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United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)

|x | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended June 30, 2005



| ̈ | Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from  to



Commission File No. 1-11182



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BIO-IMAGING TECHNOLOGIES, INC.

(Exact Name of Issuer as Specified in Its Charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 11-2872047                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)



826 Newtown-Yardley
Road, Newtown, Pennsylvania 18940-1721

(Address of Principal Executive Offices)



(267) 757-3000

(Issuers Telephone Number, Including Area Code)



---



Check whether the Issuer: (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 whether the Issuer is an accelerated filer (as described
in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes: ̈No:  x



State the number of shares outstanding of each of the Issuers classes of common stock, as of July 31, 2005:



|                                 |  |                 
|-------------------------------- |  | ----------------
|Class                            |  | Number of Shares
|Common Stock, $0.00025 par value |  | 11,133,195      

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##### Table of Contents

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES



TABLE OF CONTENTS



|                               |  |         |  |                                                                                                               |  |                                                                                       |  |     
|------------------------------ |  | ------- |  | ------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|                               |  |         |  |                                                                                                               |  |                                                                                       |  | Page
|                               | 
|PART I.
FINANCIAL INFORMATION. |  |        
|                               |  |         |  |                                                                                                              
|                               |  | Item 1. |  |                                                                                                               |  | Financial Statements                                                                  |  | 1   
|                               |  |         | 
|                               |  |         |  | CONDENSED CONSOLIDATED BALANCE SHEETS as of June 30, 2005 and December 31, 2004 (unaudited)                   |  | 2                                                                                    
|                               |  |         | 
|                               |  |         |  | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the Six Months Ended June 30, 2005 and 2004 (unaudited)   |  | 3                                                                                    
|                               |  |         | 
|                               |  |         |  | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended June 30, 2005 and 2004 (unaudited) |  | 4                                                                                    
|                               |  |         | 
|                               |  |         |  | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2005 and 2004 (unaudited)   |  | 5                                                                                    
|                               |  |         | 
|                               |  |         |  | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)                                              |  | 6                                                                                    
|                               |  |         |  |                                                                                                              
|                               |  | Item 2. |  |                                                                                                               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 14  
|                               |  |         | 
|                               |  |         |  | Results of Operations                                                                                         |  | 16                                                                                   
|                               |  |         | 
|                               |  |         |  | Business Segments                                                                                             |  | 23                                                                                   
|                               |  |         | 
|                               |  |         |  | Liquidity and Capital Resources                                                                               |  | 23                                                                                   
|                               |  |         | 
|                               |  |         |  | Changes to Critical Accounting Policies and Estimates                                                         |  | 25                                                                                   
|                               |  |         |  |                                                                                                              
|                               |  | Item 3. |  |                                                                                                               |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 26  
|                               |  |         |  |                                                                                                              
|                               |  | Item 4. |  |                                                                                                               |  | Controls and Procedures                                                               |  | 27  
|                               | 
|PART II.
OTHER INFORMATION.    |  |        
|                               |  |         | 
|                               |  | Item 4. |  | Submission of Matters to a Vote of Security Holders                                                           |  | 27                                                                                   
|                               |  |         | 
|                               |  | Item 6. |  | Exhibits                                                                                                      |  | 29                                                                                   
|                               | 
|SIGNATURES                     |  | 30     



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##### Table of Contents

PART I. FINANCIAL INFORMATION.



Item 1. Financial Statements.



References in this Form 10-Q to Bio-Imaging, we, us, or our refer to Bio-Imaging Technologies, Inc., a Delaware corporation, and its subsidiaries.



Certain information and footnote disclosures required under generally
accepted accounting principles in the United States of America have been condensed or omitted from the following condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission, although we
believe that such financial disclosures are adequate so that the information presented is not misleading in any material respect. The following condensed consolidated financial statements should be read in conjunction with the year-end condensed
consolidated financial statements and notes thereto included in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004.



The results of operations for the interim periods presented in this Form 10-Q are not necessarily indicative of the results to be expected for the entire
fiscal year.



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##### Table of Contents

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)



|                                                                                                                                                                     |  |               |            |   |                  |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | - | ---------------- | - | ---------- | -
|                                                                                                                                                                     |  | June 30, 2005 |            |   | December 31,2004 |  
|ASSETS                                                                                                                                                               |  |               |            |   |                  |   |            |  
|Current assets:                                                                                                                                                      |  |               |            |   |                  |   |            |  
|Cash and cash equivalents                                                                                                                                            |  | $             | 9,996,381  |   |                  | $ | 9,650,140  |  
|Accounts receivable, net                                                                                                                                             |  |               | 5,727,185  |   |                  |   | 7,957,736  |  
|Prepaid expenses and other current assets                                                                                                                            |  |               | 915,392    |   |                  |   | 889,208    |  
|Deferred income taxes                                                                                                                                                |  |               | 220,046    |   |                  |   | 1,551,916  |  
|                                                                                                                                                                     |  |               |            |   |                  |   |            |  
|Total current assets                                                                                                                                                 |  |               | 16,859,004 |   |                  |   | 20,049,000 |  
|                                                                                                                                                                     |  |              
|Property and equipment, net                                                                                                                                          |  |               | 5,519,197  |   |                  |   | 5,101,569  |  
|                                                                                                                                                                     |  |              
|Intangibles and goodwill                                                                                                                                             |  |               | 2,737,247  |   |                  |   | 2,905,025  |  
|                                                                                                                                                                     |  |              
|Deferred income taxes                                                                                                                                                |  |               | 1,734,487  |   |                  |   |           |  
|                                                                                                                                                                     |  |              
|Other assets                                                                                                                                                         |  |               | 310,412    |   |                  |   | 318,220    |  
|                                                                                                                                                                     |  |               |            |   |                  |   |            |  
|Total assets                                                                                                                                                         |  | $             | 27,160,347 |   |                  | $ | 28,373,814 |  
|                                                                                                                                                                     |  |               |            |   |                  |   |            |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                 |  |               |            |   |                  |   |            |  
|Current liabilities:                                                                                                                                                 |  |               |            |   |                  |   |            |  
|Accounts payable                                                                                                                                                     |  | $             | 1,847,220  |   |                  | $ | 1,269,855  |  
|Accrued expenses and other current liabilities                                                                                                                       |  |               | 1,261,413  |   |                  |   | 1,859,022  |  
|Deferred revenue                                                                                                                                                     |  |               | 4,213,015  |   |                  |   | 3,076,630  |  
|Current maturities of capital lease obligations                                                                                                                      |  |               | 892,281    |   |                  |   | 722,086    |  
|                                                                                                                                                                     |  |               |            |   |                  |   |            |  
|Total current liabilities                                                                                                                                            |  |               | 8,213,929  |   |                  |   | 6,927,593  |  
|Long-term capital lease obligations                                                                                                                                  |  |               | 857,319    |   |                  |   | 906,922    |  
|Deferred income taxes                                                                                                                                                |  |               |           |   |                  |   | 889,976    |  
|Other liability                                                                                                                                                      |  |               | 191,786    |   |                  |   | 131,681    |  
|                                                                                                                                                                     |  |               |            |   |                  |   |            |  
|Total liabilities                                                                                                                                                    |  |               | 9,263,034  |   |                  |   | 8,856,172  |  
|                                                                                                                                                                     |  |               |            |   |                  |   |            |  
|Commitments and Contingencies                                                                                                                                        |  |               |            |   |                  |   |            |  
|                                                                                                                                                                     |  |              
|Stockholders equity:                                                                                                                                                |  |               |            |   |                  |   |            |  
|Preferred stock- $.00025 par value; authorized 3,000,000 shares, 0 issued and outstanding at June 30, 2005 and at December 31,
2004                                  |  |               |           |   |                  |   |           |  
|Common stock - $.00025 par value; authorized 18,000,000 shares, issued and outstanding 11,132,195 shares at June 30, 2005 and 11,027,320
shares at December 31, 2004 |  |               | 2,783      |   |                  |   | 2,757      |  
|Additional paid-in capital                                                                                                                                           |  |               | 22,123,337 |   |                  |   | 22,016,231 |  
|Accumulated deficit                                                                                                                                                  |  |               | (4,211,707 | ) |                  |   | (2,501,346 | )
|Accumulated other comprehensive loss                                                                                                                                 |  |               | (17,100    | ) |                  |   |           |  
|                                                                                                                                                                     |  |               |            |   |                  |   |            |  
|Stockholders equity                                                                                                                                                 |  |               | 17,897,313 |   |                  |   | 19,517,642 |  
|                                                                                                                                                                     |  |               |            |   |                  |   |            |  
|Total liabilities and stockholders equity                                                                                                                           |  | $             | 27,160,347 |   |                  | $ | 28,373,814 |  
|                                                                                                                                                                     |  |               |            |   |                  |   |            |  



