U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                ----------------

                                   FORM 10-QSB

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

                For the quarterly period ended December 31, 2001

                            ------------------------

                        Commission File Number: 000-26555

                            ------------------------

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


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

400 Grandview Drive, South San Francisco, California    94080-4920
--------------------------------------------------------------------------------
(Address of principal executive offices)                (Zip Code)

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

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

                             Yes _X_         No ___

The number of shares outstanding of the issuer's common stock was 22,886,295
shares of common stock, par value $.001, as of December 31, 2001. No shares of
preferred stock are outstanding.

Transitional Small Business Disclosure Format:

                              Yes___         No _X_

<PAGE>


                           ACCUIMAGE DIAGNOSTICS CORP.

                                   Form 10-QSB
                                December 31, 2001


TABLE OF CONTENTS


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements                                                  3

             Balance Sheets as of December 31, 2001 (unaudited) and
             September 30, 2001 (audited)                                      3

             Statements of Operations & Comprehensive Income (unaudited)
             for the Three Months Ended December 31, 2001 and 2000             5

             Statements of Cash Flows (unaudited) for the
             Three Month Period Ended December 31, 2001 and 2000               6

             Notes to Financial Statements                                     7

Item 2.  Management's Discussion and Analysis of
         Financial Condition or Plan of Operations                            11


PART II.  OTHER INFORMATION


Item 2.  Changes in Securities                                                14

Item 4.  Submission of Matters to a Vote of Securities Holders                14

Item 6.  Exhibits and Reports on Form 8-K                                     14


Signature                                                                     15


    THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

                                       2
<PAGE>


PART I.  FINANCIAL INFORMATION
         ITEM 1.  FINANCIAL STATEMENTS

                           ACCUIMAGE DIAGNOSTICS CORP.
                                 BALANCE SHEETS
          DECEMBER 31, 2001(UNAUDITED) AND SEPTEMBER 30, 2001 (AUDITED)

                                                     December 31,  September 30,
                                                         2001          2001
                                                     (UNAUDITED)    (AUDITED)
                                                      ------------------------
ASSETS
Current Assets
    Cash                                              $1,015,849    $   51,422
    Accounts receivable, net of allowance
       for doubtful accounts of $12,068 and $15,000      176,790       234,875
    Employee receivable                                    1,500         7,500
    Inventory                                            125,431        94,083
    Prepaid expenses                                       6,995        17,350
    Other current assets                                      --         5,216
                                                      ------------------------

Total Current Assets                                   1,326,565       410,446

Property and Equipment, net of accumulated
  depreciation                                            48,380        53,549

Other Assets
    Security deposits                                     18,735        18,735
    Trade receivable-non-current                          15,075        15,075
    Licenses, net of accumulated amortization             26,401        29,970
    Goodwill, net of accumulated amortization            355,423       370,877
    Investment in AHS                                    375,000       375,000
                                                      ------------------------
Total Other Assets                                       790,634       809,657

TOTAL ASSETS                                          $2,165,579    $1,273,652
                                                      ========================


    THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

                                       3
<PAGE>


ACCUIMAGE DIAGNOSTICS CORP.
BALANCE SHEETS (CONTINUED)


                                                 December 31,      September 30,
                                                     2001              2001
                                                 (UNAUDITED)        (AUDITED)
                                                 ----------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
    Accounts payable                             $   91,580        $   69,932
    Product warranty reserve                        150,564           150,714
    Sales tax payable                                 9,413            13,541
    Wages & payroll taxes payable                        --             4,844
    Other accrued liabilities                       149,876           181,965
    Accrued vacation                                 53,726            53,726
    Deferred revenue                                312,100           312,100
    Customer deposits                                18,525                --
                                                 ----------------------------

Total Current Liabilities                           785,784           786,822

Long-Term Liabilities
    Shareholder notes payable                       250,000           250,000
    Non-customer deposits                             2,949                --
                                                 ----------------------------

Total Liabilities                                 1,038,733         1,036,822

Stockholders' Equity
Preferred Shares - $0.001 Par Value;
10,000,000 shares Authorized; None
issued or outstanding                                    --                --

Common Shares - $0.001 Par Value;
50,000,000 Authorized; 22,886,295 and
10,981,534 shares issued and outstanding on
December 31, 2001 and September 30, 2001             22,887            10,982

