________________________________________________________________________________

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                             ______________________

                                   FORM 10-QSB

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

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2003

                                       OR

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

             For the transition period from _________ to __________
                        Commission file number: 000-26555

                             ______________________

                           ACCUIMAGE DIAGNOSTICS CORP.
        (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)


            NEVADA                                              33-0713615
(STATE OR OTHER JURISDICTION OF                              (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                            IDENTIFICATION NUMBER)

                               510 GRANDVIEW DRIVE
                   SOUTH SAN FRANCISCO, CALIFORNIA 94080-4920
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
                                 (650) 875-0192
                (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  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

                                 YES [X] NO [ ]

As of December  31, 2003 there were  48,336,295  shares of the  Issuer's  Common
Stock outstanding,  with a par value of $0.001. No shares of Preferred Stock are
outstanding.

          Transitional Small Business Disclosure Format: YES [ ] NO [X]

________________________________________________________________________________


<PAGE>


________________________________________________________________________________

                        ACCUIMAGE DIAGNOSTICS CORPORATION
                         QUARTERLY REPORT ON FORM 10-QSB
                     FOR THE PERIOD ENDED DECEMBER 31, 2003
                                TABLE OF CONTENTS

________________________________________________________________________________


                                                                           PAGE
PART I    FINANCIAL INFORMATION                                           NUMBER

ITEM 1.   Financial Statements:

          Balance Sheets (unaudited) as of December 31, 2003 and
              September 30, 2003                                              3

          Statements of Operations (unaudited) for the three months ended
              December 31, 2003 and 2002                                      4

          Statements of Cash Flows (unaudited) for the three months ended
              December 31, 2003 and 2002                                      5

          Notes to Financial Statements                                       6

ITEM 2.   Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                      10

ITEM 3.   Controls and Procedures                                            13

PART II   OTHER INFORMATION

ITEM 1.   Legal Proceedings                                                  13

ITEM 2.   Changes in Securities and Use of Proceeds                          13

ITEM 3.   Defaults Upon Senior Securities                                    13

ITEM 4.   Submission of Matters to a Vote of Security Holders                13

ITEM 5.   Other Information                                                  13

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

          Signatures                                                         15


<PAGE>


________________________________________________________________________________
PART I:  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
________________________________________________________________________________


<TABLE>
<CAPTION>


                        ACCUIMAGE DIAGNOSTICS CORPORATION
                                 BALANCE SHEETS

                                                                              DECEMBER 31,         SEPTEMBER 30,
                                                                                  2003                   2003
                                                                              ____________         _____________
                                                                                (UNAUDITED)            (AUDITED)
<S>                                                                            <C>                  <C>

ASSETS
Current assets:
    Cash and cash equivalents                                                  $   969,786          $        --
    Accounts receivable, net of allowance of $28,229 and                           236,966              112,170
    $50,000, respectively.
    Other receivable, net                                                           25,000               50,000
    Inventory                                                                       49,193               49,193
    Prepaid expenses and other current assets                                        2,273                9,091

                                                                               ___________          ___________
       Total current assets                                                      1,283,218              220,454

Property and equipment, net of accumulated depreciation and                         42,309               45,412
    amortization
Other assets
    Deposits                                                                         9,993                9,993
    Goodwill, net                                                                  309,063              309,063
    Other intangible assets, net                                                     4,027                4,393

                                                                               ___________          ___________
       Total other assets                                                          323,083              323,449
                                                                               ___________          ___________
                                                                               $ 1,648,610          $   589,315

                                                                               ===========          ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                                           $   209,328          $   250,730
    Accrued liabilities                                                            169,517              299,010
    Product warranty reserve                                                        25,000               25,000
    Deferred revenue                                                               194,648               37,000
    Short-term note payable to an Officer of the Company                         1,008,219              762,600
                                                                               ___________          ___________
       Total current liabilities                                                 1,606,712            1,374,340

Shareholders' Equity (Deficit):
    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;                        48,337               22,887
       48,336,295 and 22,886,295 shares issued and
       outstanding on December 31, 2003 and September 30,
       2003, respectively
    Paid-in-capital                                                              4,496,899            3,488,348

    Accumulated deficit                                                         (4,503,338)         $(4,296,260)

                                                                               ___________          ___________
       Total shareholders' equity (deficit)                                         41,898             (785,025)

                                                                               ___________          ___________
                                                                               $ 1,648,610          $   589,315
                                                                               ===========          ===========


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

</TABLE>


                                       3


<PAGE>


                        ACCUIMAGE DIAGNOSTICS CORPORATION
                             STATEMENT OF OPERATIONS
                                   (UNAUDITED)


                                              THREE MONTHS ENDED
                                                 DECEMBER 31,
                                         ____________________________
                                            2003             2002
                                         ___________      ___________