See Notes to Condensed
Consolidated Financial Statements



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##### Table of Contents

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)



|                                                                               |  |                                   |            |   |      |   |            |  
|------------------------------------------------------------------------------ |  | --------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                               |  | For the Six Months Ended June 30, |           
|                                                                               |  | 2005                              |            |   | 2004 |  
|Service revenues                                                               |  | $                                 | 10,978,401 |   |      | $ | 12,440,249 |  
|Reimbursement revenues                                                         |  |                                   | 3,083,040  |   |      |   | 2,104,459  |  
|                                                                               |  |                                   |            |   |      |   |            |  
|Total revenues                                                                 |  |                                   | 14,061,441 |   |      |   | 14,544,708 |  
|                                                                               |  |                                   |            |   |      |   |            |  
|Cost and expenses:                                                             |  |                                   |            |   |      |   |            |  
|Cost of revenues                                                               |  |                                   | 12,174,223 |   |      |   | 9,462,345  |  
|General and administrative expenses                                            |  |                                   | 2,469,051  |   |      |   | 2,217,420  |  
|Sales and marketing expenses                                                   |  |                                   | 2,312,309  |   |      |   | 1,503,482  |  
|                                                                               |  |                                   |            |   |      |   |            |  
|Total cost and expenses                                                        |  |                                   | 16,955,583 |   |      |   | 13,183,247 |  
|                                                                               |  |                                   |            |   |      |   |            |  
|(Loss) Income from operations                                                  |  |                                   | (2,894,142 | ) |      |   | 1,361,461  |  
|Interest income                                                                |  |                                   | 78,206     |   |      |   | 86,551     |  
|Interest expense                                                               |  |                                   | (62,665    | ) |      |   | (77,598    | )
|                                                                               |  |                                   |            |   |      |   |            |  
|(Loss) Income before income tax (benefit) provision                            |  |                                   | (2,878,601 | ) |      |   | 1,370,414  |  
|                                                                               |  |                                  
|Income tax (benefit) provision                                                 |  |                                   | (1,168,240 | ) |      |   | 558,548    |  
|                                                                               |  |                                   |            |   |      |   |            |  
|Net (loss) income                                                              |  | $                                 | (1,710,361 | ) |      | $ | 811,866    |  
|                                                                               |  |                                   |            |   |      |   |            |  
|Basic (loss) earnings per common share                                         |  | $                                 | (0.15      | ) |      | $ | 0.08       |  
|                                                                               |  |                                   |            |   |      |   |            |  
|Weighted average number of common shares                                       |  |                                   | 11,076,930 |   |      |   | 10,772,342 |  
|                                                                               |  |                                   |            |   |      |   |            |  
|Diluted (loss) earnings per common share                                       |  | $                                 | (0.15      | ) |      | $ | 0.07       |  
|                                                                               |  |                                   |            |   |      |   |            |  
|Weighted average number of common shares and dilutive common equivalent shares |  |                                   | 11,076,930 |   |      |   | 12,278,851 |  
|                                                                               |  |                                   |            |   |      |   |            |  



See Notes to Condensed
Consolidated Financial Statements



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##### Table of Contents

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)



|                                                                               |  |                                    |            |   |      |   |            |  
|------------------------------------------------------------------------------ |  | ---------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                               |  | For the Three Months EndedJune 30, |           
|                                                                               |  | 2005                               |            |   | 2004 |  
|Service revenues                                                               |  | $                                  | 5,450,129  |   |      | $ | 6,506,698  |  
|Reimbursement revenues                                                         |  |                                    | 1,486,424  |   |      |   | 1,097,001  |  
|                                                                               |  |                                    |            |   |      |   |            |  
|Total revenues                                                                 |  |                                    | 6,936,553  |   |      |   | 7,603,699  |  
|                                                                               |  |                                    |            |   |      |   |            |  
|Cost and expenses:                                                             |  |                                    |            |   |      |   |            |  
|Cost of revenues                                                               |  |                                    | 5,802,451  |   |      |   | 4,880,639  |  
|General and administrative expenses                                            |  |                                    | 1,216,991  |   |      |   | 1,156,945  |  
|Sales and marketing expenses                                                   |  |                                    | 1,125,057  |   |      |   | 852,435    |  
|                                                                               |  |                                    |            |   |      |   |            |  
|Total cost and expenses                                                        |  |                                    | 8,144,499  |   |      |   | 6,890,019  |  
|                                                                               |  |                                    |            |   |      |   |            |  
|(Loss) income from operations                                                  |  |                                    | (1,207,946 | ) |      |   | 713,680    |  
|Interest income                                                                |  |                                    | 42,382     |   |      |   | 24,731     |  
|Interest expense                                                               |  |                                    | (22,172    | ) |      |   | (32,476    | )
|                                                                               |  |                                    |            |   |      |   |            |  
|(Loss) income before income tax provision                                      |  |                                    | (1,187,736 | ) |      |   | 705,935    |  
|                                                                               |  |                                   
|Income tax (benefit) provision                                                 |  |                                    | (475,094   | ) |      |   | 289,560    |  
|                                                                               |  |                                    |            |   |      |   |            |  
|Net (loss) income                                                              |  | $                                  | (712,642   | ) |      | $ | 416,375    |  
|                                                                               |  |                                    |            |   |      |   |            |  
|Basic (loss) earnings per common share                                         |  | $                                  | (0.06      | ) |      | $ | 0.04       |  
|                                                                               |  |                                    |            |   |      |   |            |  
|Weighted average number of common shares                                       |  |                                    | 11,102,700 |   |      |   | 10,799,852 |  
|                                                                               |  |                                    |            |   |      |   |            |  
|Diluted (loss) earnings per common share                                       |  | $                                  | (0.06      | ) |      | $ | 0.04       |  
|                                                                               |  |                                    |            |   |      |   |            |  
|Weighted average number of common shares and dilutive common equivalent shares |  |                                    | 11,102,700 |   |      |   | 12,235,437 |  
|                                                                               |  |                                    |            |   |      |   |            |  



See Notes to Condensed
Consolidated Financial Statements



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##### Table of Contents

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)



|                                                                                            |  |                                  |            |   |      |   |            |  
|------------------------------------------------------------------------------------------- |  | -------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                            |  | For the Six Months EndedJune 30, |           
|                                                                                            |  | 2005                             |            |   | 2004 |  
|Cash flows from operating activities:                                                       |  |                                  |            |   |      |   |            |  
|Net (loss) income                                                                           |  | $                                | (1,710,361 | ) |      | $ | 811,866    |  
|Adjustments to reconcile net income to net cash (used in) provided by operating activities: |  |                                  |            |   |      |   |            |  
|Depreciation and amortization                                                               |  |                                  | 1,093,329  |   |      |   | 856,980    |  
|Provision for deferred income taxes                                                         |  |                                  | (1,292,593 | ) |      |   | 592,195    |  
|Bad debt (recovery) provision                                                               |  |                                  | (10,801    | ) |      |   | 15,813     |  
|Sales leaseback deferred gains                                                              |  |                                  | 16,518     |   |      |   |           |  
|Stock based compensation expense                                                            |  |                                  | 1,142      |   |      |   | 6,852      |  
|Changes in operating assets and liabilities:                                                |  |                                  |            |   |      |   |            |  
|Decrease (increase) in accounts receivable                                                  |  |                                  | 2,241,352  |   |      |   | (1,435,449 | )
|Increase in prepaid expenses and other current assets                                       |  |                                  | (30,702    | ) |      |   | (7,721     | )
|Decrease (increase) in other assets                                                         |  |                                  | 6,721      |   |      |   | (68,317    | )
|Increase in accounts payable                                                                |  |                                  | 577,365    |   |      |   | 186,678    |  
|Decrease in accrued expenses and other current liabilities                                  |  |                                  | (556,506   | ) |      |   | (953,261   | )
|Increase in deferred revenue                                                                |  |                                  | 1,136,385  |   |      |   | 208,343    |  
|Increase in other liabilities                                                               |  |                                  | 60,104     |   |      |   | (77,013    | )
|                                                                                            |  |                                  |            |   |      |   |            |  
|Net cash provided by (used in) operating activities                                         |  |                                  | 1,531,953  |   |      |   | 136,966    |  
|                                                                                            |  |                                  |            |   |      |   |            |  
|Cash flows from investing activities:                                                       |  |                                  |            |   |      |   |            |  
|Purchases of property and equipment                                                         |  |                                  | (1,342,091 | ) |      |   | (965,227   | )
|                                                                                            |  |                                  |            |   |      |   |            |  
|Net cash used in investing activities                                                       |  |                                  | (1,342,091 | ) |      |   | (965,227   | )
|                                                                                            |  |                                  |            |   |      |   |            |  
|Cash flows from financing activities:                                                       |  |                                  |            |   |      |   |            |  
|Payments under equipment lease obligations                                                  |  |                                  | (386,280   | ) |      |   | (307,950   | )
|Payments under promissory note                                                              |  |                                  |           |   |      |   | (83,334    | )
|Purchase of premium for foreign currency options                                            |  |                                  | (29,100    | ) |      |   |           |  
|Proceeds from sales leaseback                                                               |  |                                  | 506,872    |   |      |   | 339,567    |  
|Proceeds from exercise of stock options                                                     |  |                                  | 64,887     |   |      |   | 104,461    |  
|                                                                                            |  |                                  |            |   |      |   |            |  
|Net cash provided by (used in) financing activities                                         |  |                                  | 156,379    |   |      |   | 52,744     |  
|                                                                                            |  |                                  |            |   |      |   |            |  
|Net increase (decrease) in cash and cash equivalents                                        |  |                                  | 346,241    |   |      |   | (775,517   | )
|Cash and cash equivalents at beginning of period                                            |  |                                  | 9,650,140  |   |      |   | 13,289,453 |  
|                                                                                            |  |                                  |            |   |      |   |            |  
|Cash and cash equivalents at end of period                                                  |  | $                                | 9,996,381  |   |      | $ | 12,513,936 |  
|                                                                                            |  |                                  |            |   |      |   |            |  



See Notes to Condensed
Consolidated Financial Statements



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##### Table of Contents

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



Note 1 - Basis of Presentation:



The financial statements included in this Form 10-Q have been prepared by
us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting
principles in the United States of America have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and
notes thereto included in our Annual Report on Form 10-KSB for the year ended December 31, 2004.