Paid-In-Capital                                   3,488,348         2,500,253
Accumulated other comprehensive loss               (125,000)         (125,000)
Accumulated Earnings (Deficit)                   (2,259,387)       (2,149,405)
                                                 ----------------------------

Total Stockholder's Equity                        1,126,847           236,830

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $2,165,579        $1,273,652
                                                 ============================

    THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

                                       4
<PAGE>


                           ACCUIMAGE DIAGNOSTICS CORP
           STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME (UNAUDITED)
                           FOR THE THREE MONTHS ENDED
                           DECEMBER 31, 2001 AND 2000


                                                    For the three months
                                                      Ended December 31,
                                               --------------------------------
                                                   2001                2000
                                               ------------        ------------

REVENUES                                           $746,733            $453,238

COST OF GOODS SOLD                                   76,886             130,748
                                               --------------------------------

GROSS PROFIT                                        669,847             322,490

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
General and
Administrative                                      374,756             282,037
Sales and Marketing                                 159,357             122,037
Research and
Development                                         249,879             133,163
                                               --------------------------------
TOTAL SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES                             783,992             537,237


                                               --------------------------------
OPERATING LOSS                                     (114,145)           (214,747)

OTHER (INCOME) AND EXPENSES
    Interest Income                                    (466)             (7,171)
    Other Income                                     (9,948)                 --
    Interest Expense                                  6,250                  --
    Franchise and Other Taxes                            --               2,191
                                               --------------------------------

TOTAL OTHER (INCOME) AND EXPENSES                    (4,164)             (4,980)
                                               --------------------------------

NET LOSS                                          $(109,981)          $(209,767)
                                               ================================

INCOME (LOSS) PER SHARE-
BASIC & DILUTED                                     $(0.008)            $(0.019)
                                               ================================


Weighted Average Shares Outstanding
        Basic & Diluted                          13,597,965          10,914,253

    THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

                                       5
<PAGE>


                           ACCUIMAGE DIAGNOSTICS CORP
                      STATEMENTS OF CASH FLOWS (UNAUDITED)
             FOR THREE MONTH PERIOD ENDED DECEMBER 31, 2001 AND 2000

                                                      December 31,  December 31,
                                                         2001          2000
                                                      ------------------------
Cash Flows from Operating Activities
    Net Cash provided (used) by Operating Activities:   $(35,028)    $(112,526)
                                                      ------------------------

    Loan to other entity

Cash Flow from Investing Activities:
    Investment in Property and Equipment                    (545)      (78,572)
                                                      ------------------------

    Net Cash Provided (Used) by Investing Activities        (545)      (78,572)
                                                      ------------------------

Cash Flow From Financing Activities:
    Proceeds from Sales of Stock                       1,000,000            --
                                                      ------------------------

    Net Cash Provided (Used) by Financing Activities   1,000,000            --
                                                      ------------------------

Increase (Decrease) in Cash                              964,427      (191,098)

Cash Balance at beginning of period                       51,422       702,903
                                                      ------------------------

Cash Balance at end of period                         $1,015,849      $511,805
                                                      ========================



Supplemental Disclosure:
    Interest Paid                                        $12,500            $0
    Income Taxes-Franchise tax                                $0        $4,111
    Compensation paid in shares (Non-Cash)                    $0            $0


    THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

                                       6
<PAGE>


NOTES TO THE FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

         In  the  opinion  of  the  management,  the  accompanying  consolidated
financial  statements  contain all  adjustments  necessary  (consisting  of only
normal recurring  accruals) to present fairly the financial position at December
31, 2001 and September  30, 2001,  the results of its  operations  for the three
months ended December 31, 2001 and 2000, and the cash flow for the periods ended
December  31,  2001 and  2000.  Certain  information  and  footnote  disclosures
normally  included  in  financial  statements  that would have been  prepared in
accordance with generally accepted accounting  principles have been condensed or
omitted  pursuant to the rules and  regulations  of the  Securities and Exchange
Commission,  although management of the Company believes that the disclosures in
these  financial  statements  are  adequate  to make the  information  presented
therein  not  misleading.   It  is  suggested  that  these  condensed  financial
statements  and  notes  thereto  be  read  in  conjunction  with  the  financial
statements  and the notes thereto  included in the Company's  September 30, 2001
Form 10-KSB.  The results of operations  for the three months ended December 31,
2001 are not necessarily  indicative of the results of operations to be expected
for the full fiscal year ending September 30, 2002.

