Management's Discussion And Analysis of Financial Condition and Results
         Of Operations.

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

     The Company's  fiscal year end falls on September  30th,  and references to
2001,  2000, 1999 and 1998 discussed  below refer to the years ending  September
30, 2001, 2000, 1999 and 1998 respectively.


Revenue
-------

     In fiscal year 2000,  total  revenue  increased  194% to $3,114,720 in 2000
compared  with  $1,059,138 in 1999.  These  increases  were almost  entirely the
result of increased sales of the Company's  medical  visualization  and analysis
software.  In 1999,  the  Company  successfully  finished  its  transition  from
distributing software developed by a third party and licensed to the Company, to
distributing its own software that was developed  in-house.  The Company expects
continued revenue growth in fiscal year 2001, although this is a forward-looking
statement and actual results could vary materially from Company expectations.


Gross Margin
------------

     The gross margin percentage  decreased to 68% in 2000 from 77% in 1999. The
decrease of the 2000 result over the 1999 result is in part due to the Company's
transition  from one  hardware  vendor to another more  reliable  and  expensive
vendor for our  workstation  platforms.  The  remainder of the decrease in gross
margin is due to the increased purchases necessary to support the level of sales
activity during the year. While revenues almost tripled last year, the Company's
cost of good sold quadrupled. During 2001, the Company will attempt to negotiate
better discounts for the purchase of hardware and peripheral  components for its
workstations,  all of which should lead to improvement in the gross margin. This
forward-looking  statement will be influenced primarily by the Company's ability
to secure favorable  discounts along with the evolution of the Company's product
line.


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

     The Company's sales and marketing expenses were approximately  $486,000 and
$160,000  in 2000 and 1999,  respectively.  The  increase  reflects  the cost of
increased sales and marketing  activity as well as the cost of having a presence
at an increasing  number of conferences and trade shows throughout the year. The
Company  expects sales and marketing costs to continue to increase as additional
sales personnel are hired and sales commissions  increase.  This forward-looking
statement  will  be  influenced  by the  actual  sales  levels  attained  by the
Company's sales force.


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

     The Company spent  approximately  $385,000 on research and  development  in
2000 and  approximately  $300,000 in 1999.  These costs are associated  with the
in-house  development of the software that the Company is now distributing,  and
largely  represents  salaries and fees for software  developers and  independent
contractors.  The Company  anticipates that software  development  costs will at
least continue at this level and may increase if further recruitment of software
development expertise is warranted.


Operational and Administrative
------------------------------

     Operational and administrative  expenses were approximately  $1,085,000 and
$1,029,000 in 2000 and 1999,  respectively.  The increase  includes  significant
compensation costs related to increased operational and administrative  staffing
and  professional,   legal  and  accounting  fees.  The  Company  believes  that
operational and administrative  costs will increase in the future if the Company
successfully  recruits  new staff and  management  and  augments  its ability to
support present and future customers with additional technical support staff. As
a result of becoming a reporting company pursuant to the Securities Exchange Act
of 1934,  the  Company  will  likely  increase  its  expenditures  on legal  and
financial expertise.


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

     The increased  revenues  offset  increased  expenses for sales,  marketing,
administrative and research and development  resulting in an operating income of
$149,524 in 2000. The operating loss in 1999 was $517,404.


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

     On September 30, 2000, the Company held accounts  receivable of $525,000 as
well as $702,900 in cash.  The Company  also raised  $710,000 in gross  proceeds
from a private placement completed in February 2000.

     During the next nine months, the Company anticipates that cash requirements
will be met by operational income from sales, with the possibility of additional
equity  financing for research and  development  costs,  however there can be no
guarantee that such income and financing  will be forthcoming  and the inability
of the Company to secure such capital  would have a material  adverse  effect on
the Company's business.


Foreign Currency Transactions
-----------------------------

     All the Company's  transactions  are negotiated,  invoiced and paid in U.S.
dollars.


Inflation
---------

     Management  believes the Company's  operations and financial condition have
suffered no adverse material effect due to inflation.


Share Price Volatility
----------------------

     The trading  price of the  Company's  Common Stock could be subject to wide
fluctuations in response to quarter-to-quarter  variations in operating results,
changes in  earnings  estimates  by  analysts,  announcements  of  technological
innovations  or  new  products  by  the  Company  or  its  competitors,  general
conditions in the software and computer  industries and other events or factors.
In  addition,  in recent  years the stock  market in general,  and the shares of
technology companies in particular, have experienced extreme price fluctuations.
This  volatility has had a substantial  effect on the market price of securities
issued by many companies for reasons  unrelated to the operating  performance of
the specific companies. These broad market fluctuations may adversely affect the
market price of the Common Stock. Item 7. Financial Statements

     The following consolidated financial statements are filed as a part of this
Form 10-KSB and are included immediately following the signature page.

          Independent Auditors' Report....................................  F-1
          Balance Sheet...................................................  F-2
          Statement of Operations.......................................... F-3
          Statement of Changes in Shareholders' Equity..................... F-4
          Statement of Cash Flows...........................................F-5
          Notes to the Financial Statements........................... F-6-F-16


Item 8.  Changes In And Disagreements With Accountants

     From approximately April 1997 through August 1999, the Company's accountant
was  Schvaneveldt  and  Company of Salt Lake City,  Utah.  From  August  through
December  1999,  the  Company's  account  was  James R.  Kerr CPA of San  Mateo,
California.  In December 1999,  Berg & Company LLP of San Francisco,  California
became the Company's independent accountants.  During the two most recent fiscal
years, there have been no disagreements between the Company and its accountants.


PART III

     The information  required by Items 9, 10, 11 and 12 will be included in the
Company's  definitive  proxy  statement  or as an  amendment to the Form 10-KSB,
which will be filed with the  Securities  and Exchange  Commission no later than
120 days after the end of the fiscal year.


Item 13.  Exhibits and Reports on Form 8-K

(a) The exhibits listed on the accompanying "Index to Exhibits" are filed or are
incorporated herein by reference as part of this report.

(b) Reports on 8-K. No reports on Form 8-K were filed during the fourth quarter.


SIGNATURES

     In accordance  with Section 13 or 15(d) of the  Securities and Exchange Act
of 1934,  the  Company  caused  this  report to be  signed on its  behalf by the
undersigned, thereunto duly authorized.


                                   ACCUIMAGE DIAGNOSTICS CORP.


Date: December 28, 2000            By:  /s/  Douglas P. Boyd
                                      --------------------------------------
                                      Douglas P. Boyd, Chairman of the Board



     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  Registrant and in the capacities and on
the dates indicated.