In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting solely of those which are
of a normal recurring nature, necessary for a fair statement of the results for the interim periods.



Interim results are not necessarily indicative of results for the full fiscal year.



Note 2  Stock-Based Compensation:



In December 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123(R) (FAS
123(R)), Share-Based Payment. FAS 123(R) revises FASB Statement No. 123 (FAS 123), Accounting for Stock-Based Compensation. Also, FAS 123(R) supersedes Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. In April 2005, the Securities and Exchange Commission extended the effectiveness deadline. For public companies, FAS 123(R) is now
effective for annual periods beginning after June 15, 2005.



FAS 123(R) requires companies to expense the fair value of employee stock options and other forms of stock-based compensation. Specifically, FAS 123(R) requires companies to (i) use fair value to measure stock-based compensation awards and
(ii) cease using the intrinsic value method of accounting under APB 25 that resulted in no expense for many awards of stock options for which the exercise price of the option equaled the price of the underlying stock at the grant date. In addition,
FAS 123(R) retains the modified grant date model from FAS 123 in that compensation cost is measured at the grant date fair value of the award and adjusted to reflect actual forfeitures and the outcome of certain conditions. The fair value of an
award is not re-measured after its initial estimation on the grant date, except in certain cases. FAS 123(R)s transition provisions provide a number of alternatives to address implementation issues and to increase the comparability of
compensation cost.



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##### Table of Contents

BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



We expect to adopt the Modified Prospective Application (MPA) method, without restatement of prior interim periods on January 1,
2006. Under the MPA method without restatement approach, we would recognize compensation cost for (1) awards that were granted or modified after the fiscal year beginning after December 15, 1994, (2) any portion of awards that have not vested by
January 1, 2006, and (3) any outstanding liability awards. Compensation cost for the portion of awards for which the requisite service has not been rendered that are outstanding at January 1, 2006, will be recognized using the measurement data and
attribution method used in our FAS 123 pro forma disclosures as those services are received after January 1, 2006.



We are currently assessing the impact of FAS 123(R) on our 2005 financial statements and believe that this will have a material affect on our results of
operations.



We have undergone a study of our stock-based
compensation plans in anticipation of the adoption of FAS 123(R) and recent changes in tax laws with regard to deferred compensation. Currently, we do not anticipate a change in our current compensation strategy or structure, but continue to look
for ways to compensate individuals via avenues that align the interests of individuals with the interests of shareholders through ownership of company stock.



At June 30, 2005, we have one stock-based employee compensation plan. We account for this plan under the recognition and measurement principles of APB
Opinion No. 25, Accounting for Stock Issued to Employees, and Related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under this plan as of June 30, 2005 had an exercise price
equal to or greater than the fair market value of the underlying common stock on the date of grant. However, we have recorded stock-based compensation expense for restricted shares granted to one of our executives. The following table illustrates
the effect on net income and earnings per share if we had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, as amended by FASB Statement No. 148 Accounting for
Stock-Based Compensation  Transition and Disclosure, to account for stock-based employee compensation.



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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



|                                                                                                                                    |  |                           |            |   |                             |   |          |      |  |   |          |   |  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ---------- | - | --------------------------- | - | -------- | ---- |  | - | -------- | - |  | - | ------- | -
|                                                                                                                                    |  | Six Months Ended June 30, |            |   | Three Months Ended June 30, |  
|                                                                                                                                    |  | 2005                      |            |   | 2004                        |   |          | 2005 |  |   | 2004     |  
|Net (loss) income, as reported                                                                                                      |  | $                         | (1,710,361 | ) |                             | $ | 811,866  |      |  | $ | (712,642 | ) |  | $ | 416,375 |  
|Add: Stock-based employee compensation expense included in reported net income, net of related tax effects                          |  |                           | 689        |   |                             |   | 6,852    |      |  |   | 689      |   |  |   | 3,426   |  
|Deduct: Total stock-based employee compensation determined under fair value based method for all awards, net of related tax
effects |  |                           | (131,252   | ) |                             |   | (131,798 | )    |  |   | (65,626  | ) |  |   | (65,889 | )
|                                                                                                                                    |  |                           |            |   |                             |   |          |      |  |   |          |   |  |   |         |  
|Pro forma net income                                                                                                                |  |                           | (1,840,924 | ) |                             |   | 686,920  |      |  |   | (777,579 | ) |  |   | 353,912 |  
|                                                                                                                                    |  |                           |            |   |                             |   |          |      |  |   |          |   |  |   |         |  
|Earnings per share:                                                                                                                 |  |                           |            |   |                             |   |          |      |  |   |          |   |  |   |         |  
|Basic-as reported                                                                                                                   |  | $                         | (0.15      | ) |                             | $ | 0.08     |      |  | $ | (0.06    | ) |  | $ | 0.04    |  
|Basic-pro forma                                                                                                                     |  | $                         | (0.17      | ) |                             | $ | 0.06     |      |  | $ | (0.07    | ) |  | $ | 0.03    |  
|                                                                                                                                    |  |                           |            |  
|Diluted-as reported                                                                                                                 |  | $                         | (0.15      | ) |                             | $ | 0.07     |      |  | $ | (0.06    | ) |  | $ | 0.04    |  
|Diluted-pro forma                                                                                                                   |  | $                         | (0.17      | ) |                             | $ | 0.06     |      |  | $ | (0.07    | ) |  | $ | 0.03    |  



On January 31, 2005,
we issued 30,000 shares of Common Stock to an executive officer pursuant to his employment agreement dated February 1, 2002. We accrued $1,142 and $6,852 of stock based compensation expense during the six months ended June 30, 2005 and 2004,
respectively. We accrued $1,142 and $3,426 of stock based compensation expense during the three months ended June 30, 2005 and 2004, respectively.



Note 3 - Earnings Per Share:



Basic (loss) earnings per common share for the three months ended June 30, 2005 and 2004 was calculated based upon net (loss) income divided by the
weighted average number of shares of our common stock, $0.00025 par value, outstanding during the period. Diluted earnings per share for the three and six months ended June 30, 2005 was calculated based upon net income divided by the weighted
average number of shares of our common stock outstanding during the period, adjusted for dilutive securities using the treasury method. Diluted loss per common share for the three and six months ended June 30, 2005 exclude the impact of outstanding
stock options as their inclusion would be antidilutive.



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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



The computation of basic (loss) earnings per common share and diluted (loss) earnings per common share was as follows:



|                                                                               |  |                           |            |                             |      |   |            |  |   |            |   |  |   |           
|------------------------------------------------------------------------------ |  | ------------------------- | ---------- | --------------------------- | ---- | - | ---------- |  | - | ---------- | - |  | - | ----------
|                                                                               |  | Six Months Ended June 30, |            | Three Months Ended June 30,
|                                                                               |  | 2005                      |            |                             | 2004 |   | 2005       |  |   | 2004      
|Net income  basic                                                             |  | $                         | (1,710,361 | )                           |      | $ | 811,866    |  | $ | (712,642   | ) |  | $ | 416,375   
|Interest expense on convertible note                                           |  |                           |           |                             |      |   | 19,606     |  |   |           |   |  |   | 12,667    
|                                                                               |  |                           |            |                             |      |   |            |  |   |            |   |  |   |           
|Net income  diluted                                                           |  | $                         | (1,710,361 | )                           |      | $ | 831,472    |  | $ | (712,642   | ) |  | $ | 429,042   
|                                                                               |  |                           |            |                             |      |   |            |  |   |            |   |  |   |           
|Denominator  basic:                                                           |  |                           |            |                             |      |   |            |  |   |            |   |  |   |           
|Weighted average number of common shares                                       |  |                           | 11,076,930 |                             |      |   | 10,772,342 |  |   | 11,102,700 |   |  |   | 10,799,852
|Basic earnings per common                                                      |  | $                         | (0.15      | )                           |      | $ | 0.08       |  | $ | (0.06      | ) |  | $ | 0.04      
|                                                                               |  |                           |            |                             |      |   |            |  |   |            |   |  |   |           
|Denominator  diluted:                                                         |  |                           |            |                             |      |   |            |  |   |            |   |  |   |           
|Weighted average number of common shares                                       |  |                           | 11,076,930 |                             |      |   | 10,772,342 |  |   | 11,102,700 |   |  |   | 10,799,852
|Common share equivalents of outstanding stock options                          |  |                           |           |                             |      |   | 1,346,553  |  |   |           |   |  |   | 1,275,078 
|Common share equivalents related to the convertible promissory note            |  |                           |           |                             |      |   | 159,956    |  |   |           |   |  |   | 160,507   
|                                                                               |  |                           |            |                             |      |   |            |  |   |            |   |  |   |           
|Weighted average number of common shares and dilutive common equivalent shares |  |                           | 11,076,930 |                             |      |   | 12,278,851 |  |   | 11,102,700 |   |  |   | 12,235,437
|                                                                               |  |                           |            |                             |      |   |            |  |   |            |   |  |   |           
|Diluted earnings per common share                                              |  | $                         | (0.15      | )                           |      | $ | 0.07       |  | $ | (0.06      | ) |  | $ | 0.04      
|                                                                               |  |                           |            |                             |      |   |            |  |   |            |   |  |   |           



As of June 30, 2005
and 2004, options to purchase 1,893,683 and 206,100 shares, respectively, of our common stock have been excluded from the calculation of diluted earnings per common share as they were all antidilutive.



Note 4 - Debt:



On May 17, 2005, we renewed and amended our agreement with Wachovia Bank,
National Association. The renewed and amended agreement is for an unsecured committed line of credit of $5,000,000. Interest is payable at the LIBOR Market Index Rate plus 2.0%. The



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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



agreement requires us, among other things, to maintain certain financial covenants. The committed line of credit matures June 30, 2006 and may be renewed on an annual basis. At June 30, 2005, we had no borrowings
under the committed line of credit and are compliant with the financial covenants.