CONCENTRATION OF CASH

         The Company at times  maintains cash balances in an account that is not
fully  federally  insured.  Uninsured  balances  as of  December  31,  2001  and
September 30, 2001 were $1,015,849 and $52,334, respectively.

INVENTORIES AND COST OF GOOD SOLD

         Inventories  are  stated  at the  lower  of  cost  or  market.  Cost is
determined by the first-in,  first-out  (FIFO)  method.  Interim  period cost of
goods sold is  calculated  using the  perpetual  inventory  record.  The Company
reports any significant  adjustments  that result from reconciling the perpetual
inventory record to periodic and annual physical inventory observations.

SOFTWARE DEVELOPMENT COSTS

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

WARRANTY RESERVE

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

                                       7
<PAGE>


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

DEFERRED REVENUE

         The Company recognizes revenues as earned. Amounts billed in advance of
the period in which product is shipped are recorded as liability under "deferred
revenue".

ADVERTISING COSTS

         The  Company   expenses   advertising   costs  as  they  are  incurred.
Advertising  expenses  were  $17,837 and $25,757 for the three  months  ended on
December 31, 2001, and 2000, respectively.

INCOME TAXES

         At September 30, 2001,  the Company has  approximately  $1,900,477  net
operating loss carryforwards available to offset future federal and state income
taxes,  which  expire  through  2010 and 2019.  The Company has elected to fully
reserve all tax benefits  until such time as it is able to reasonably  expect to
realize those benefits.

USE OF ACCOUNTING ESTIMATES

         The  preparation  of  the  financial   statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ materially from those estimates.
The actual  results with regard to warranty  expenditures  could have a material
impact on the  financial  statements  of the  Company if the actual rate of unit
failure is greater than what was estimated by the Company in the  calculation of
its warranty reserve.

COMPREHENSIVE INCOME (LOSS)

         The Financial  Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), which
is effective for financial  statements for periods  beginning after December 15,
1997.  This  pronouncement  establishes  standards  for reporting and display of
comprehensive  income (loss) and its components in a full set of general-purpose
financial statements.  Comprehensive income (loss) consists of net income (loss)
and other gains and losses affecting  Stockholders' equity that, under generally
accepted accounting principles, are excluded from net income (loss). The Company
did not have any components of comprehensive  income (loss) for the three months
ended  December  31, 2001.  For the fiscal year ended  September  30, 2001,  the
Company   recorded   unrealized   losses  of  $125,000   on  equity   securities
available-for-sale.

NET LOSS PER SHARE

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

         Basic EPS is  computed by dividing  net income  (loss) by the  weighted
average number of common shares outstanding.  The dilutive EPS calculation gives
effect  to all  dilutive  potential  common  shares,  such as stock  options  or
warrants,  which were  outstanding  during the period.  Shares issued during the
period and shares repurchased by the Company are weighted for the portion of the
period that they were  outstanding for both basic and diluted EPS  calculations.
There were no dilutive  securities for the three month period ended December 31,
2001 and 2000.

                                       8
<PAGE>


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


STOCK-BASED COMPENSATION


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

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


ACCOUNTING PRONOUNCEMENTS

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

         In  July  2001,  the  Financial   Accounting   Standards  Board  issued
Statements of Financial  Accounting  Standards No. 141, "Business  Combinations"
("FAS 141") and No. 142,  "Goodwill  and Other  Intangible  Assets" ("FAS 142").
SFAS No. 141 requires all business combinations initiated after June 30, 2001 to
be accounted  for using the purchase  method.  Under SFAS No. 142,  goodwill and
intangible  assets with  indefinite  lives are no longer  amortized  but instead
tested for impairment at least annually in accordance with the provisions of FAS
No. 142.  FAS No. 142 will also  require that  intangible  assets with  definite
lives be  amortized  over  their  respective  useful  lives  to their  estimated
residual  values,  and reviewed for impairment in accordance  with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed  Of." The  provisions  of this  Statement are required to be applied
starting with fiscal years  beginning  after December 15, 2001. The Company will
continue  to amortize  goodwill  existing  at  September  30, 2001 until the new
standard is adopted and goodwill  tested for impairment in accordance  with SFAS
No. 121. The Company is  currently  evaluating  the effect that  adoption of the
provisions of FAS No. 142 will have on its results of  operations  and financial
position.