/s/  Douglas P. Boyd                                          December 28, 2000
---------------------------
Douglas P. Boyd, Ph.D.
Chairman of the Board and Principal Executive Officer


/s/  Chris Shepherd                                           December 28, 2000
---------------------------
Chris Shepherd
Acting Chief Financial Officer and Director


/s/  Alexander Margulis                                       December 28, 2000
---------------------------
Alexander Margulis, M.D.
Director


/s/  John C. Klock                                            December 28, 2000
----------------------------
John C. Klock, MD
Director

<PAGE>



                        AccuImage Diagnostics Corporation

                              Financial Statements

                           September 30, 2000 and 1999



Independent Auditor's Report                                    F-1

Balance Sheets                                                  F-2

Statements of Operations                                        F-3

Statements of Changes in Stockholders' Equity                   F-4

Statements of Cash Flows                                        F-5

Notes to the Financial Statements                               F-6 - F-16




<PAGE>



                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Shareholders
of AccuImage Diagnostic Corporation

We have  audited  the  accompanying  balance  sheets  of  AccuImage  Diagnostics
Corporation,  a Nevada  Corporation,  as of September 30, 2000 and 1999, and the
related  statements of operations,  changes in  stockholders'  equity,  and cash
flows for the fiscal  years  then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion  on these  financial  statements  based  on our  audits.  The  financial
statements of the Company for the year ended  September 30, 1998 were audited by
another  auditor,  whose  report  expressed  an  unqualified  opinion  on  those
financial  statements.  Our  opinion,  in so far as it  relates  to the  amounts
included for the year ended September 30, 1998, is based solely on the report of
the other auditor.

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

In our  opinion,  based on our audits and the report of the other  auditor,  the
financial statements referred to above present fairly, in all material respects,
the financial position of AccuImage  Diagnostic  Corporation as of September 30,
2000 and 1999,  and the  results  of its  operations  and its cash flows for the
fiscal  years  then  ended in  conformity  with  generally  accepted  accounting
principles.



Berg & Company, LLP
San Francisco, CA
December 18, 2000

                                      F-1
<PAGE>



                        ACCUIMAGE DIAGNOSTICS CORPORATION
                                 Balance Sheets
                        As of September 30, 2000 and 1999



                                     ASSETS
                                     ------
<TABLE>
<CAPTION>

                                                                      2000               1999
                                                              ------------------- -----------------

Current Assets
<S>                                                           <C>                <C>
   Cash                                                       $       702,903       $    34,201
   Accounts Receivable                                                499,141           172,125
   Employee Receivable                                                      -            31,274
   Inventory                                                          101,893            44,957
   Prepaid License Fees                                                     -            16,370
   Prepaid Expenses                                                     3,648             4,489
                                                               ------------------- -----------------
Total Current Assets                                                1,307,585           303,416


Property and Equipment, net of accumulated Depreciation                52,015            61,351

Other Assets
   Trade Receivable - Non-current                                      11,375                 -
   Deposits                                                            11,711             3,820
   Goodwill, net of Accumulated Amortization                          432,691           494,507
   Other Intangible Assets                                             44,603            60,216
                                                               ------------------- -----------------
Total Other Assets                                                    500,380           558,543

        TOTAL ASSETS                                          $     1,859,980       $   923,310
                                                               =================== =================


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

Current Liabilities
   Accounts Payable                                            $       137,995      $   146,376
   Wages payable                                                        17,150           69,313
   Accrued vacation                                                     23,351            2,151
   Other accrued liabilities                                             2,400            5,332
   Product Warranty Reserves                                           246,785           84,270
   Sales tax payable                                                     3,282            4,190
   Shareholder Notes Payable                                                 -           56,500
                                                                ------------------- -----------------
Total Current Liabilities                                              430,963          368,132

Stockholders' Equity
   Preferred stock - $0.001 Par value; 10,000,000 shares                     -                -
   Authorized; none issued or outstanding
   Common stock - $0.001 Par value; 50,000,000 shares                   10,982            9,748
   Authorized; 10,981,534 and 9,748,200 issued and
   Outstanding on September 30, 2000 and 1999 respectively
   Additional Paid-In-Capital                                        2,443,470        1,740,662
   Accumulated deficit                                              (1,025,435)      (1,195,232)
                                                                 ------------------- -----------------
Total Stockholders' Equity                                           1,429,017          555,178

        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY               $   1,859,980       $  923,310
                                                                 =================== =================
</TABLE>

                  See accompanying notes and auditor's report.

                                      F-2
<PAGE>

                        ACCUIMAGE DIAGNOSTICS CORPORATION
                            Statements of Operations
             For the Years Ended September 30, 2000, 1999, and 1998

<TABLE>
<CAPTION>


                                                       2000                1999               1998
                                                 ------------------  ------------------ -----------------

<S>                                              <C>                  <C>                 <C>
   Sales                                         $      3,114,720     $     1,059,138     $    443,343
   Cost of Sales                                        1,008,521             246,793          151,195
                                                 ------------------  ------------------ -----------------

       Gross Profit                                     2,106,199             812,345          292,148

   Operating Expenses
       Bad debts                                           10,093              16,619                -
       Depreciation and amortization                       97,781             114,784          210,219
       Salaries and wages                                 693,009             551,120          245,945
       Employee Benefits                                   15,017              64,361           37,061
       General and administrative expenses                329,569             129,230           70,107
       Legal and accounting                               209,265              59,525           36,936
       Professional Consulting                            116,674             223,232          187,577
       Rent                                                45,140              41,221           40,654
       Marketing and promotion                            429,526             121,172          121,372
       Other operating expenses                            10,601               8,485           29,680
                                                 ------------------  ------------------ -----------------
   Total Operating Expenses                             1,956,675           1,329,749          979,551

       Operating Income (Loss)                            149,524            (517,404)        (687,403)

   Other (Income) and Expense
       Interest expense                                     2,151               5,927            1,389
       Other Income                                          (200)            (17,738)               -
       Interest Income                                    (23,024)             (3,209)          (5,344)
                                                 ------------------  ------------------ -----------------
   Total Other (Income) and Expense                       (21,073)            (15,020)          (3,955)

       Income (Loss) Before Taxes                         170,597            (502,384)        (683,448)

   Provision for Taxes                                       (800)               (800)            (800)
                                                 ------------------  ------------------ -----------------

       Net Income (Loss)                         $        169,797     $      (503,184)    $   (684,248)
                                                 ==================  ================== =================


   Earnings per share
       Basic                                     $         0.0163     $       (0.0530)    $   (0.0796)
                                                 ==================  ================== =================
       Diluted                                   $         0.0153     $       (0.0464)    $   (0.0739)
                                                 ==================  ================== =================

   Weighted Average Shares Outstanding
       Basic                                           10,421,035           9,496,905       8,593,333
                                                   ================    ================    ==============
       Diluted                                         11,067,956          10,854,267       9,253,563
                                                   ================    ================    ==============

</TABLE>
                                      F-3
<PAGE>


                        ACCUIMAGE DIAGNOSTICS CORPORATION
                  Statements of Changes in Stockholders' Equity
             For the Years Ended September 30, 2000, 1999, and 1998