On June 1, 2005, we entered into a $506,872 sale-leaseback transaction whereby we sold and leased back computer equipment and furniture. The resulting lease is being accounted for as a capital lease. There was a gain
recorded on the sale in the amount of $16,518 which is being deferred and amortized over the life of the lease. The lease term is for 3 years with an interest rate of 6.1%.



Note 5  Commitments and Contingencies:



On March 28, 2005 and upon recommendation of the Compensation Committee, we executed an employment agreement with our
President and Chief Executive Officer for a two-year period, beginning as of February 1, 2005 and ending on February 28, 2007. Prior to or on February 28, 2006, the Board of Directors, in its sole discretion, may extend the employment period until
February 28, 2008. The aggregate amount due under this agreement is $580,000.



Note 6  Business Segments



FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information, requires companies to provide certain information about their operating segments. In November 2003, we acquired the intellectual
property of CapMed Corporation. Accordingly, we now have two operating segments: pharmaceutical contract services and the CapMed division. Our pharmaceutical contract service segment provides services that support the product development process of
the pharmaceutical, biotechnology and medical device industries. Our CapMed segment offers a software application that enables users to manage and store personal health information, including their medical images, on the privacy of their desktop
computer, while linking directly to sponsor-directed resources such as drug information, patient education, or disease guidelines. The operating segments are managed separately because each offers different services and applications to different
markets. Our management evaluates the performance of each segment based upon operating earnings or losses before interest and income taxes.



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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



Summarized financial information concerning our operational segments is shown in the following table:



|                                         |  |                                |            |   |                |   |           |                   |  |   |             |  
|---------------------------------------- |  | ------------------------------ | ---------- | - | -------------- | - | --------- | ----------------- |  | - | ----------- | -
|                                         |  | PharmaceuticalContractServices |            |   | CapMedDivision |   |           | ConsolidatedTotal | 
|For the six months ended June 30, 2005   |  |                                |            |   |                |   |           |                   |  |   |             |  
|Total revenues                           |  | $                              | 13,837,327 |   |                | $ | 224,114   |                   |  | $ | 14,061,441  |  
|Total cost and expenses                  |  | $                              | 16,231,741 |   |                | $ | 723,842   |                   |  | $ | (16,955,583 | )
|Loss from operations                     |  | $                              | (2,394,414 | ) |                | $ | (499,728  | )                 |  | $ | (2,894,142  | )
|                                         |  |                                |           
|For the six months ended June 30, 2004   |  |                                |            |   |                |   |           |                   |  |   |             |  
|Total revenues                           |  | $                              | 13,972,589 |   |                | $ | 6,614     |                   |  | $ | 13,979,203  |  
|Total cost and expenses                  |  | $                              | 12,195,692 |   |                | $ | 422,050   |                   |  | $ | 12,617,742  |  
|Income (loss) from operations            |  | $                              | 1,776,897  |   |                | $ | (415,436  | )                 |  | $ | 1,361,461   |  
|                                         |  |                                |           
|For the three months ended June 30, 2005 |  |                                |            |   |                |   |           |                   |  |   |             |  
|Total revenues                           |  | $                              | 6,836,295  |   |                | $ | 100,258   |                   |  | $ | 6,936,553   |  
|Total cost and expenses                  |  | $                              | 7,759,921  |   |                | $ | 384,578   |                   |  | $ | 8,144,499   |  
|Loss from operations                     |  | $                              | (923,626   | ) |                | $ | (284,320  | )                 |  | $ | (1,207,946  | )
|                                         |  |                                |           
|For the three months ended June 30, 2004 |  |                                |            |   |                |   |           |                   |  |   |             |  
|Total revenues                           |  | $                              | 7,352,789  |   |                | $ | 2,003     |                   |  | $ | 7,354,792   |  
|Total cost and expenses                  |  | $                              | 6,401,455  |   |                | $ | 239,657   |                   |  | $ | 6,641,112   |  
|Income (loss) from operations            |  | $                              | 951,334    |   |                | $ | (237,654  | )                 |  | $ | 713,680     |  
|                                         |  |                                |           
|Segment assets at June 30, 2005          |  |                                | 26,873,643 |   |                | $ | 1,057,989 |                   |  | $ | 27,931,632  |  
|Segment assets at June 30, 2004          |  | $                              | 25,240,251 |   |                | $ | 989,670   |                   |  | $ | 26,229,921  |  



Our foreign customers
accounted for approximately 22% and 13% of service revenues for the six months ended June 30, 2005 and 2004, respectively. For the three months ended June 30, 2005 and 2004, our foreign customers accounted for approximately 20% and 15% of service
revenues, respectively.



Note 7 
Accounts Receivable and Allowance for Doubtful Accounts



We
maintain allowances for doubtful accounts on a specific identification method for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in
an impairment of our



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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



customers ability to make payments, additional allowances may be required. We do not have any off-balance-sheet credit exposure related to our customers and the trade accounts receivable does not bear interest.



|                                   |  |               |   |  |                  
|---------------------------------- |  | ------------- | - |  | -----------------
|                                   |  | June 30, 2005 |   |  | December 31, 2004
|Billed trade accounts receivable   |  | 3,015,295     |   |  | 3,718,465        
|Unbilled trade accounts receivable |  | 2,713,534     |   |  | 4,252,845        
|Other receivables                  |  | 1,651         |   |  | 593              
|                                   |  |               |   |  |                  
|Total Receivables                  |  | 5,730,480     |   |  | 7,971,903        
|                                   |  |              
|Allowance Rollforward:             |  |               |   |  |                  
|Balance at January 1, 2005         |  | 14,167        |   |  |                  
|Additions                          |  |              |   |  |                  
|Write offs (net of recoveries)     |  | (10,872       | ) |  |                  
|                                   |  |               |   |  |                  
|Balance at June 30, 2005           |  | 3,295         |   |  |                  



Note 8  Income Taxes



We record a valuation allowance to reduce our deferred tax assets to an
amount that is more likely than not to be realized. In assessing the need for the valuation allowance, we consider our future taxable income and on-going prudent and feasible tax planning strategies. In the event that we were to determine that, in
the future, we would be able to realize our deferred tax assets in excess of its net recorded amount, an adjustment to the deferred tax asset would be made, thereby increasing net income in the period such determination was made. Likewise, should we
determine that it is more likely than not that we will be unable to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged, thereby decreasing net income in the period such
determination was made.



We have accumulated tax losses, which
include allowable deductions related to exercised employee stock options, generating federal and state net operating loss (NOL) credit carryforwards of $6.0 million as of June 30, 2005. Due to ownership changes that have occurred in prior years, we
have estimated that $1.1 million of our current federal net operating loss will likely expire unused due to Internal Revenue Code Section 382 limitations. Our current and long-term deferred tax assets are comprised of the NOL credit carryforwards
with a tax effected value of $1,954,533 as of June 30, 2005. Generally accepted accounting principles require that we establish a valuation allowance for any portion of our deferred tax assets for which management believes it is more likely than not
we will be unable to utilize the asset to offset future taxes. We will continue to evaluate the potential use of our deferred tax assets and the need for a valuation allowance by considering our future taxable income and our on-going prudent and
feasible tax planning strategies. Subsequent revisions to the estimated realizable



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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



value of our deferred tax assets could cause our provision for income taxes to vary significantly from period to period, although our cash tax payments would remain unaffected until our NOL credit carryforward is
fully utilized or has expired.



We recognize contingent
liabilities for any tax related exposures when those exposures are both probable and estimable. At June 30, 2005, we have determined that there is sufficient future taxable income to more likely than not utilize the unlimited net operating loss
carryforward at June 30, 2005.



Note 9  Derivatives and Other Hedging
Instruments



All derivatives are recognized in our
Consolidated Statement of Operations at fair value and are reported in prepaid expenses and other current assets on the Balance Sheet. To qualify for hedge accounting in accordance with SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, (SFAS No. 133), we require that the instruments are effective in reducing the risk exposure that they are
designated to hedge. For instruments that are associated with the hedge of cash flows, hedge effectiveness criteria also require that it be probable that the underlying transaction will occur. Instruments that meet established accounting criteria
are formally designated as hedges at the inception of the contract. These criteria demonstrate that the derivative is expected to be highly effective at offsetting changes in fair value or cash flows of the underlying exposure both at inception of
the hedging relationship and on an ongoing basis. The assessment for effectiveness is formally documented at hedge inception and reviewed at least quarterly throughout the designated hedge period.



In accordance with our current foreign exchange rate risk management policy,
on June 2, 2005, we purchased six Euro call options in the amount of 250,000 Euros each with the first expiration on July 27, 2005 and the last expiration on December 28, 2005 at a strike price of $1.26 to hedge against the exposure to variability
in our cash flows due to the Euro denominated costs for our Netherlands subsidiary. We paid a total premium of $29,100 for the options and at June 30, 2005 have recorded an Accumulated Other Comprehensive Loss of $17,100 in the stockholders
equity section of the Balance Sheet due to changes in the value of this derivative.



Upon expiration or ineffectiveness of the derivative, we will record a gain or loss from the derivative that is deferred in stockholders equity to cost of revenues and general and administrative expenses in the
Consolidated Statement of Earnings based on the nature of the underlying cash flow hedged.



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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.