         In June 2001,  the FASB  issued  SFAS No.  143,  "Accounting  for Asset
Retirement  Obligations."  SFAS  No.  143  requires  liability  recognition  for
obligations  associated with the retirement of tangible long-lived asset and the
associated  asset  retirement  costs.  The  Statement is effective for financial
statements  issued for fiscal years  beginning  after June 15, 2002 with earlier
application  encouraged.  The  implementation  of SFAS  No.  143 will not have a
material affect on the Company's results of operations or financial position.

                                       9
<PAGE>


         (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         In August  2001,  the FASB  issued SFAS No.  144,  "Accounting  for the
Impairment or Disposal of Long-Lived  Assets." SFAS No. 144 supersedes  SFAS No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to Be Disposed of", in that it removes goodwill from its impairment scope
and allows for different approaches in cash flow estimation.  However,  SFAS No.
144 retains the  fundamental  provisions of SFAS No. 121 for (a) recognition and
measurement  of  long-lived  assets to be held and used and (b)  measurement  of
long-lived  assets to be disposed of. SFAS No. 144 also  supersedes the business
segment   concept  in  APB   opinion   No.  30,   "Reporting   the   Results  of
Operations-Reporting  the Effects of  Disposal  of a Segment of a Business,  and
Extraordinary,  Unusual and Infrequently  Occurring Events and Transactions," in
that it permits presentation of a component of an entity,  whether classified as
held for sale or disposed of, as a discontinued operation. However, SFAS No. 144
retains the requirement of APB Opinion No. 30 to report discontinued  operations
separately  from  continuing  operations.  The  provisions of this Statement are
effective  for  financial  statements  issued for fiscal years  beginning  after
December 15, 2001 with earlier  application  encouraged.  Implementation of SFAS
No. 144 will not have a material  effect on the Company's  results of operations
or financial position.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying value of certain financial instruments, including accounts
receivable, accounts payable and accrued expenses approximates fair value due to
their short maturities.  Based on borrowing rates currently  available for loans
with similar terms,  the carrying values of notes payable  approximates the fair
values.


(2) RELATED PARTY TRANSACTIONS

         Douglas  Boyd,  P.H.D.  is the Chairman of The Board of Directors and a
shareholder in the Company.  Mr. Boyd is also a member of the Board of Directors
of Imatron,  Inc.  and a minority  shareholder  in Imatron,  Inc. On April 1999,
AccuImage  Diagnostics  Corp.  entered into an agreement with Imatron,  Inc. for
Imatron to be a distributor of the Company's  products.  Sales to Imatron,  Inc.
amounted  to  $441,444  and  $334,775  and  represented  59.1%  and 73.9% of the
Company's  total revenue for the three months ended  December 31, 2001 and 2000,
respectively.

         Douglas Boyd and family  members are majority  shareholders  of Imaging
Technology Group, Inc (ITG). There were sales to either ITG for the three months
ended December 31, 2001 and 2000, respectively, were $0 and $75,199.

         The following  transactions  took place between the Company and related
parties during the period ended September 30, 2001:

         Leon Kaufman, the CEO advanced to the Company $50,000. The terms of the
note payable  required the Company to repay $25,000  within seven days after the
Company  completing  their  equity  investment  in AHS (see Note 4 and 12),  and
$25,000 is due June 30, 2005. The note payable bears an interest rate of 10% per
annum. The Company has repaid to Mr. Kaufman $25,000 plus applicable interest in
August 2001.  Mr.  Kaufman has been  performing  the duties of President and CEO
starting February 1, 2001.

         In August 2001, two shareholders advanced to the Company $450,000.  The
note  payable  bears an  interest  rate of 10% per annum.  The terms of the note
payable  required  the  Company to repay  $225,000  within  seven days after the
Company  completing  their  equity  investment  in AHS (see Note 4 and 12),  and
$225,000 is due June 30,  2005.  The  Company  has repaid to these  shareholders
$225,000 plus applicable interest in August 2001.