<TABLE>
<CAPTION>


                                                 Common Stock
                                       --------------------------------                     Accumulated
                                                                            Paid-In          Earnings
                                           Shares           Amount          Capital          (Deficit)           Total
                                       ---------------  --------------- ---------------  ------------------ ---------------

<S>                                      <C>            <C>             <C>              <C>                <C>
Balance-September 30, 1997                8,582,100      $      8,582    $  1,148,418     $        (7,800)   $  1,149,200

Shares Issued for cash                      150,000               150          74,850                    -         75,000

Net Loss for Fiscal Year ended
September 30, 1998                                -                 -               -            (684,248)      (684,248)
                                       ---------------  ---------------   -------------    ----------------   -------------

Balance-September 30, 1998                8,732,100             8,732       1,223,268            (692,048)       539,952

Shares issued for cash                      780,000               780         382,720                    -       383,500

Shares issued for compensation              236,100               236         134,674                    -       134,910

Net Loss for Fiscal Year ended
September 30, 1999                                                  -               -            (503,184)      (503,184)
                                       ---------------  ---------------   -------------    ----------------   -------------

Balance-September 30, 1999                9,748,200             9,748       1,740,662          (1,195,232)       555,178

Shares issued for cash, net of            1,183,334             1,184         675,816                    -       677,000
issuance costs

Options exercised during the year            50,000                50          20,450                    -        20,500

Compensation recognized on options                -                 -           6,542                    -         6,542
granted

Net Income for Fiscal Year
ended September 30, 2000                          -                 -               -             169,797        169,797
                                       ---------------  --------------- ---------------  ------------------ ---------------

Balance-September 30, 2000               10,981,534      $     10,982    $  2,443,470     $    (1,025,435)   $ 1,429,017
                                       ===============  =============== ===============  ================== ===============
</TABLE>

                                      F-4
<PAGE>


                        ACCUIMAGE DIAGNOSTICS CORPORATION
                            Statements of Cash Flows
              For the Years Ended September 30, 2000, 1999 and 1998


<TABLE>
<CAPTION>
                                                                  2000              1999              1998
                                                            ----------------    ----------------    -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                          <C>                 <C>               <C>
 Net Income (Loss)                                           $     169,797       $   (503,184)     $ (684,248)
 Adjustment to reconcile net loss to net cash
  provided (used) by operating activities:
  Depreciation and amortization                                     97,781             112,599         210,219
  Issuance of common stock for services                                  -             134,910               -
  Compensation expense on stock options granted                      6,542                   -               -
  Change in warranty reserve                                       162,515              54,605               -
  Change in receivables                                           (307,117)           (186,173)         80,499
  Change in inventory                                              (56,936)            (32,591)         23,208
  Change in license rights                                          16,370              65,480         (81,850)
  Change in prepaid assets                                             841                (822)          5,033
  Change in deposits                                                (7,891)                498          (3,917)
  Change in accounts payable                                        (8,381)            127,396          18,981
  Change in accrued expenses                                       (34,802)             (8,551)       (101,039)
                                                            -----------------   -----------------  --------------
Net Cash Provided (Used) by Operating Activities                    38,719            (235,833)       (533,114)

CASH FLOW FROM INVESTING ACTIVITIES:
 Investment in Property and Equipment                              (11,017)            (37,873)         (7,741)
                                                            -----------------   -----------------  ---------------
Net Cash Used by Investing Activities                              (11,017)            (37,873)         (7,741)

CASH FLOW FROM FINANCING ACTIVITIES:
 Shareholder Note Payable Proceeds (Payments)                      (56,500)           (100,000)        156,500
 Sale of common stock, net of issuance cost                        677,000             383,500          75,000
 Exercise of options                                                20,500                   -               -
 Deferred Private Offering Costs                                         -              22,290         (22,290)
                                                            ------------------  -----------------   ---------------
Net Cash Provided by Financing Activities                          641,000             305,790         209,210
                                                            ------------------  ------------------  --------------
NET INCREASE (DECREASE) IN CASH                                    668,702              32,084        (331,645)


CASH AT BEGINNING OF YEAR                                           34,201               2,117         333,762
                                                            ------------------  ------------------  ---------------

CASH AT END OF YEAR                                          $     702,903       $      34,201      $    2,117
                                                            ==================  ==================  ================

Supplemental Disclosure:
  Income taxes paid                                         $            -       $           -      $       -
  Interest Paid During the Year                             $        5,554       $       3,750      $       -
                                                            ==================  ==================  =================

Non-Cash Activities:
  Compensation expense on stock options granted             $        6,542       $           -       $      -
                                                            ==================  ==================  =================
  Common stock issued for services                          $            -       $     134,910       $       -
                                                            ==================  ==================  =================
</TABLE>

                                      F-5
<PAGE>




                        ACCUIMAGE DIAGNOSTICS CORPORATION
                          Notes to Financial Statements
                           September 30, 2000 and 1999



1)       ORGANIZATION
         ------------

         The Company was  organized  on February 2, 1990,  under the Laws of the
         State of Nevada as Black Pointe  Holdings,  Inc. On June 26, 1996,  The
         Company  changed  its  the  name to  AccuImage  Diagnostics  Corp  (the
         Company).

         On  September 30, 1997,  pursuant to a Stock  Exchange  Agreement,  the
         Company  acquired all of the outstanding  shares of AccuImage,  Inc., a
         Nevada  corporation,  which  owned  the  exclusive  rights  to  certain
         computer  software and technology which the Company had been licensing.
         Subsequent to the exchange, AccuImage, Inc. was dissolved.

         AccuImage  Diagnostics  Corp.  is based in South San  Francisco  and is
         engaged in the  development,  marketing  and sales of Internet  enabled
         software   used  for  medical  data  and   interactive   medical  image
         visualization.  The  software,  which  runs  on  a  personal  computer,
         interprets  images obtained from leading  equipment  manufacturers  and
         imaging modalities (e.g., CT, MRI, and Ultrasound).

         The Company  provides its software to three different  markets.  First,
         the Company  offers  hospitals,  clinics and  medical  professionals  a
         scalable solution for transmitting data on the Internet,  and enhancing
         the  diagnostic  value of data already  obtained.  Second,  the Company
         sells to Original Equipment Manufacturers (OEMs) of medical acquisition
         devices (e.g. GE,  Siemens,  and Imatron) a  customizable  version that
         adds value to their core  products.  Third,  the Company offers vendors
         who sell Picture and Archiving  Communication  Systems (PACs) a medical
         diagnostic   software  package  that  complements  and  enhances  their
         existing product line.

2)       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         ------------------------------------------

         Basis of Accounting

         The Company  presents its financial  statements on the accrual basis of
         accounting in accordance with generally accepted accounting principles.

         Reclassification of Financial Statements Presentation

         Certain  reclassifications  have  been  made to the  September  30,1999
         fiscal year ending  financial  statements  to conform to September  30,
         2000  fiscal  year  ending  financial  statement   presentation.   Such
         reclassifications had no effect on net income as previously reported.