Overview



Pharmaceutical Contract Services



We are a global pharmaceutical contract service organization, providing services that support the product development process of the pharmaceutical,
biotechnology and medical device industries. We specialize in assisting our clients in the design and management of the medical imaging component of clinical trials for all modalities, which consist of computerized tomography (CT), magnetic
resonance imaging (MRI), x-rays, dual energy x-ray absorptiometry (DXA/DEXA), positron emission tomography (PET), single photon emission computerized tomography (SPECT), quantitative coronary angiography (QCA), cardiac MRI and CT, intravascular
ultrasound (IVUS), peripheral quantitative angiography (QVA) and ultrasound. We provide services that include the processing and analysis of medical images and the data-basing and regulatory submission of medical images, quantitative data and text.
We also offer a service called Bio-Imaging ET&CSM, which focuses on education, training and certification for
medical imaging equipment, facilities and staff.



Our sales
cycle, referring to the period from the presentation by us to a potential client to the engagement of us by such client, has historically been approximately 12 months. In addition, the contracts under which we perform services typically cover a
period of 12 to 60 months and the volume and type of services performed by us generally vary during the course of a project. We cannot assure you that our project revenues will be at levels sufficient to achieve profitability. Service revenues were
generated from 85 clients encompassing 203 distinct projects for the six months ended June 30, 2005. This compares to 71 clients encompassing 167 distinct projects for the six months ended June 30, 2004.



Our contracted/committed backlog, referred to as backlog, is the amount of
service revenue that remains to be earned and recognized on both signed and verbally agreed to contracts. Our backlog was $47.1 million as of June 30, 2005. This compares to $44.8 million as of June 30, 2004 and $38.5 million as of December 31,
2004. Contracts included in backlog are subject to termination by our clients at any time. In the event that a contract is cancelled by the client, we would be entitled to receive payment for all services performed up to the cancellation date. The
duration of the projects included in our backlog range from less than 3 months to 5 years. We believe that our backlog assists our management as a general indicator of our long-term business. However, we do not believe that backlog is a reliable
predictor of near-term results because service revenues may be incurred in a given period on contracts that were not included in the previous reporting periods backlog and/or contract cancellations or project delays may occur in a given period
on contracts that were included in the previous reporting periods backlog.



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##### Table of Contents

We believe that demand for our services and technologies will continue to grow as the use of digital
technologies for data acquisition and management increases in the radiology and drug development communities. We also believe that there is a growing recognition within the bio-pharmaceutical industry of the advantages in using an independent
centralized core laboratory for analysis of medical-imaging data and compliance with the regulatory demands for the submission of such data. In addition, the FDA is gaining experience with electronic submissions and is continuing to develop
sophisticated guidelines for computerized submission of clinical trial data, including medical images. Furthermore, we believe that the increased use of digital medical images in clinical trials, especially for important drug classes such as
anti-inflammatory, neurologic and oncologic therapeutics and diagnostic image agents, generate large amounts of image data from a large number of imaging sources. These studies require processing, analysis, data management and submission services
best handled by vendors with scalable logistical capabilities and extensive experience working with research facilities worldwide. Due to several factors, including, without limitation, competition from commercial competitors and academic research
centers and the risk of project cancellations, slowing of patient enrollment in on-going studies or delay of future project awards, among others, we cannot assure you that demand for our services and technologies will grow, sustain growth, or that
additional revenue generating opportunities will be realized by us.



CapMed Division



Our CapMed division offers
the Personal Health Record software, referred to as PHR, and the patent-pending Personal HealthKey technology. The PHR is a software application that enables users to manage and store personal health information, including their medical images, on the privacy of their desktop
computer, while linking directly to sponsor-directed resources such as drug information, patient education, or disease guidelines. The Personal HealthKey plugs into a computers USB port, allowing doctors and patients easy access to the patients medical record without the need for
additional hardware or software, and it is password protected.



We intend to expand our CapMed division through partnerships and marketing efforts devoted to the PHR and Personal HealthKey products. We believe that continued emphasis on improving patient care and reducing cost will contribute to the growth of the personal electronic
medical records market.



Certain matters discussed in this Form
10-Q are forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may be identified by, among other things,
the use of forward-looking terminology such as believes, expects, may, will, should, or anticipates or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy that involve risks and uncertainties. In particular, our statements regarding the demand for our services and technologies, growing recognition for the use of independent centralized core laboratories,
trends toward the outsourcing of imaging services in



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clinical trials, realized return from our marketing efforts, increased use of digital medical images in clinical trials,
integration of our acquired companies and businesses, expansion into new business segments and the level of our backlog are examples of such forward-looking statements. The forward-looking statements include risks and uncertainties, including, but
not limited to, the timing of revenues due to the variability in size, scope and duration of projects, estimates made by management with respect to our critical accounting policies, regulatory delays, clinical study results which lead to reductions
or cancellations of projects, and other factors, including general economic conditions and regulatory developments, not within our control. The factors discussed in this Form 10-Q and expressed from time to time in our filings with the Securities
and Exchange Commission, as well as the risk factors set forth in our most recent Form 10-KSB, could cause actual results and developments to be materially different from those expressed in or implied by such statements. The forward-looking
statements are made only as of the date of this filing, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.



Results of Operations



Six
Months Ended June 30, 2005 and 2004



|                                                    |  |                                |            |   |                  |       |    |                                |   |                  |  |       |          |  |   |            |   |  |        |   
|--------------------------------------------------- |  | ------------------------------ | ---------- | - | ---------------- | ----- | -- | ------------------------------ | - | ---------------- |  | ----- | -------- |  | - | ---------- | - |  | ------ | --
|                                                    |  | Six Months Ended June 30, 2005 |            |   | % ofTotalRevenue |       |    | Six Months Ended June 30, 2004 |   | % ofTotalRevenue |  |       | $ Change |  |   | % Change   |  
|Service revenues                                    |  | $                              | 10,978,401 |   |                  | 78.1  | %  |                                | $ | 12,440,249       |  | 85.5  | %        |  | $ | (1,461,848 | ) |  | (11.8  | )%
|Reimbursement revenues                              |  |                                | 3,083,040  |   |                  | 21.9  | %  |                                |   | 2,104,459        |  | 14.5  | %        |  |   | 978,581    |   |  | 46.5   | % 
|                                                    |  |                                |            |   |                  |       |    |                                |   |                  |  |       |          |  |   |            |   |  |        |   
|Total revenues                                      |  |                                | 14,061,441 |   |                  | 100.0 | %  |                                |   | 14,544,708       |  | 100.0 | %        |  | $ | (483,267   | ) |  | (3.3   | )%
|                                                    |  |                                |            |   |                  |       |    |                                |   |                  |  |       |          |  |   |            |   |  |        |   
|Cost of revenues                                    |  |                                | 12,174,223 |   |                  | 86.6  | %  |                                |   | 9,462,345        |  | 65.1  | %        |  | $ | 2,711,878  |   |  | 28.7   | % 
|General and administrative expenses                 |  |                                | 2,469,051  |   |                  | 17.6  | %  |                                |   | 2,217,420        |  | 15.2  | %        |  | $ | 251,631    |   |  | 11.3   | % 
|Sales and marketing expenses                        |  |                                | 2,312,309  |   |                  | 16.4  | %  |                                |   | 1,503,482        |  | 10.3  | %        |  |   | 808,827    |   |  | 53.8   | % 
|                                                    |  |                                |            |   |                  |       |    |                                |   |                  |  |       |          |  |   |            |   |  |        |   
|Total cost and expenses                             |  |                                | 16,955,583 |   |                  | 120.6 | %  |                                |   | 13,183,247       |  | 90.6  | %        |  |   | 3,772,336  |   |  | 28.6   | % 
|Interest (expense) income - net                     |  |                                | 15,541     |   |                  | (0.1  | )% |                                |   | 8,953            |  | 0.1   | %        |  | $ | 6,588      |   |  | 73.6   | % 
|                                                    |  |                                |            |   |                  |       |    |                                |   |                  |  |       |          |  |   |            |   |  |        |   
|(Loss) income before income tax (benefit) provision |  |                                | (2,878,601 | ) |                  | (20.5 | )% |                                |   | 1,370,414        |  | 9.4   | %        |  | $ | (4,249,015 | ) |  | (310.1 | )%
|Income tax (benefit) provision                      |  |                                | (1,168,240 | ) |                  | (8.3  | )% |                                |   | 558,548          |  | 3.8   | %        |  | $ | (1,726,788 | ) |  | (309.2 | )%
|                                                    |  |                                |            |   |                  |       |    |                                |   |                  |  |       |          |  |   |            |   |  |        |   
|Net (loss) income                                   |  | $                              | (1,710,361 | ) |                  | (12.2 | )% |                                | $ | 811,866          |  | 5.6   | %        |  | $ | (2,522,227 | ) |  | (310.7 | )%
|                                                    |  |                                |            |   |                  |       |    |                                |   |                  |  |       |          |  |   |            |   |  |        |   



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Service revenues for the six months ended June 30, 2005 and 2004 were $10,978,401 and $12,440,249,
respectively, a decrease of $1,461,848 or 11.8%. The decrease in service revenues was due to a significantly higher than historical norm cancellation rate in the fourth quarter of fiscal 2004 which resulted in a loss of revenue from anticipated
projects for the six months ended June 30, 2005. Our backlog at June 30, 2005 increased to $47.1 million from $38.5 million at December 31, 2004, an increase of 22.3%. We believe this increase in backlog is an indicator that the overall market
growth for medical-imaging related services for clinical trials continues to be positive, subject to project cancellations, slowing of patient enrollment in on-going studies and delays of future project awards.