         The  Company  received  cash  from  AHS,  Inc.,  an entity in which the
Company has a 5% ownership  interest,  in the amount of $312,100 during the year
ended  September 30, 2001, for sales of the Company's  products,  which were not
yet  shipped at  September  30,  2001.  AHS is not able to take  delivery of the
products ordered due to

                                       10
<PAGE>


construction  delays at their  facilities.  $312,100  was  recorded  as deferred
revenue  for the fiscal  year  ended  September  30,  2001 and was still held as
deferred revenue for the quarter ended December 31, 2001.


(3) EQUITY TRANSACTIONS

COMMON STOCK TRANSACTIONS

         Effective  December 10,  2001,  the Company  concluded  the sale of its
common shares through a private placement offering.  The Company sold 11,904,761
shares of unregistered,  restricted common stock for $999,999.92, completing the
full offering.  The shares were issued at a price of $0.084 per share, which was
at a discount from the market price. Under this private placement offering,  the
Company sold 2,976,189 of these shares to related parties, which include members
of the Board of Directors  and their  relatives.  Additionally,  one  individual
purchased 6,378,576 shares and became a member of the Board of Directors.

STOCK OPTIONS

         During the period  October 1, 2001 to December  31,  2001,  the Company
issued incentive stock options to its employees  allowing them to purchase up to
235,000  shares of common stock.  The exercise price is equivalent to the market
price on the date of the grant.  The  exercise  period for the options is for 10
years from the date of the grant, and the options vest over a 4-year period.


Item 2.  Management's  Discussion and Analysis of Financial Condition or Plan of
         Operations

         The following  discussion  and analysis  should be read in  conjunction
with the Company's  Consolidated  Financial Statements and related Notes thereto
contained  elsewhere with this document.  Operating  results for the three-month
period ended  December 31, 2001 are not  necessarily  indicative  of the results
that may be expected  for any future  periods,  including  the full fiscal year.
Reference should also be made to the Annual Financial Statements, Notes thereto,
and Management's  Discussion and Analysis of Financial  Condition and Results of
Operations contained in the Company's Form 10-KSB, filed on January 14, 2002.

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

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

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

                                       11
<PAGE>


REVENUE

         For the three months ended  December  31,  2001,  revenue  increased by
$329,537  or 72.7%.  Revenues  for the  quarter  ended  December  31,  2001 were
$746,733  compared with  $453,238 for the same period in 2000.  Sales to Imatron
Inc. increased by approximately  $107,000 to $441,444,  compared to $334,444 for
the same period in 2000 and sales to other  customers  increased  by $222,869 to
$341,332, compared to $118,463 for the same period in 2000.

GROSS PROFIT

         For the three  months ended  December  31, 2001,  gross profit on sales
increased to $669,847,  or 107.7%,  compared with $322,490 in 2000 due primarily
to increased sales of software options, which have higher gross margins than the
Company's other products.

SALES AND MARKETING

         The  Company's  sales and  marketing  expenses  for the  quarter  ended
December 31, 2001 were $159,357  compared with expenses of $122,037 for the same
quarter in fiscal year 2000. This increase,  of $37,320, was due to increases in
salary and related  expenses,  and travel  expenses which were offset by reduced
marketing materials purchases.

RESEARCH AND DEVELOPMENT

         The Company spent $249,879 on research and development (R&D) activities
during the quarter  ended  December  31, 2001  compared  with  $133,163  for the
quarter ended  December 31, 2000.  This increase is due primarily to an increase
in  salary  and  related  expenses;  R&D  staff had  increased  by two  software
engineers  over the quarter  ended  December  31,  2000.  Also,  R&D  consultant
expenses had increased by approximately  $20,000 over the quarter ended December
31, 2000.  The Company  does not intend to reduce its  research and  development
effort since maintenance of a competitive  position in the marketplace where the
Company operates requires constant improvement and high-level development of the
Company's software products.