         Fiscal Year

         The Company has a fiscal year that ends on September  30.  Fiscal years
         2000, 1999 and 1998 ended on September 30, 2000, September 30, 1999 and
         September 30, 1998 respectively.

         Concentration of Cash

         The Company at times  maintains cash balances in an account that is not
         fully federally  insured.  Uninsured  balances as of September 30, 2000
         were $633,842.

                                      F-6
<PAGE>
         Cash Equivalents

         For purposes of the statement of cash flows, the Company  considers all
         highly  liquid  securities  purchased  with maturity of three months or
         less to be cash  equivalents.  As of September 30, 2000 and 1999, there
         are no cash equivalents.

         Inventories

         Inventories  are  stated  at the  lower  of  cost  or  market.  Cost is
         determined by the first-in, first-out (FIFO) method.

         Property and Equipment

         Property and Equipment are stated at cost. Depreciation is computed for
         financial  reporting  purposes using the straight-line  method over the
         estimated  useful lives of the assets.  Repairs and maintenance that do
         not extend the useful life of  property  and  equipment  are charged to
         expense  as  incurred.  When  property  and  equipment  are  retired or
         otherwise  disposed of, the asset and its accumulated  depreciation are
         removed from the accounts and the resulting profit or loss is reflected
         in income.

         Long-lived assets

         In accordance with Statement of Financial Accounting Standards ("SFAS")
         No. 121,  the Company  reviews the  carrying  values of its  long-lived
         assets and identifiable  intangibles for possible  impairment  whenever
         events or changes in circumstances indicate that the carrying amount of
         assets to be held and used may not be recoverable.

         Intangible assets

         Purchased  technology  and  other  intangible  assets,   (software  and
         intellectual  property licenses) are amortized on a straight-line basis
         over the expected periods to be benefited, generally five to ten years.
         The Company evaluates the  recoverability of these intangible assets at
         each period end using the  undiscounted  estimated future net operating
         cash flows expected to be derived from such assets.  If such evaluation
         indicates a potential  impairment,  the Company  uses the fair value to
         determine the amount of these intangible  assets that should be written
         off.

         Software development costs

         The  Company   capitalizes   certain  software   development  costs  in
         accordance  with SFAS No.  86,  Accounting  for the  Costs of  Computer
         Software  to Be Sold,  Leased or  Otherwise  Marketed.  Costs  incurred
         internally  to create a  computer  software  product  or to  develop an
         enhancement to an existing product are charged to expense when incurred
         as research and development  until  technological  feasibility has been
         established  for the product or enhancement.  Thereafter,  all software
         production   costs  are  capitalized  and  reported  at  the  lower  of
         unamortized cost or net realizable  value.  Capitalization  ceases when
         the  product  or  enhancement  is  available  for  general  release  to
         customers.  Software development costs are amortized on a product basis
         at the greater of the amounts  computed  using (a) the ratio of current
         gross  revenues for a product or  enhancement  to the total current and
         anticipated  future gross revenues for that product or enhancement,  or
         (b) the straight-line method over the remaining estimated economic life
         of the product or  enhancements,  not to exceed five years. The Company
         evaluates the net realizable value of its software development costs at
         each period end using undiscounted  estimated future net operating cash
         flows  expected to be derived from the respective  software  product or
         enhancement. If such evaluation indicates that the unamortized software
         costs  exceed the net  realizable  value,  the  Company  writes off the
         amount by which the unamortized  software  development costs exceed net
         realizable value.

                                      F-7
<PAGE>
         Warranty Reserve

         Based  upon  historical  costs and its sales  agreements,  the  Company
         maintains  a  reserve  of 8% of  product  sales  to  cover  anticipated
         warranty  costs related to software  sold.  This reserve is continually
         compared to actual costs by management and revised as necessary.

         Advertising Costs

         The  Company   expenses   advertising   costs  as  they  are  incurred.
         Advertising expenses were $41,758 and $1,490 for the fiscal years ended
         on September 30, 2000 and 1999, respectively.

         Software Revenue and Costs

         According  to SOP  97-2  "Software  Revenue  Recognition",  revenue  is
         recognized  when the receipt of payment is probable,  the selling price
         is  known,  the  software  has  been  delivered,  and the  contract  is
         enforceable. The company follows these guidelines to recognize revenue.
         Research  and  Development  costs  related to both  future and  present
         products are charged to expense as incurred.

         Income Taxes

         The Company  accounts for income taxes in accordance with SFAS No. 109,
         "Accounting  for Income  Taxes".  Income taxes are provided for the tax
         effects  of  transactions  reported  in the  financial  statements  and
         consist of deferred taxes related to  differences  between the basis of
         assets and  liabilities  for  financial and income tax  reporting.  The
         deferred  tax assets and  liabilities  represent  the future tax return
         consequences  of those  differences,  which  will be either  taxable or
         deductible  when the assets and  liabilities  are recovered or settled.
         Deferred  taxes  are also  recognized  for  operating  losses  that are
         available to offset future taxable income.

         Use of Accounting Estimates

         The  preparation  of  the  financial   statements  in  conformity  with
         generally accepted  accounting  principles  requires management to make
         estimates  and  assumptions  that  affect the  amounts  reported in the
         financial  statements  and  accompanying  notes.  Actual  results could
         differ materially from those estimates.

         The actual  results with regard to warranty  expenditures  could have a
         material  impact on the  financial  statements  of the  Company  if the
         actual rate of unit failure is greater  than what was  estimated by the
         Company in the calculation of its warranty reserve.

         Comprehensive Income (Loss)

         The Financial  Accounting Standards Board issued Statement of Financial
         Accounting  Standards No. 130, "Reporting  Comprehensive  Income" (SFAS
         130), which is effective for financial statements for periods beginning
         after December 15, 1997. This pronouncement  establishes  standards for
         reporting and display of comprehensive income (loss) and its components
         in a full set of  general-purpose  financial  statements.  The Company,
         however, does not have any components of comprehensive income (loss) as
         defined by SFAS 130 and  therefore,  for the years ended  September 30,
         2000  and  1999  comprehensive  income  (loss)  is  equivalent  to  the
         Company's net income (loss).

         Net Loss Per Share

         The  Company  follows  SFAS  No.  128,  "Earnings  per  Share,"  which
         establishes  standards for computing and presenting earnings per share
         ("EPS").

         Basic EPS is  computed by dividing  net income  (loss) by the  weighted
         average  number  of  common  shares   outstanding.   The  dilutive  EPS
         calculation gives effect to all dilutive potential common shares,  such
         as stock options or warrants, which were outstanding during the period.
         Shares issued during the period and shares  repurchased  by the Company
         are weighted  for the portion of the period that they were  outstanding
         for both basic and diluted EPS calculations.