Service revenues were generated from 85 clients encompassing 203 distinct
projects for the six months ended June 30, 2005. This compares to 71 clients encompassing 167 distinct projects for the six months ended June 30, 2004. No client accounted for more than 10% of our service revenues for the six months ended June 30,
2005. One client, Amgen Inc., encompassing 10 projects represented 10.7% of our service revenues for the six months ended June 30, 2004. No other client accounted for more than 10% of service revenues for the six months ended June 30, 2004. Service
revenues generated from our client base, while still concentrated as measured by the number of clients, has continued to become more dispersed over time, and we believe more diversification is evident when revenue concentration is measured by the
number of individual projects. We believe that measuring revenue concentration by project diversification may be more indicative of revenue concentration risk since we are often working on several separately-based and funded projects with a single
client, with each project often being wholly independent from the others. Our primary scope of work in both periods included both medical-imaging core laboratory services and image-based information management services.



Reimbursement revenues consist of reimbursements received from the customer
for pass-through costs. Reimbursement revenues fluctuate significantly over the course of any given project and quarter to quarter variations are a reflection of this project timing. Therefore, our management believes that reimbursement revenues are
not a significant indicator of our overall performance trends.



Cost of revenues for the six months ended June 30, 2005 and 2004 was $12,174,223 and $9,462,345, respectively, an increase of $2,711,878 or 28.7%.The increase in cost of revenues is primarily due to the increase in reimbursement
revenues for the six months ended June 30, 2005, which included $1,052,000 of fees paid directly to independent radiologists who review our clients imaging data. An additional $1,400,000 of the increase is attributable to the expansion of our
European facility to expand our global capabilities and further develop our therapeutic expertise in the cardiovascular area, including the additional personnel and costs from the Heart Core acquisition. Cost of revenues for the six months ended
June 30, 2005 and six months ended June 30, 2004 were comprised of professional salaries and benefits, allocated overhead and pass-through costs, which includes fees paid to independent radiologists. We expect that our cost of revenues will continue
to increase in fiscal 2005 as reimbursement revenues increase, offset in part by the cost reductions discussed below.



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The increase in the cost of revenues as a percentage of total revenues to 86.6% for the six months ended
June 30, 2005 from 65.1% for the six months ended June 30, 2004 is primarily due to lower service revenues for the six months ended June 30, 2005 due to cancellations from the fourth quarter of 2004 offset in part by the $500,000 decrease in our
cost of revenues due to implementing cost reductions during the first quarter of 2005 which was fully realized in the second quarter of 2005. The cost of revenues as a percentage of total revenues also fluctuates due to work-flow variations in the
utilization of staff and the mix of services provided by us in any given period.



General and administrative expenses for the six months ended June 30, 2005 and 2004 were $2,469,051 and $2,217,420, respectively, an increase of $251,631 or 11.3%. The increase is primarily due to an increase in
professional and consulting services. General and administrative expenses in each of the six months ended June 30, 2005 and 2004 consisted primarily of professional salaries and benefits, depreciation and amortization, professional and consulting
services, office rent and corporate insurance. We expect that our general and administrative expenses will continue to increase due to anticipated expenditures for Sarbanes-Oxley compliance and a general increase in the fees associated with being a
publicly traded company.



The increase in general and
administrative expenses as a percentage of total revenues to 17.6% for the six months ended June 30, 2005 from 15.2% for the six months ended June 30, 2004 is primarily due to a lesser increase in our total revenues.



Sales and marketing expenses for the six months ended June 30, 2005 and 2004
were $2,312,309 and $1,503,482, respectively, an increase of $808,827 or 53.8%. The increase is due to an increase associated with our CapMed division of $261,000, $189,000 fees and expenses associated with our Scientific Advisory Board and $358,000
of other sales and marketing expenses including an increase in personnel. Sales and marketing expenses in each of the six months ended June 30, 2005 and June 30, 2004 were comprised of direct sales and marketing costs, professional salaries and
benefits and allocated overhead. We expect that sales and marketing expenses will increase in fiscal 2005 as we continue to expand our market presence in the United States and Europe.



The increase in sales and marketing expenses as a percentage of total revenues to 16.4% for the six months ended June 30,
2005 from 10.3% for the six months ended June 30, 2004 is primarily due to an increase in personnel and increased expenses associated with our CapMed division and Scientific Advisory Board.



Net interest income for the six months ended June 30, 2005 and 2004 were
$15,541 and $8,953 respectively, an increase of $6,588 or 73.6%. This increase is primarily due to the payment of the Quintiles Note in November 2004, and, therefore, we did not incur this interest



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expense for the six months ended June 30, 2005. Net interest income and expense for the six months ended June 30, 2005
and 2004 is comprised of interest income earned on our cash balance and interest expense incurred on equipment lease obligations. Net interest income and expense for the six months ended June 30, 2004 also included interest expense incurred on the
Quintiles Note.



Loss before income taxes was $2,878,601 for
the six months ended June 30, 2005 and income before income taxes was $1,370,414 for the six months ended June 30, 2004, a decrease of $4,249,015 or 310.1%. The decrease was due to lower service revenues, an increase in personnel (including the
Heart Core acquisition), an increase in professional and consulting services fees and an increase in our sales and marketing expenses.



We had an income tax benefit of $1,168,240 for the six months ended June 30, 2005 as compared to an income tax provision for the six months ended June 30,
2004 of $558,548, a decrease of $1,726,788, or 309.2%. The decrease is primarily due to the net loss for the six months ended June 30, 2005 generating a 40% income tax benefit as compared to our estimated effective tax rate for 2004 of 41%.



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Three Months Ended June 30, 2005 and 2004



|                                          |  |                                  |            |   |                  |       |    |                                  |   |           |                  |  |       |          |  |   |            |   |  |        |   
|----------------------------------------- |  | -------------------------------- | ---------- | - | ---------------- | ----- | -- | -------------------------------- | - | --------- | ---------------- |  | ----- | -------- |  | - | ---------- | - |  | ------ | --
|                                          |  | Three Months Ended June 30, 2005 |            |   | % ofTotalRevenue |       |    | Three Months Ended June 30, 2004 |   |           | % ofTotalRevenue |  |       | $ Change |  |   | % Change   |  
|Service revenues                          |  | $                                | 5,450,129  |   |                  | 78.6  | %  |                                  | $ | 6,506,698 |                  |  | 85.6  | %        |  | $ | (1,056,569 | ) |  | (16.2  | )%
|Reimbursement revenues                    |  |                                  | 1,486,424  |   |                  | 21.4  | %  |                                  |   | 1,097,001 |                  |  | 14.4  | %        |  |   | 389,423    |   |  | 35.5   | % 
|                                          |  |                                  |            |   |                  |       |    |                                  |   |           |                  |  |       |          |  |   |            |   |  |        |   
|Total revenues                            |  |                                  | 6,936,553  |   |                  | 100.0 | %  |                                  |   | 7,603,699 |                  |  | 100.0 | %        |  |   | (667,146   | ) |  | (8.8   | )%
|                                          |  |                                  |            |   |                  |       |    |                                  |   |           |                  |  |       |          |  |   |            |   |  |        |   
|Cost of revenues                          |  |                                  | 5,802,451  |   |                  | 83.7  | %  |                                  |   | 4,880,639 |                  |  | 64.2  | %        |  |   | 921,812    |   |  | 18.9   | % 
|General and administrative expenses       |  |                                  | 1,216,991  |   |                  | 17.5  | %  |                                  |   | 1,156,945 |                  |  | 15.2  | %        |  |   | 60,046     |   |  | 5.2    | % 
|Sales and marketing expenses              |  |                                  | 1,125,057  |   |                  | 16.2  | %  |                                  |   | 852,435   |                  |  | 11.2  | %        |  |   | 272,622    |   |  | 32.0   | % 
|                                          |  |                                  |            |   |                  |       |    |                                  |   |           |                  |  |       |          |  |   |            |   |  |        |   
|Total cost and expenses                   |  |                                  | 8,144,499  |   |                  | 117.4 | %  |                                  |   | 6,890,019 |                  |  | 90.6  | %        |  |   | 1,254,480  |   |  | 18.2   | % 
|Interest income (expense) net             |  |                                  | 20,210     |   |                  | 0.3   | %  |                                  |   | (7,745    | )                |  | (0.1  | )%       |  |   | 27,955     |   |  | (360.9 | )%
|                                          |  |                                  |            |   |                  |       |    |                                  |   |           |                  |  |       |          |  |   |            |   |  |        |   
|(Loss) income before income tax provision |  |                                  | (1,187,736 | ) |                  | (17.1 | )% |                                  |   | 705,935   |                  |  | 9.3   | %        |  |   | (1,893,671 | ) |  | (268.3 | )%
|Income tax (benefit) provision            |  |                                  | (475,094   | ) |                  | (6.8  | )% |                                  |   | 289,560   |                  |  | 3.8   | %        |  |   | (764,654   | ) |  | (264.1 | )%
|                                          |  |                                  |            |   |                  |       |    |                                  |   |           |                  |  |       |          |  |   |            |   |  |        |   
|Net (loss) income                         |  | $                                | (712,642   | ) |                  | (10.3 | )% |                                  | $ | 416,375   |                  |  | 5.5   | %        |  | $ | (1,129,017 | ) |  | (271.2 | )%
|                                          |  |                                  |            |   |                  |       |    |                                  |   |           |                  |  |       |          |  |   |            |   |  |        |   



Service revenues for
the three months ended June 30, 2005 and 2004 were $5,450,129 and $6,506,698, respectively, a decrease of $1,056,569 or 16.2%. The decrease in service revenues was due to a significantly higher than historical norm cancellation rate in the fourth
quarter of fiscal 2004 which resulted in a loss of revenue from anticipated projects for the three months ended June 30, 2005. Our backlog at June 30, 2005 increased to $47.1 million from $38.5 million at December 31, 2004, an increase of 22.3%. We
believe this increase in backlog is an indicator that the overall market growth for medical-imaging related services for clinical trials continues to be positive, subject to project cancellations, slowing of patient enrollment in on-going studies
and delays of future project awards.