OPERATIONAL AND ADMINISTRATIVE

         Operational and  administrative  expenses were $374,756 for the quarter
ended  December 31, 2001,  which  compares with $282,037 for the same quarter in
the previous year. The increase is primarily due to higher  salaries and related
expenses;  headcount  increased by one over the quarter ended December 31, 2000.
Also,  increased  spending on patent legal expenses and rent  contributed to the
rise in  operational  and  administrative  expenses over the prior quarter ended
December 31,  2000.  Patent legal  expenses  were $22,894 for the quarter  ended
December 31, 2001 and $0 for the quarter ended December 31, 2000.  Rent expenses
increased  to $56,183 for the quarter  ended  December 31, 2001 from $25,097 for
the same quarter ended in fiscal year 2000 due to the increased monthly rent for
the 400 Oyster Point Blvd. facility, the lease agreement of which was terminated
effective  December 31, 2001,  as well as the entering  into a new lease on June
20, 2001 for the current headquarters located at 400 Grandview Drive. Due to the
early  termination of the 400 Oyster Point Blvd.  facility,  management  expects
rent expense to decrease for the  remainder of the fiscal year to  approximately
$38,000 per quarter.

RESULTS OF OPERATIONS

         Revenues  increased $293,495 for the period ended December 31, 2001, or
approximately  65% over the same quarter ended December 31, 2000. Even with this
significant   increase   in   revenues,   expenses   for  R&D  and  general  and
administrative  expenses increased approximately 50% over the same quarter ended
December 31, 2000.  This  resulted in a net  operating  loss of $114,145 for the
three months ending  December 31, 2001 or $100,602  lower than the net operating
loss of $214,747 for the same period in fiscal year 2000.

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<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

         In the quarter  ending  December  31,  2001,  the Company  generated an
operating loss of  ($109,981).  On December 31, 2001, the Company had $1,015,849
in cash and net accounts receivable of $176,790.  Working capital for the period
ended December 31, 2001 equaled $540,781 compared with ($373,427) for the period
ended  September 30, 2001.  The current ratio for the period ended  December 31,
2001 was 1.69 compared to (0.52) for the period ended September 30, 2001.

         The significant increase in cash was due to the conclusion of a sale of
11,904,761  shares of the  Company's  common stock  through a private  placement
offering on  December  10,  2001.  This  private  placement  offering  generated
$999,999.92  in cash.  The  shares  were  issued at a price of $0.084 per share,
which was at a discount  from the market  price.  Under this  private  placement
offering,  the Company sold 2,976,189 of these shares to related parties,  which
include members of the Board of Directors and their relatives. Additionally, Dr.
C. Allen  Wall  purchased  6,378,576  shares and became a member of the Board of
Directors during the quarter ended December 31, 2001. This infusion of cash will
be used for short-term working capital requirements to generate future sales.

         The Company anticipates that cash requirements for the remainder of the
fiscal year will be met by a combination  of existing cash on hand,  operational
income, and financing.

FOREIGN CURRENCY TRANSACTIONS

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

INFLATION

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

SHARE PRICE VOLATILITY

         During the first quarter of fiscal year 2001, the Company's share price
experienced some price decline and volatility compared to the same period in the
prior  fiscal year.  The trading  price of the  Company's  common stock could be
subject to wide  fluctuations  in response to  quarter-to-quarter  variations in
operating results,  changes in earnings estimates by analysts,  announcements of
technological  innovations  or new  products by the Company or its  competitors,
general  conditions in the software and computer  industries and other events or
factors.  In  addition,  in recent  years the stock  market in general,  and the
shares of technology  companies in particular,  have  experienced  extreme price
fluctuations.  This volatility has had a substantial  effect on the market price
of securities  issued by many  companies for reasons  unrelated to the operating
performance  of the  specific  companies.  These broad market  fluctuations  may
adversely affect the market price of the common stock.

FORWARD-LOOKING STATEMENTS

         The discussion  contained in this  Management  Discussion & Analysis is
"forward  looking" as that term is contemplated by Section 27A of the Securities
Act of 1933 and Section 12E of the Securities  exchange Act of 1934,  including,
without limitation,  statements regarding the Company's  expectations,  beliefs,
intentions or strategies  regarding  future  business  operations  and projected
earnings  from its products and services,  which are subject to many risks.  All
forward-looking  statements  included in this document are based on  information
available  to the  Company  on the  date  hereof,  and the  Company  assumes  no
obligation to update any such forward-looking  statements.  The Company's actual
results may differ  materially as a result of certain  factors,  including those
set forth  hereafter  and  elsewhere  in this Form 10-QSB.  Potential  investors
should consider  carefully the previously  stated  factors,  as well as the more
detailed  information  contained elsewhere in this Form 10-QSB,  before making a
decision to invest in the common stock of the Company.