Sales                                    $    86,981      $   745,283

Cost of sales                                    105          185,656

                                         ___________      ___________
Gross profit                                  86,876          559,627

Operating expenses:
   Research and development                  129,663          329,237

   Sales and marketing                        48,320          298,914

   General and administrative                107,662          316,442

                                         ___________      ___________
       Total operating expenses              285,645          944,593

                                         ___________      ___________
Operating loss                              (198,769)        (384,966)

Net interest expense and other                 8,309            6,350

                                         ___________      ___________
Net loss                                 $  (207,078)     $  (391,316)

                                         ===========      ===========
Basic and diluted net loss per share     $    (0.008)     $    (0.017)

                                         ===========      ===========
Weighted average shares outstanding

    Basic and diluted                     27,312,382       22,886,295
                                         ===========      ===========


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


                                       4


<PAGE>

<TABLE>
<CAPTION>


                        ACCUIMAGE DIAGNOSTICS CORPORATION
                             STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

                                                     THREE MONTHS ENDED DECEMBER 31,
                                                     _______________________________
                                                            2003          2002
                                                         __________     ________
<S>                                                      <C>            <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
           Net cash used in operating activities         $ (277,833)    $(42,384)
                                                         __________     ________

CASH FLOWS FROM INVESTING ACTIVITIES:
           Net cash used in investing activities         $       --     $ (6,134)
                                                         __________     ________

CASH FLOWS FROM FINANCING ACTIVITIES:
           Net cash provided by financing activities     $1,247,619     $100,000
                                                         __________     ________

Net increase in cash and cash equivalents                   969,786       51,482

Cash and cash equivalents at beginning of period                 --      232,245

                                                         __________     ________
Cash and cash equivalents at end of period               $  969,786     $283,727
                                                         ==========     ========

SUPPLEMENTAL DISCLOSURE
    Cash paid during the period for interest             $   32,448     $     --

    Cash paid during the period for taxes                $      150     $     --


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

</TABLE>


                                       5


<PAGE>


                        ACCUIMAGE DIAGNOSTICS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND OPERATIONS

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

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

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

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

BASIS OF PRESENTATION

    In the opinion of management,  the accompanying financial statements contain
all  adjustments  (consisting of only normal  recurring  accruals)  necessary to
present  fairly the  financial  position at December 31, 2003 and  September 30,
2003,  and the results of its operations for the three months ended December 31,
2003 and 2002 and cash flows for the three  months  ended  December 31, 2003 and
2002.  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 herein not misleading.
It is suggested  that these  financial  statements  and notes thereto be read in
conjunction with the financial  statements and the notes thereto included in the
Company's September 30, 2003 Form 10-KSB filed December 31, 2003. The results of
operations  for the three  months ended  December  31, 2003 are not  necessarily
indicative  of the results of operations to be expected for the full fiscal year
ending September 30, 2004.

GOING CONCERN

These  financial  statements  have been prepared on a going concern  basis.  The
Company has  reported  net  operating  losses for this  quarter and for the past
three fiscal years. Management plans to achieve profitability in the fiscal year
ending  September 30, 2004 by generating  higher revenue through an expansion of
the Company's sales force and control of costs and expenses.

The Company's expectations as to its cash flows, and as to future cash balances,
are  subject  to  a  number  of  assumptions,  including  assumptions  regarding
anticipated revenues, customer purchasing and payment patterns, and improvements
in general economic conditions,  many of which are beyond the Company's control.
If  revenues  do not  match  projections  and if  losses  exceed  the  Company's
expectations,  the Company will implement  additional cost saving initiatives in
order to preserve  cash.  If the  Company  experiences  a continued  decrease in
demand for its products from the level experienced during fiscal year 2003, then
it would need to reduce  expenditures to a greater degree than  anticipated,  or
raise additional funds if possible.

Certain  shareholders have agreed to provide additional  financing if necessary.
During the first quarter of fiscal 2004 the Company borrowed  $1,000,000 from an
officer of the Company (see Note 2).


                                       6


<PAGE>


USE OF ESTIMATES

The preparation of 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.

Other  significant  estimates  include  the  estimated  cash  flows  to  measure
long-lived  assets,  including  goodwill  and other  intangible  assets  and the
recoverability of the Company's investment.

REVENUE RECOGNITION

The  Company's  revenue is derived  primarily  from two  sources:  (i)  software
license  revenue,  derived  primarily from product sales to distributors and end
users,  and (ii)  maintenance  and  services  revenue,  derived  primarily  from
support,  education and consulting  services provided to end-users.  The Company
typically  requires  deposits upon the receipt of a signed  purchase and license
agreement.  Deposits received on these agreements represent unearned revenue and
are classified as customer deposit liabilities on the Company's balance sheet.