         Stock-Based Compensation

         The Company  accounts  for its stock based  compensation  plan based on
         accounting  Principles  Board ("APB")  Opinion No. 25. In October 1995,
         the  Financial   Accounting   Standards  Board  issued  SFAS  No.  123,
         Accounting  for  Stock-Based  Compensation.  The Company has determined
         that it will not change to the fair value  method and will  continue to
         use APB Opinion No. 25 for  measurement  and recognition of any expense
         related to employee  stock based  transactions.  As such,  compensation
         expense  would  generally  be recorded on the date of grant only if the
         current  market  price of the  underlying  stock  exceeds the  exercise
         price.

                                      F-8
<PAGE>
         In March 2000, the FASB released Interpretation No. 44, "Accounting for
         Certain Transactions Involving Stock Compensation." This Interpretation
         addresses  certain  practice  issues related to APB Opinion No. 25. The
         provisions  of this  Interpretation  are  effective  July 1, 2000,  and
         except for  specific  transactions  noted in  paragraphs  94-96 of this
         Interpretation, shall be applied prospectively to new awards, exchanges
         of awards in business  combinations,  modifications  to an  outstanding
         award,  and  exchanges  in grantee  status  that occur on or after that
         date. Certain events and practices covered in this  Interpretation have
         different application dates, and events that occur after an application
         date  but  prior  to  July  1,  2000,  shall  be  recognized  only on a
         prospective  basis.  Accordingly,  no  adjustment  shall  be made  upon
         initial  application of the Interpretation to financial  statements for
         periods prior to July 1, 2000.  Thus,  any  compensation  cost measured
         upon initial  application of this  Interpretation that is attributed to
         periods  prior to July 1, 2000  shall not be  recognized.  The  Company
         adopted the provisions of this Interpretation starting July 1, 2000.

         Accounting Pronouncements

         The FASB issued SFAS No. 133, Accounting for Derivative Instruments and
         Hedging Activities.  SFAS No. 133 requires that an enterprise recognize
         all derivatives  either as assets or as liabilities in the statement of
         financial  position and measure those  instruments  at fair value.  The
         statement is effective for the Company's  fiscal year ending  September
         30,  2000.  The Company  does not have any  derivative  instruments  or
         conduct any hedging activities.

         The FASB  issued  SFAS No. 131 on  "Disclosures  about  Segments of an
         Enterprise  and Related  Information"  effective in 1998.  The Company
         evaluated  SFAS No. 131 and  determined  that the Company  operates in
         only one segment.

3)       RELATED PARTY TRANSACTIONS
         --------------------------

         Douglas Boyd,  P.H.D.  is the Chairman of The Board of Directors and a
         shareholder in the Company.  Mr. Boyd is also a member of the Board of
         Directors of Imatron, Inc. and a minority shareholder in Imatron, Inc.
         On April 1999,  AccuImage  Diagnostics Corp. entered into an agreement
         with Imatron,  Inc. for Imatron to be the exclusive distributor of the
         Company's products.  Sales to Imatron,  Inc. represented around 69% of
         the Company's total revenue for the year.

         Douglas Boyd and family  members are majority  shareholders  of Imaging
         Technology  Group,  Inc (ITG).  Sales to ITG for the fiscal  year ended
         September 30, 2000 amounted to $70,000.

         John Klock, a member of the Board of directors of the Company, is also
         a 50 % shareholder of Holistica Inc. Sales to Holistica,  Inc. for the
         fiscal year ended September 30, 2000 amounted to $30,000.

         A family member of Douglas Boyd, the chairman of the Board of Directors
         of AccuImage  Diagnostics Corp.,  provided software consulting services
         to the  Company,  and received  remuneration  of $30,485 and options to
         purchase 30,000 shares of the Company common stock.

4)       ACCOUNTS RECEIVABLE - TRADE
         ---------------------------

         Accounts  receivable - trade is net of allowance for doubtful  accounts
         of $26,712 and $16,619 as of September 2000 and 1999 respectively,  and
         consists of the following at September 30:

<TABLE>
<S>                          <C>                      <C>                  <C>                   <C>

                                     2000                  2000                   1999                 1999
                                    Amount              Percentage               Amount             Percentage
                              -------------------     ----------------     -------------------    ---------------

        Customer A                    $  258,003                  52%      $    83,767                 49%
        Customer B                        96,745                  20%           51,457                 30%
        Customer C                        34,992                   7%           18,917                 11%
        All Others                       109,401                  21%           17,984                 10%
                              -------------------     ----------------     -------------------    ---------------
                                      $  499,141                 100%      $   172,125                100%
</TABLE>

         As of September  30, 2000 and 1999,  the Company was owed  $258,003 and
         $83,767  respectively for sales to another entity  controlled and owned
         in part by Company stockholders.

                                      F-9
<PAGE>

5)       INVENTORIES
         -----------

         Inventories  consist of personal  computer  components  of $101,893 and
         $44,957 for the years ended September 30, 2000 and 1999 respectively.

6)       PROPERTY AND EQUIPMENT
         ----------------------

         Property and Equipment consists of the following at September 30:


                                                     2000              1999
                                                 ------------   ---------------

             Computers & Equipment               $   66,989      $   58,987
             Furniture & Fixtures                    35,208          32,193
             Software                                30,349          30,349
                                                 ------------    --------------
                                                    132,546         121,529
             Less Accumulated Depreciation          (80,531)        (60,178)
                                                 ------------     -------------

                                                 $   52,015       $  61,351
                                                 =============    =============

         The  useful  lives  of  all  assets  are   estimated  to  be  5  years.
         Depreciation  expense for the periods ended September 30, 2000 and 1999
         was $20,353 and $35,340 respectively.


7)       OTHER ASSETS
         ------------

         The Company has a long-term trade receivable amounting to $11,375 as of
         September  30, 2000.  Security  deposits were $11,711 and 3,820 for the
         periods ended September 30, 2000 and 1999 respectively.



8)       INTANGIBLE ASSETS
         -----------------

         Intangible assets consist of the following at September 30:

                                               2000                 1999
                                           -----------           ---------

             AccuImage Software              $ 125,716         $ 125,716
             License Fees                       15,200            15,200
                                          ---------------      -------------
                                           $   140,916         $ 140,916
             Less Accumulated Amortization     (96,313)          (80,700)
                                          ---------------      -------------
                                           $    44,603        $   60,216
                                          ===============      =============

         Amortization expense for the periods ended September 30, 2000 and 1999
         was $15,613 and $17,630 respectively.

         AccuImage Software

         On September  30,1997,  the Company  acquired  AccuImage Inc. which had
         entered into an agreement  with the  developer of a 3D medical  imaging
         software  package  referred to as MIDP.  The  developer  granted to the
         AccuImage  Inc. an exclusive  license to use and sell the MIDP software
         for a period of ten years.

         The  Company  subsequently  assumed  all the rights  under the license
         agreement when AccuImage Inc. was acquired.  The value of the software
         was  capitalized as part of the purchase price of AccuImage,  Inc. and
         is being amortized over its expected useful life of 10 years,

         On November 1, 1998,  the  developer  of the  software,  pursuant to an
         employment  settlement,  transferred  all rights in the software to the
         Company.