                                       13
<PAGE>


PART II - OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES

         On  December  10,  2001,  the  Company  entered  into a Stock  Purchase
Agreement with several investors  pursuant to which the Company,  subject to the
terms and  conditions set forth  therein,  raised  $999,999.92 in cash through a
private equity  offering of 11,904,761  shares of restricted  Common Stock.  The
sale of these securities was not registered under the Securities Act of 1933, as
amended, and was exempt from the registration  requirements  thereunder pursuant
to Section 4(2) thereof.  The Company  reported this transaction in an 8-K filed
December 26, 2001.

         Under this private  placement  offering,  the Company sold 2,976,189 of
these shares to related parties, which include members of the Board of Directors
and their relatives.  Inyoung S. Boyd,  spouse of Douglas Boyd,  Chairman of the
Board and Principal Executive Officer of the Company, purchased 1,000,000 shares
of the Company Common Stock. John C. Klock,  Director of the Company,  purchased
595,238 shares of the Company Common Stock.  Hedvig Hricak,  spouse of Alexander
R. Margulis,  Director of the Company,  purchased  119,047 shares of the Company
Common Stock.  Chris R.  Shepherd,  Director of the Company,  purchased  261,904
shares of the Company Common Stock.  Chung Lew, a 5% stockholder of the company,
purchased  1,000,000 shares of the Company Common Stock.  Additionally,  through
two entities over which he has direct control, C. Allen Wall purchased 6,378,576
shares and became a member of the Board of  Directors  during the quarter  ended
December 31, 2001.

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

         None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits:

                  Exhibit 10.1:  Form of Stock Purchase  Agreement  entered into
                  between Company and several investors on December 10, 2001.**

                  Exhibit 10.2:  Stock Purchase  Agreement  entered into between
                  Company and Inyoung S. Boyd, Spouse of Douglas Boyd,  Chairman
                  of the Board and Principal Executive Officer of the Company.

                  Exhibit 10.3:  Stock Purchase  Agreement  entered into between
                  Company and John C. Klock, Director of the Company.

                  Exhibit 10.4:  Stock Purchase  Agreement  entered into between
                  Company and Chris R. Shepherd, Director of the Company.

                  Exhibit 10.5:  Stock Purchase  Agreement  entered into between
                  Company and C.A. Wall Family Foundation,  an entity controlled
                  by C. Allen Wall, Director of the Company.

                  Exhibit 10.6:  Stock Purchase  Agreement  entered into between
                  Company  and C. Allen Wall UTA  Charles  Schwab & Co.,  Inc. -
                  T.J. Whalen and C.A. Wall Keogh Plan, an entity  controlled by
                  C. Allen Wall, Director of the Company.

                  Exhibit 10.7:  Stock Purchase  Agreement  entered into between
                  Company and Chung Lew, a 5% stockholder of the Company.

                  Exhibit 10.8:  Stock Purchase  Agreement  entered into between
                  Company and Hedvig  Hricak,  Spouse of Alexander R.  Margulis,
                  Director of the Company.

                                       14
<PAGE>


                  ** Incorporated  by reference to the Company's  Current Report
                  filed December 26, 2001.

         (b)      Form 8-K Reports:

                  On December 26, 2001,  the Company  filed a Current  Report on
                  Form 8-K reporting its December 10, 2001 transaction, in which
                  the  Company  entered  into a Stock  Purchase  Agreement  with
                  several  investors  pursuant to which the Company,  subject to
                  the terms and conditions set forth therein, raised $999,999.92
                  in cash through a private equity offering of 11,904,761 shares
                  of restricted  Common Stock.  The sale of these securities was
                  not  registered  under the  Securities Act of 1933, as amended
                  and was exempt from the registration  requirements  thereunder
                  pursuant  to  Section 4 (2)  thereof.  Copy of the form of the
                  Stock Purchase Agreement was filed as an exhibit with the 8-K.


                                   SIGNATURES

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

                                                     ACCUIMAGE DIAGNOSTICS CORP.

February 14, 2002

                                                     By: /s/ LEON KAUFMAN
                                                         -----------------------
                                                         Leon Kaufman
                                                         Chief Executive Officer

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