The Company  accounts for sales of software and  maintenance  revenue  under the
provisions  of  Statement  of  Position  97-2 ("SOP  97-2"),  "Software  Revenue
Recognition," as amended. SOP 97-2 generally requires revenue earned on software
arrangements  involving  multiple elements to be allocated to each element based
on  vendor-specific  objective  evidence.  For  hardware  transactions  where no
software is involved,  the Company  applies the  provisions of Staff  Accounting
Bulletin 101, "Revenue Recognition."

The fee for  multiple-element  arrangements  is allocated to each element of the
arrangement,  such as maintenance  and support  services,  based on the relative
fair  values of the  elements.  The  Company  determines  the fair value of each
element  in  multi-element   arrangements  based  on  vendor-specific  objective
evidence  for each  element,  which is based on the price  charged when the same
element  is sold  separately.  If  evidence  of fair  value  of all  undelivered
elements exists but evidence does not exist for one or more delivered  elements,
then revenue is recognized using the residual method. Under the residual method,
the fair value of the undelivered elements is deferred and the remaining portion
of the arrangement fee is recognized as revenue.

The  Company  recognizes  revenue  from  the  sale  of  software  licenses  when
persuasive evidence of an arrangement exists, the product has been accepted, the
fee is fixed or  determinable,  and  collection of the  resulting  receivable is
probable.  Acceptance  generally  occurs when the  product  has been  installed,
training has occurred and the product is in clinical use at the customer site.

Fair values for the ongoing maintenance, which includes updates and support, are
based upon a percentage of the current list price of the software. Fair value of
services,  such as training or  consulting,  is based upon separate sales by the
Company of these services to other customers.  Payments received for maintenance
and services are deferred and  recognized  as revenue  ratably over the contract
term. Training and consulting services are billed based on hourly rates, and are
generally  recognized  as  revenue  as these  services  are  performed.  Amounts
deferred  for  maintenance  services,   term  software  license  agreements  and
warranties comprise the main components of deferred revenue.

PRODUCT WARRANTY RESERVE

       Based  upon  historical  costs  and its  sales  agreements,  the  Company
maintains a product warranty reserve based on product sales to cover anticipated
warranty costs related to software sold. The Company  typically  provides 1-year
warranties  on its  software  and hardware  products  sold.  The majority of the
hardware  warranty is covered by the hardware  vendor.  The Company  continually
compares its reserves to actual costs as determined by  management,  and adjusts
its  reserves  as  necessary.  There were no changes in the  Company's  warranty
reserve during the three months ended December 31, 2003.


                                       7


<PAGE>


ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company  performs  ongoing credit  evaluations  of its customers'  financial
conditions and generally requires no collateral from its customers.  The Company
maintains  allowances for doubtful  accounts for estimated losses resulting from
the  inability of its  customers to make  required  payments.  If the  financial
condition  of  the  Company's  customers  should  deteriorate,  resulting  in an
impairment  of their  ability to make  payments,  additional  allowances  may be
required.  Trade  accounts  receivable  are  presented  net of an allowance  for
doubtful  accounts of $28,229 and $50,000 at December 31, 2003 and September 30,
2003, respectively.

RECOVERABILITY OF LONG LIVED ASSETS

The Company evaluates the  recoverability of its long-lived assets  periodically
by analyzing its operating results and considering significant events or changes
in the business environment.

LOSS PER SHARE

Basic net loss per share is  computed by dividing  net loss  (numerator)  by the
weighted-average  number of common shares outstanding  (denominator)  during the
period. Diluted net loss per share gives effect to all dilutive potential common
shares outstanding during the period including stock options, using the treasury
stock method.  In computing  diluted net loss per share, the average stock price
for the  period  is used in  determining  the  number of  shares  assumed  to be
purchased  from the  exercise  of stock  options.  For the  three  months  ended
December  31, 2003,  options and warrants  outstanding  were  excluded  from the
calculation since their effect was antidilutive.  The total options and warrants
outstanding  at  December  31,  2003  and 2002  were  4,925,834  and  3,925,834,
respectively.