         Other License Fees

         Included in other  license  fees is a $10,000  fee the Company  paid to
         National Science and Technology  Development Agency,  Bangkok Thailand,
         for a License to act as an "Exclusive  authorized reseller" of hardware
         and  software  known as CalScore  1.0.  The  license,  which  commenced
         February 17, 1997, is being amortized over its term of 5 years.

                                      F-10
<PAGE>
9)       NOTES PAYABLE
         -------------

         Notes Payable - Other

         The Company  borrowed  $100,000 in 1997 on a short-term  note. The note
         bore  interest of 12% per annum and was due upon  demand.  The note was
         repaid during the year ended September 30, 1999.

         Shareholders Note Payable

         The Company has notes  payable to a number of its  shareholders.  These
         notes bear a 5% interest rate and are due upon demand.  The balances of
         the notes  payable due to  shareholders  at September 30, 2000 and 1999
         were $-0- and $56,500, respectively.

         Interest  expense  on all  notes  payable  for  the  periods  ended  on
         September 30, 2000 and 1999 was $2,151 and $5,928 respectively.


10)      STOCKHOLDERS' EQUITY
         --------------------

         Starting  in August  1998,  the Company  commenced a private  placement
         offering  which  offered  for sale up to  1,200,000  Units at $0.80 per
         Unit.  Each Unit  consists of one share of common stock and one warrant
         which  entitles  the holder to purchase one share of common stock at an
         exercise price of $1.00 per share, subject to adjustment.

         The common  stock and the warrants are  separately  transferable.  Each
         warrant will be immediately  exercisable upon issuance and shall remain
         exercisable  for a period of five years from its date of issuance.  The
         Company  may call  all of its  warrants  for  redemption  at $0.01  per
         warrant  commencing  one year from the date of closing of the offering.
         The minimum purchase per investor is 31,250 Units ($25,000) except that
         the Company in its sole discretion may accept  subscriptions  for fewer
         Units. Thirteen individuals purchased 930,000 Units as of September 30,
         1999.

         On January 25, 2000, the Company concluded a private placement offering
         of up to 1,285,000 Units at $0.60 per Unit. Each Unit consisting of one
         share of Company common stock and one common stock purchase  warrant to
         purchase  one share of company  common  stock at an  exercise  price of
         $1.50 per share at any time during a five-year  term  commencing on the
         date of  issuance.  The  Company  paid a finder's  fee in the amount of
         $33,000 to a related party for services rendered in connection with the
         placement of the Units.

         The  issuance  of the  securities  was  exempt  from  the  registration
         requirements  of the  Securities  Act of 1933, as amended,  pursuant to
         Section 4(2) thereof.  The total Units sold under the private placement
         offering as of September 30, 2000 were 1,183,334. Net proceeds from the
         private placement were $672,072.

         In fiscal year 2000,  the Company  issued  50,000  shares of restricted
         common stock upon the exercise of an option  priced at $0.41 per share.
         The  issuance  of the  securities  was  exempt  from  the  registration
         requirements  of the  Securities  Act of 1933, as amended,  pursuant to
         section 4(2) thereof.

         A summary of the  Company's  outstanding  warrants as of September 30,
         2000 and 1999 is presented below:


                                                                 Average
                                                    Shares     exercise price
                                               ------------- -------------------
         Outstanding at September 30, 1998          150,000        $1.00
                                                                   -----

         Issued                                     780,000        $1.00
                                                    -------        -----

         Outstanding at September 30, 1999          930,000        $1.00
                                                                   -----

         Issued                                   1,183,334        $1.50
                                                  ---------        -----

         Outstanding at September 30, 2000        2,113,334        $1.28
                                                  =========        =====

                                      F-11
<PAGE>
11)      PRODUCT DEVELOPMENT, DISTRIBUTION, AND WARRANTY SUPPORT AGREEMENT
         -----------------------------------------------------------------

         On April 14, 1999, the Company  entered into a five year agreement with
         Imatron, Inc., a New Jersey Corporation and related party, which allows
         Imatron to be the exclusive authorized distributor and service provider
         of the  Company's  products  to  Imatron's  new  customers.  Imatron is
         responsible  for  promotion,   installation,  sales,  and  applications
         training of all hardware and software products distributed by them.

         Under the agreement,  the Company  continues to provide  service to the
         prior  installed base of Imatron  customers and can still solicit sales
         from these  customers for new products.  The Company agrees not to sell
         below the published  selling  price of its products to these  customers
         without the prior review and written approval of Imatron.

         For the Company's  products sold by Imatron,  Imatron  provides on-site
         applications  training and installation.  Each sale includes a one-year
         warranty that covers parts and on-site  service and phone support plan.
         The Company  agrees to further  pay Imatron 5% of the selling  price of
         the Company's products purchased by Imatron to offset these costs

         For  single  sales  over  $40,000,  the  Company  offers an  additional
         one-year  warranty that covers parts and on-site  service  performed by
         Imatron.  The  Company  will pay an  additional  5% of  product's  list
         selling price to Imatron for providing these services


12)      CONCENTRATIONS
         --------------

         The company derives all of its revenues from organizations operating in
         the medical field, from medical professionals, and from other companies
         which  are  in  the  business  of  manufacturing  and  selling  medical
         equipment and devices.

         The Company  derived  $2,131,347 and $750,134 in revenues from Imatron,
         Inc.,   another  entity   controlled  and  owned  in  part  by  Company
         stockholders,  during  the  years  ended  September  30,  2000 and 1999
         respectively.  The revenue from Imatron, Inc. represents  approximately
         69% of the total revenue generated by AccuImage Diagnostics Corp.


13)      COMMITMENTS AND CONTINGENCIES
         -----------------------------

         Litigation

         The Company has no litigation pending.

         Employment and Consulting Agreements

         In June 1999,  the Company  entered  into an  agreement  with its Chief
         Technology  Officer.   The  agreement  included  an  annual  salary  of
         $110,000,  health and retirement benefits and 300,000 stock options. In
         August 1999, the Chief Technology Officer assumed the position of Chief
         Executive Officer, and was granted a salary of $126,500 and was granted
         an additional 150,000 stock options.

         The Company has  various  employment  and  consulting  agreements  less
         material in nature that  provide for  issuance of the  Company's  stock
         options  in  exchange  for  services  rendered  to the  Company.  These
         agreements  relate  primarily  to  professional  services  rendered  in
         connection with product development, sales and technical support.

         Other

         During the year ended  September 30, 2000, the Company  entered into an
         agreement  with a customer to advance it $86,000.  On October 11, 2000,
         the Company  concluded the  transaction.  Terms for repayment  call for
         minimum monthly payments of $7,454  including  interest at 10% maturing
         on December 29, 2001. The note receivable is unsecured.