Service revenues
were generated from 79 clients encompassing 186 distinct projects for the three months ended June 30, 2005. This compares to 69 clients encompassing 153 distinct projects for the three months ended June 30, 2004. One client, Novartis
Pharmaceuticals, Inc.,



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encompassing 13 distinct projects, accounted for 10.6% of our service revenues for the three months ended June 30, 2005.
No other client accounted for more than 10% of service revenues for the three months ended June 30, 2005. There were no clients that accounted for more than 10% of our service revenues for the three months ended June 30, 2004. Service revenues
generated from our client base, while still concentrated as measured by the number of clients, has continued to become more dispersed over time and we believe more diversification is evident when revenue concentration is measured by the number of
individual projects. We believe that measuring revenue concentration by project diversification may be more indicative of revenue concentration risk since we are often working on several separately-based and funded projects with a single client,
with each project often being wholly independent from the others. Our primary scope of work in both periods included medical-imaging core laboratory services and image-based information management services.



Reimbursement revenues consist of reimbursements received from the customer
for pass-through costs. Reimbursement revenues fluctuate significantly over the course of any given project and quarter to quarter variations are a reflection of this project timing. Therefore, our management believes that reimbursement revenues are
not a significant indicator of our overall performance trends.



Cost of revenues for the three months ended June 30, 2005 and 2004 was $5,802,451 and $4,880,639, respectively, an increase of $921,812 or 18.9%.The increase in cost of revenues is primarily due to the increase in reimbursement
revenues for the three months ended June 30, 2005 which included $477,000 of fees paid directly to independent radiologists who review our clients imaging data. An additional $700,000 of the increase is attributable to the expansion of our
European facility to expand our global capabilities and further develop our therapeutic expertise in the cardiovascular area, including the additional personnel and costs from the Heart Core acquisition. Cost of revenues for the three months ended
June 30, 2005 and three months ended June 30, 2004 were comprised of professional salaries and benefits, allocated overhead and pass-through costs, which includes fees paid to independent radiologists. We expect that our cost of revenues will
continue to increase in fiscal 2005 as reimbursement revenues increase, offset in part by the cost reductions discussed below.



The increase in the cost of revenues as a percentage of total revenues to 83.7% for the three months ended June 30, 2005 from 64.2% for the three months
ended June 30, 2004 is primarily due to lower service revenues for the three months ended June 30, 2005 due to cancellations from the fourth quarter of 2004 offset in part by the $500,000 decrease in our cost of revenues due to implementing cost
reductions during the first quarter of 2005 which was fully realized in the second quarter of 2005. The cost of revenues as a percentage of total revenues also fluctuates due to work-flow variations in the utilization of staff and the mix of
services provided by us in any given period.



General
and administrative expenses for the three months ended June 30, 2005 and 2004 were $1,216,991 and $1,156,945, respectively, an increase of $60,046 or 5.2%. The increase is



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primarily due to an increase in professional and consulting services. General and administrative expenses in each of the
three months ended June 30, 2005 and 2004 consisted primarily of professional salaries and benefits, depreciation and amortization, professional and consulting services, office rent and corporate insurance. We expect that our general and
administrative expenses will continue to increase due to anticipated expenditures for Sarbanes-Oxley compliance and a general increase in the fees associated with being a publicly traded company.



The increase in general and administrative expenses as a percentage of total
revenues to 17.5% for the three months ended June 30, 2005 from 15.2% for the three months ended June 30, 2004 is primarily due to a lesser increase in our total revenues.



Sales and marketing expenses for the three months ended June 30, 2005 and 2004 were $1,125,057 and $852,435, respectively,
an increase of $272,622 or 32.0%. The increase is due to an increase in expenses associated with our CapMed division of $120,000, $78,000 fees and expenses associated with our Scientific Advisory Board and $75,000 of other sales and marketing
expenses including and an increase in personnel. Sales and marketing expenses in each of the three months ended June 30, 2005 and June 30, 2004 were comprised of direct sales and marketing costs, professional salaries and benefits and allocated
overhead. We expect that sales and marketing expenses will increase in fiscal 2005 as we continue to expand our market presence in the United States and Europe.



The increase in sales and marketing expenses as a percentage of total revenues to 16.2% for the three months ended June 30, 2005 from 11.2% for the
three months ended June 30, 2004 is primarily due to an increase in personnel and increased expenses associated with our CapMed division and Scientific Advisory Board.



Net interest income for the three months ended June 30, 2005 was $20,210 as compared to net interest expense for the three
months ended June 30, 2004 of $7,745, a decrease of $27,955 or 360.9%. This decrease is primarily due to the payment of the Quintiles Note in November 2004, and, therefore, we did not incur this interest expense for the three months ended June 30,
2005. Net interest income and expense for the three months ended June 30, 2005 and 2004 is comprised of interest income earned on our cash balance and interest expense incurred on equipment lease obligations. Net interest income and expense for the
three months ended June 30, 2004 also included interest expense incurred on the Quintiles Note.



Loss before income taxes was $1,187,736 for the three months ended June 30, 2005 and income before income taxes was $705,935 for the three months ended
June 30, 2004, a decrease of $1,893,671 or 268.3%. The decrease was due to lower service revenues, an increase in personnel (including the Heart Core acquisition), an increase in professional and consulting services fees and an increase in our sales
and marketing expenses.



We had an income tax benefit of
$475,094 for the three months ended June 30, 2005 as compared to an income tax provision for the three months ended June 30, 2004 of $289,560, a



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decrease of $764,654, or 264.1%. The decrease is primarily due to the net loss for the three months ended June 30, 2005
generating a 40% income tax benefit as compared to our estimated effective tax rate for 2004 of 41%.



Business Segments



We have set
forth certain financial information with respect to our two business segments, pharmaceutical contract services and the CapMed division, in Note 6  Business Segments to our Condensed Consolidated Financial Statements in this Form
10-Q. During the six months ended June 30, 2005, we had CapMed segment sales of $224,114 and total costs and expenses of $723,842, consisting of $514,237 of sales and marketing expenses, $128,559 of general and administrative expenses and $81,046 of
cost of revenues. During the three months ended June 30, 2005, we had CapMed segment sales of $100,258 and total costs and expenses of $384,578, consisting of $263,586 of sales and marketing expenses, $65,896 of general and administrative expenses
and $55,096 of cost of revenues.



Liquidity and Capital Resources



|                                          |  |                                |            |   |                                |   |          |  
|----------------------------------------- |  | ------------------------------ | ---------- | - | ------------------------------ | - | -------- | -
|                                          |  | Six Months Ended June 30, 2005 |            |   | Six Months Ended June 30, 2004 |  
|Net cash provided by operating activities |  | $                              | 1,531,953  |   |                                | $ | 136,966  |  
|Net cash used in investing activities     |  | $                              | (1,342,091 | ) |                                | $ | (965,227 | )
|Net cash provided by financing activities |  | $                              | 156,379    |   |                                | $ | 52,744   |  



At June 30, 2005, we
had cash and cash equivalents of $9,996,381. Working capital at June 30, 2005 was $8,645,075.



Net cash provided by operating activities for the six months ended June 30, 2005 was $1,531,953 as compared to $136,966 for the six months ended June 30, 2004. This is primarily due to the net collection in our
accounts receivable of $2,241,352 at June 30, 2005 from December 31, 2004 from our collection efforts to reduce the days outstanding and the decrease in our unbilled accounts receivable from $4,252,845 at December 31, 2004 to $2,713,534 at June 30,
2005 and from the increase in our deferred revenue of $1,136,385 at June 30, 2005 from December 31, 2004 due to the advance deposits received from our clients from new contract signings. This was offset by the net loss for the six months ended June
30, 2005 of $1,710,361.



Net cash used in investing activities
for the six months ended June 30, 2005 represents our investment in furniture and fixtures for new space in our Newtown facility and software for our operations. We currently anticipate that capital expenditures for the remainder of the fiscal year
ending December 31, 2005 will be approximately $1,400,000. These expenditures represent software development and additional upgrades in our networking, data storage and core laboratory capabilities for both our United States and European operations.



Net cash provided by financing activities for the six months
ended June 30, 2005 is primarily attributable to the proceeds of $506,872 from our sales leaseback transaction offset by payments under equipment lease obligations.



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The following table lists our cash contractual obligations as of June 30, 2005:



|                                   |  |                        |           |                 |   |           |  |           |           |              |   |           |  |  
|---------------------------------- |  | ---------------------- | --------- | --------------- | - | --------- |  | --------- | --------- | ------------ | - | --------- |  | -
|                                   |  | Payments Due By Period
|Contractual obligations            |  | Total                  |           | Less than 1year |   | 1-3 years |  | 4-5 years |           | After 5years
|Capital lease obligations          |  | $                      | 1,749,600 |                 | $ | 892,281   |  | $         | 857,319   |              |   |          |  | 
|Facility rent operating leases     |  | $                      | 6,627,664 |                 | $ | 1,384,683 |  | $         | 2,828,219 |              | $ | 2,414,762 |  | 
|Employment agreements              |  | $                      | 598,016   |                 | $ | 404,683   |  | $         | 193,333   |              |   |          |  | 
|                                   |  |                        |           |                 |   |           |  |           |           |              |   |           |  |  
|Total contractual cash obligations |  | $                      | 8,975,280 |                 | $ | 2,681,647 |  | $         | 3,878,871 |              | $ | 2,414,762 |  | 
|                                   |  |                        |           |                 |   |           |  |           |           |              |   |           |  |  



On May 17, 2005, we
renewed and amended our agreement with Wachovia Bank, National Association. The renewed and amended agreement is for an unsecured committed line of credit of $5,000,000. Interest is payable at the LIBOR Market Index Rate plus 2.0%. The agreement
requires us, among other things, to maintain certain financial covenants. The committed line of credit matures June 30, 2006 and may be renewed on an annual basis. At June 30, 2005, we had no borrowings under the committed line of credit and are
compliant with the financial covenants.