         Leases

         On January 22, 1998,  the Company  entered into a three-year  operating
         lease agreement for its main operating  facility  located at 400 Oyster
         Point Blvd in South San  Francisco,  CA with Kashiwa  Fudosan  America,
         Inc, a California  Corporation.  The commencement  date of the lease is
         February 1, 1998,  and the  expiration  date is January 31, 2001.  Rent
         expense  under this lease  agreement  was  $45,140  and $41,221 for the
         fiscal years ended on September 30, 2000 and 1999 respectively.

         On August 31, 2000,  the Company  entered  into a three-year  operating
         lease agreement for its second operating facility located at 384 Oyster
         Point  Blvd in  South  San  Francisco,  CA with  Shelton  International
         Holdings,  Inc., a Hawaii  corporation.  The  commencement  date of the
         lease is November 1, 2000, and the expiration date is October 31, 2003.

                                      F-12
<PAGE>
         Minimum rental  commitments under these operating lease agreements are
         as follows:

         Fiscal Year Ended September 30,

                     2001            $    55,408
                     2002                 45,381
                     2003                 47,196
                     2004                  3,946
                                    -----------------

                     Total           $    151,931
                                    =================


14)      STOCK OPTION PLAN
         -----------------

         During 1997,  the Company  started a Stock Option Plan that  authorized
         the  issuance of options for up to  1,600,000  shares of the  Company's
         common stock.

         During 2000, the Board of Directors  authorized the issuance of options
         for an additional 500,000 shares of the Company common stock.

         Under this plan, no option may be exercised  after the expiration  date
         of ten years from the date of grant and no option may be  exercised  as
         to less than one hundred  (100)  shares at any one time.  There are two
         categories of options:  Incentive Stock Options (ISO) AND Non-Qualified
         Stock Options (NSO).

         ISOs are granted to employees and the purchase  price shall not be less
         than the Fair  Market  Value of the common  stock  share at the date of
         grant and no ISO shall be  exercisable  more than ten (10)  years  from
         date of grant  except that in the case of any person who owns more than
         10% of the  voting  power of all  classes  of  stock,  no ISO  shall be
         exercisable more than five (5) years from date of grant.

         NSOs may be granted to any eligible  participant.  The  purchase  price
         shall not be less than 85% of the Fair  Market  Value of the  shares at
         the time except that when the grantee  owns more than 10% of the voting
         power of all  classes  of stock at the time of  grant,  the price is be
         110% of the Fair  Market  Value of the shares at the time of the grant.
         No NSO shall be  exercisable  more than ten (10) years from the date of
         grant.

         In general,  granted  ISO's expire  three months after the  termination
         date.  If  employment  termination  is due to cause,  the options shall
         expire immediately;  and if employment  termination is due to permanent
         and total  disability,  the  options  may be  exercised  up to one year
         following termination.

         The Company has adopted only the disclosure provisions of SFAS No. 123.
         It applies APB Opinion No. 25 and related interpretations in accounting
         for its stock option plan.  Accordingly,  no compensation cost has been
         recognized  for its stock option plan other than for options  issued to
         outside  third  parties.  If  the  Company  had  elected  to  recognize
         compensation  expense  based  upon the fair value at the grant date for
         awards under this plan consistent  with the  methodology  prescribed by
         SFAS No. 123, the Company's  net income (loss) and earnings  (loss) per
         share would be reduced to the pro forma amounts indicated below for the
         years ended September 30:
<TABLE>
<CAPTION>

                                                                         2000              1999
                                                                    --------------    --------------
         Net Income (loss):
<S>                                                                  <C>               <C>
                     As reported                                      $  169,797        $  (503,184)
                     Pro forma                                        $  (39,599)       $  (646,876)

         Basic and diluted earnings (loss) per common share:
                As reported:
                                Basic                                 $   0.0163        $    (.0530)
                                Diluted                               $   0.0153        $    (.0464)
                Pro forma:
                                Basic                                 $   (.0038)       $    (.0681)
                                Diluted                               $   (.0036)       $    (.0596)
</TABLE>
                                      F-13
<PAGE>
         Options are  granted at prices are equal to the  current  fair value of
         the Company's  common stock at the date of grant. The vesting period is
         usually  related to the length of  employment  or  consulting  contract
         period.

         The fair  value of these  options  was  estimated  at the date of grant
         using  the  Black-Scholes   option-pricing  model  with  the  following
         weighted-average  assumptions:  1999:  dividend  yield of 0%;  expected
         volatility of 50%;  risk-free  interest rate of 6.0%, and expected life
         of 3 to 5 years;  2000:  dividend yield of 0%;  expected  volatility of
         200%; risk-free interest rate of 5.48%, and expected life of 5 years.

         A  summary  of the  status of the  Company's  stock  option  plan as of
         September 30, 2000 and 1999 and changes during the years ended on those
         dates is presented below:

<TABLE>
<CAPTION>

                                                            2000                                 1999
                                              ----------------------------------    --------------------------------

                                                                    Weighted                            Weighted
                                                  Number             average                             average
                                                    of              exercise          Number of         exercise
                                                  options             price            options            price

                                              ----------------    -- -----------    --------------    -- -----------
<S>                                                 <C>           <C>                   <C>           <C>
Outstanding at beginning of year                    1,446,280     $        0.44         1,264,200     $        0.39
Granted                                               526,199              0.95           827,080              0.49
Exercised                                             (50,000)             0.41         (645,000)              0.40
Forfeited/Cancelled                                   (90,000)             0.91                 -                 -
                                              ----------------    -- -----------    --------------    -- -----------


Outstanding at end of year                          1,832,479     $        0.57         1,446,280     $        0.44
                                              ================    ==============    ==============    ==============


Options exercisable at year end                       969,867                             474,405
                                              ================                      ==============

Weighted average fair value of
Options granted during the year               $         0.92                        $       0.43
                                              ================                      ==============
</TABLE>

         The  Black-Scholes  option  valuation  model was  developed  for use in
         estimating  the fair  value of traded  options,  which  have no vesting
         restrictions and are fully transferable.  In addition, option valuation
         models require the input of highly subjective assumptions including the
         expected stock price volatility.  Because the Company's  employee stock
         options  have  characteristics  significantly  different  from those of
         traded options, and because changes in the subjective input assumptions
         can materially affect the fair value estimate, in management's opinion,
         the  existing  models  do not  necessarily  provide a  reliable  single
         measure of the fair value of its stock options.

         At September  30, 2000 and 1999,  the Company  granted to its employees
         and other eligible  participants  options  exercisable  for the Company
         common stock.  The exercise price varies depending on the trading price
         of the  Company's  common  stock on the date of  issuance  among  other
         factors.

                                      F-14
<PAGE>
<TABLE>
<CAPTION>

                                     Options Outstanding                            Options Exercisable
                  -----------------------------------------------------------------------------------------------
                                            Weighted
                          Number             Average          Weighted             Number            Weighted
    Range of           Outstanding          Remaining          Average           Exercisable          Average
    Exercise              as of            Contractual        Exercise              as of            Exercise
     Prices         September 30, 1999        Life              Price        September 30, 1999        Price
---------------- --------------------------------------- ---------------------------------------- --------------


<S>      <C>              <C>                     <C>     <C>                      <C>              <C>
 $0.30 - $0.34            20,000                  9.08     $   0.31                15,000           $    0.31
 $0.36 - $0.40           615,000                  8.29     $   0.38               218,125           $    0.38
 $0.41 - $0.45           50,000                  9.17     $   0.41                  -              $    0.41
 $0.46 - $0.49           175,000                  2.92     $   0.47               175,000           $    0.47
     $0.50               586,280                  9.66     $   0.50                66,280           $    0.50
                  -----------------------                                   ----------------------
                       1,446,280                                                  474,405
                  =======================                                   ======================


                                     Options Outstanding                            Options Exercisable
                  -----------------------------------------------------------------------------------------------
                                            Weighted
                          Number             Average          Weighted             Number            Weighted
    Range of           Outstanding          Remaining          Average           Exercisable          Average
    Exercise              as of            Contractual        Exercise              as of            Exercise
     Prices         September 30, 2000        Life              Price        September 30, 2000        Price
----------------- --------------------------------------- ---------------------------------------- --------------


 $0.30 - $0.34            20,000              8.08           $  0.31                20,000           $   0.31
 $0.36 - $0.40           575,000              7.29           $  0.38               346,875           $   0.38
 $0.41 - $0.49           175,000              1.92           $  0.47               175,000           $   0.47
     $0.50               637,479              8.78           $  0.50               326,229           $   0.50
 $0.51 - $0.99            50,000              9.50           $  0.88                13,438           $   0.88
 $1.00 - $1.03           375,000              9.58           $  1.01                88,325           $   1.02
                  -----------------------                                   ---------------------
                        1,832,479                                                 969,867
                  =======================                                   =====================


</TABLE>

15)      GOODWILL - ACQUISITION OF ACCUIMAGE, INC.
         -----------------------------------------

         Amortization  expense of Goodwill for the periods ended  September 30,
         2000 and 1999 was $61,814 and $61,814 respectively.


16)      FOREIGN OPERATIONS
         ------------------

         The Company has had revenue  from sources  outside the United  States;
         all sales were accounted for in U.S dollars.

                 Country                             2000             1999
                 --------                            -----          --------
                 Germany                       $      -0-        $  93,128
                 India                                -0-           19,975
                 Taiwan                             8,300              -0-
                 Thailand                             -0-              504
                 Japan                             26,152              -0-
                                              -------------    -------------
                 Total Foreign Sales           $   34,452       $  113,607
                                              =============    =============

                                      F-15
<PAGE>
17)      INCOME TAXES
         ------------

         Significant  components of the provision for taxes based on income for
         the years ended September 30 are as follows:

                                                     2000             1999
                                                 -------------   --------------
                  Current tax expense
                        Federal                  $     -             $     -
                        State                        800                 800
                                                 -------------    -------------
                                                     800                 800


                  Deferred tax expense
                        Federal                        -                   -
                        State                          -                   -
                                                  -------------    ------------

                  Provision for income taxes     $   800             $   800
                                                  =============    ============

         A  reconciliation  of the  provision  for income tax  expense  with the
         expected income tax computed by applying the federal  statutory  income
         tax rate to income before provision for (benefit from) income taxes for
         the years ended September 30 is as follows:


                                                           2000       1999
                                                          --------   ---------


           Income tax provision (benefit) computed
           at federal statutory rate                       34.0%    34.0%

           State                                            8.84%    8.84%

           Increase in valuation allowance                (42.28%) (42.84%)

           Total                                            0.56%     0.0%


         Significant  components  of the  Company's  deferred  tax  assets  and
         liabilities for income taxes consist of the following:


                                                       2000             1999
                                                   ------------      ----------
            Deferred tax asset
               Net operating loss carryforwards     $    307,128     $  656,625
               Allowance for warranty costs              105,723         36,104
               Depreciation/amortization                  55,588         26,314
               Other accruals and allowances              21,447         18,037
                                                   -------------    -----------
                                                         489,886        737,080
            Deferred tax liability
               Deferred state income tax                 (20,198)       (51,713)
                                                   --------------   -----------
                                                         469,688        685,367
            Valuation allowance                         (469,688)      (685,367)
                                                   --------------   -----------
                                                    $         -      $        -
                                                   ==============   ===========

         At  September  30,  2000,  the Company has  approximately  $839,514 net
         operating  loss  carryforwards  available to offset future  federal and
         state income taxes, which expire through 2010 and 2019.

         The  Company   has  elected  to  reserve   fully  the  benefit  of  tax
         carryforwards  until  such time as it is able to  reasonably  expect to
         realize those benefits.


18)      SUBSEQUENT EVENTS
         -----------------

         The Chief Executive Officer of the Company resigned effective December
         6, 2000. A Management Committee comprised of Douglas P. Boyd, Chairman
         of the  Board,  and  John  C.  Klock,  Director,  is  supervising  the
         operations of the Company while the Board  conducts a search for a new
         Chief Executive Officer.

                                      F-16


<PAGE>


INDEX TO EXHIBITS

  Exhibit No.   Exhibit Name
  -----------   ------------

        2.1     Rescission and Transfer Agreement, dated June 30, 1998(1)

        2.2     Stock Allocation Agreement, dated June 30, 1998(1)

        3.1     Articles of Incorporation of Company, filed February 2, 1990(1)

        3.2     Certificate of Amendment of Articles of Incorporation of
                Company, filed June 27, 1996(1)

        3.3     By-laws of the Company(1)

        4.1     Form of Warrant issued to investors in Private Offering
                concluded April 30, 2000(3)

        10.1    Product Development, Distribution, and Warranty Support
                Agreement, dated April 14, 1999(1)

        10.2    AccuImage Stock Option Plan(4)

        10.3    Form of Stock Option Agreement(1)

        10.4    Poirson Employment Agreement(1)

        10.5    Separation Agreement and General Release between Company and
                Allen Poirson(2)

        10.6    Robert Taylor Employment Agreement(2)

        10.7    Form of Unit Purchase Agreement between the Company and
                investors in the Private Offering which concluded April 30,
                2000(3)

        23.1    Consent of Schvaneveldt and Company, Independent Auditors

        23.2    Consent of Berg & Company LLP, Independent Auditors

        27      Financial Data Schedule
--------------------------------------------------------------------------------
[FN]

(1)  Incorporated by reference to the Company's  Registration  Statement on Form
     10, filed June 30, 1999.

(2)  Incorporated  by reference to the  Company's  Annual Report on Form 10-KSB,
     filed on March 20, 2000.

(3)  Incorporated by reference to the Company's Quarterly Report on Form 10-QSB,
     filed on May 15, 2000.

(4)  Incorporated by reference to the Company's  Definitive Proxy Statement  on
     Form DEF 14A, filed June 6, 2000.

</FN>