We have neither paid
nor declared dividends on our common stock since our inception and do not plan to pay dividends on our common stock in the foreseeable future.



On June 2, 2005, we purchased six Euro call options in the amount of 250,000 Euros each with the first expiration on July 27, 2005 and the last expiration
on December 28, 2005 at a strike price of $1.26 to hedge against the exposure to variability in our cash flows due to the Euro denominated costs for our Netherlands subsidiary. We paid a total premium of $29,100 for the options.



We have not entered into any off-balance sheet transactions, arrangements or
other relationships with unconsolidated entities or other persons that are likely to affect liquidity or the availability of or requirements for capital resources.



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We anticipate that our existing capital resources together with cash flow from operations and borrowing
capacity under the existing line of credit, will be sufficient to meet our cash needs for at least the next twelve months. However, we cannot assure you that our operating results will achieve profitability on an annual basis in the future. The
inherent operational risks associated with the following risks may have a material adverse affect on our future liquidity:



| |  |  | our ability to gain new client contracts;
| | - |  | -----------------------------------------



| |  |  | the variability of the timing of payments on existing client contracts; and
| | - |  | ---------------------------------------------------------------------------



| |  |  | other changes in our operating assets and liabilities.
| | - |  | ------------------------------------------------------



We may seek to raise additional capital from equity or debt sources in order to take advantage of unanticipated opportunities, such as more rapid
expansion, acquisitions of complementary businesses or the development of new services. We cannot assure you that additional financing will be available, if at all, on terms acceptable to us.



Changes to Critical Accounting Policies and Estimates



Our critical accounting policies and estimates are set forth in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004. As of June 30, 2005, there have been no changes to such critical accounting
policies and estimates.



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Item 3. Quantitative and Qualitative Disclosures About Market Risk.



Interest Rate Risk



We invest in high-quality financial instruments, primarily money market funds, federal agency notes, asset backed securities, corporate debt securities
and United States treasury notes, with an effective duration of the portfolio of less than nine months and no security with an effective duration in excess of two years, which we believe are subject to limited credit risk. We currently do not hedge
our interest rate exposure. Due to the short-term nature of our investments, we do not believe that we have any material exposure to interest rate risk arising from our investments.



Foreign Currency Risk



Our financial statements are denominated in United States dollars. Fluctuations in foreign currency exchange rates could materially increase the operating
costs of our facility in the Netherlands, including the operations of Heart Core, which are primarily EURO denominated. If the exchange rate undergoes a change of 10%, we believe that it would have a material impact on our results of operations due
to the increased cost of our Netherlands facility. In addition, certain of our contracts are denominated in foreign currency. We believe that any adverse fluctuation in the foreign currency markets relating to these contracts will not result in any
material adverse effect on our financial condition or results of operations. In the event we derive a greater portion of our service revenues from international operations, factors associated with international operations, including changes in
foreign currency exchange rates, could affect our results of operations and financial condition.



As a result, we do hedge our foreign currency exposure. Our foreign currency financial instruments primarily consist of cash, trade receivables, prepaid
expenses, fixed assets, trade payables and accrued expenses and were in a net asset position at June 30, 2005 and December 31, 2004. An increase in the exchange rate would result in less net assets when converted to U.S. dollars. Conversely, if we
were in a net liability position, a decrease in the exchange rate would result in more net liabilities when converted to U.S. dollars. At June 30, 2005 and December 31, 2004, a 10% increase (decrease) in the EURO to U.S. dollar spot exchange rate
would result in the following foreign currency risk for our Netherlands facility in a net asset position:



Chart of Foreign Currency Risk

(Dollars in Thousands)



|                        |  |      |    
|----------------------- |  | ---- | ---
|                        |  | EURO
|As of June 30, 2005     |  | $    | 122
|As of December 31, 2004 |  | $    | 127



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##### Table of Contents

Item 4. Controls and Procedures.



Evaluation of disclosure controls and procedures. Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act) as of June 30, 2005, our president and chief
executive officer (principal executive officer) and our chief financial officer (principal accounting and financial officer) have concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms and are operating in an effective
manner.



Changes in internal control over financial
reporting. There was no change in our internal controls over financial reporting that occurred during the quarter ended June 30, 2005 that has materially affected, or is reasonably likely to materially affect, our internal controls over
financial reporting.



PART II. OTHER INFORMATION.



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



|(a) | Our annual meeting of stockholders was held on May 11, 2005.
|--- | ------------------------------------------------------------



|(b) | The following is a list of all of the nominees for Director of the Company who were elected at the Meeting and whose term of office continued after the Meeting:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



Mark L. Weinstein



Jeffrey H. Berg, Ph.D.



Richard F. Cimino



E. Martin Davidoff, CPA, Esq.



David E. Nowicki, D.M.D.



David M. Stack



Paula B. Stafford



James A. Taylor, Ph.D.



|(c) | There were present at the annual meeting, in person or by proxy, 9,794,451 shares of Common Stock out of a total of 11,062,445 shares of our common stock issued and outstanding and
entitled to vote at the annual meeting.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(d) | The results of the vote of the stockholders taken at the annual meeting by ballot and by proxy as solicited by us on behalf of the board of directors were as follows:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (i) | The results of the vote taken at the Meeting for the election of the nominees for our board of directors were as follows:
| | --- | -------------------------------------------------------------------------------------------------------------------------



|                              |  |           |  |         
|----------------------------- |  | --------- |  | --------
|Nominee                       |  | For       |  | Withheld
|Mark L. Weinstein             |  | 9,719,222 |  | 75,229  
|Jeffrey H. Berg, Ph.D.        |  | 9,690,222 |  | 104,229 
|Richard F. Cimino             |  | 9,686,922 |  | 107,529 
|E. Martin Davidoff, CPA, Esq. |  | 9,686,922 |  | 107,529 
|David E. Nowicki, D.M.D.      |  | 9,708,772 |  | 85,679  
|David M. Stack                |  | 9,691,422 |  | 103,029 
|Paula B. Stafford             |  | 9,694,722 |  | 99,729  
|James A. Taylor, Ph.D.        |  | 9,696,422 |  | 98,029  



(ii) A vote was taken
on the proposal to approve the 2005 restatement of our 2002 Stock Incentive Plan, including an increase of 750,000 shares of our common stock available for issuance under the 2002 Stock Incentive Plan. The results of the vote taken at the annual
meeting with respect for such approval were as follows:



|          |  |         |  |         |  |                
|--------- |  | ------- |  | ------- |  | ---------------
|For       |  | Against |  | Abstain |  | BrokerNon-Votes
|6,233,708 |  | 337,045 |  | 20,177  |  | 3,203,521      



(iii) A vote was taken
on the proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2005. The results of the vote taken at the annual meeting with respect to such
appointment were as follows:



|          |  |         |  |        
|--------- |  | ------- |  | -------
|For       |  | Against |  | Abstain
|9,732,272 |  | 52,850  |  | 9,329  



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Item 6. Exhibits.



|     |  |                                                                                                                                                                                                                                                                                                                                                                          
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|4.1  |  | Promissory Note for $5,000,000, dated May 17, 2005, made by Bio-Imaging Technologies, Inc. in favor of Wachovia Bank, National Association.                                                                                                                                                                                                                              
|     | 
|10.1 |  | Loan Agreement, dated May 17, 2005, by and between Bio-Imaging Technologies, Inc. and Wachovia Bank, National Association.                                                                                                                                                                                                                                               
|     | 
|10.2 |  | Development and Supply Agreement dated June 20, 2005 between CapMed, a division of Bio-Imaging Technologies, Inc., and Medic Alert Foundation Unites States, Inc. (Portions of this exhibit
have been omitted and have been filed separately pursuant to an application for confidential treatment filed with the Securities and Exchange Commission on August 15, 2005).
|     | 
|31.1 |  | Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                  
|     | 
|31.2 |  | Certification of principal financial and accounting officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                   
|     | 
|32.1 |  | Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350.                                                                                                                                                                                                                                                  
|     | 
|32.2 |  | Certification of principal financial and accounting officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350.                                                                                                                                                                                                                                   



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SIGNATURES



In accordance with the
requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                      |  |                                |  |                                                                                                              
|--------------------- |  | ------------------------------ |  | -------------------------------------------------------------------------------------------------------------
|                      | 
|                      |  | BIO-IMAGING TECHNOLOGIES, INC.
|                      |  |                               
|DATE: August 15, 2005 |  | By:                            |  | /s/ Mark L. Weinstein                                                                                        
|                      |  |                                |  | Mark L. Weinstein, President and Chief Executive
Officer (Principal Executive Officer)                       
|                      |  |                               
|DATE: August 15, 2005 |  | By:                            |  | /s/ Ted I. Kaminer                                                                                           
|                      |  |                                |  | Ted I. Kaminer, Senior Vice President and Chief
Financial Officer(Principal Financial and Accounting Officer)



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