STOCK BASED COMPENSATION

On December 31, 2002, the FASB issued SFAS No. 148,  "Accounting for Stock Based
Compensation  -  Transition  and   Disclosure,"   which  amends  SFAS  No.  123,
"Accounting for Stock-Based  Compensation." SFAS No. 148 requires more prominent
and frequent  disclosures  about the effects of  stock-based  compensation.  The
Company  accounts for its  stock-based  compensation  plans using the  intrinsic
value  method  prescribed  in  Accounting   Principles  Board  Opinion  No.  25,
"Accounting for Stock Issued to Employees." Compensation cost for stock options,
if any, is measured by the excess of the quoted  market  price of the  Company's
stock at the date of grant over the amount an  employee  must pay to acquire the
stock. SFAS No. 123 established  accounting and disclosure  requirements using a
fair-value  based method of accounting  for  stock-based  employee  compensation
plans.  Had  compensation  expense  for the  Company's  Stock  Option  Plan been
determined to be consistent  with SFAS No. 123, the Company's net loss and basic
and diluted net loss per share would have  increased to the  following pro forma
amounts:

                                                THREE MONTHS ENDED DECEMBER 31,
                                                _______________________________
                                                    2003             2002
                                                 ___________      ___________

Net loss, as reported                            $  (207,078)     $  (391,316)
   Employee stock-based compensation expense
       determined under fair value:                  (87,178)              --
                                                 ___________      ___________
   Pro forma net loss                            $  (294,256)     $  (391,316)
                                                 ===========      ===========
   Weighted average shares outstanding            27,312,382       22,886,295
Shares used to compute basic and diluted net
   loss per share                                 27,312,382       22,886,295
                                                 ===========      ===========
Basic and diluted net loss per share             $   (0.011)      $   (0.017)
                                                 ===========      ===========


                                       8


<PAGE>


2.       RELATED PARTY TRANSACTIONS

The following  transactions  took place between the Company and related  parties
during the three months ended December 31, 2003:

In fiscal year 2001,  the Company  received and approved  executed note purchase
agreements and subscription  agreements for a total of $500,000. As of September
30,  2003,  the  unpaid  balance  on  the  notes  amounted  to  $250,000,  which
represented the secured long-term portion of the notes due on June 30, 2005. All
of the notes plus accrued interest of $31,250 was repaid in October 2003.

In fiscal year 2003,  the  Company  borrowed an  additional  $512,600  from four
stockholders at 10% interest.  All of the notes were  short-term  notes and were
repaid in October  2003 from  proceeds  received  through  the  issuance  of two
Promissory Notes to an Officer of the Company.

In October 2003 and November 2003, the Company entered into two Promissory Notes
with an Officer of the Company for $500,000 each, totaling $1,000,000.  The note
bears  interest at 5% per annum and mature in October 2004 and in November 2004,
respectively.

In October 2003, the Company entered into a Common Stock Purchase Agreement with
the same Officer of the Company  pursuant to which the  Company,  subject to the
terms and  conditions  set forth  therein,  raised  $1,002,000 in cash through a
private equity  offering of 25,050,000  shares of restricted  common stock.  The
shares were issued at a price of $0.04 per share,  which was a discount from the
market  price.  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 proceeds  from
this offering are being used to fund operations.  This purchase of the Company's
common stock resulted in the Officer of the Company  owning a majority  interest
in the Company totaling 52% at December 31, 2003.


3.       EQUITY TRANSACTIONS

In December 2003,  the Company issued 400,000 shares of restricted  common stock
to employees for prior services rendered as consultants during fiscal year 2003.
The shares were valued at the market  price on the date of issuance at $0.08 per
share and as a result,  the Company  recorded  charges to  operations  of $8,000
during the quarter ended December 31, 2003 and $24,000 in the prior fiscal year.
The issuance of these securities were not registered under the Securities Act of
1933, as amended and was exempt from the  registration  requirements  thereunder
pursuant to Section 4 (2) thereof.

In December  2003, the Company  issued  incentive  stock options to its Board of
Directors  allowing  them to  purchase up to 1 million  shares of the  Company's
common stock.  The options were issued at an exercise  price of $0.10 per share,
which was  greater  than the  market  price on the date of grant.  The  exercise
period for the options is 10 years and the options  were 100% vested on the date
of grant. Total options outstanding at December 31, 2003 were 2,812,500.

4.       SUBSEQUENT EVENTS

In  February  2004,  the  Company  and SMAART  Medical  Systems  entered  into a
five-year  agreement (the "Software License Agreement") with respect to purchase
and distribution of AccuImage's medical imaging software.


                                       9


<PAGE>


________________________________________________________________________________

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
________________________________________________________________________________


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  ("Exchange  Act"),
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 Form 10-QSB 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 and as disclosed in
the Company's other filings with the Security and Exchange Commission. 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.

OVERVIEW

The following  discussion and analysis  should be read in  conjunction  with the
Company's  financial  statements and related notes thereto  contained  elsewhere
with this Form 10-QSB. Operating results for the three months ended December 31,
2003 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 September 30, 2003 Form 10-KSB, filed on December 31, 2003.

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.

RESULTS OF OPERATIONS

REVENUES

For the quarter ended  December 31, 2003,  net sales  decreased by $658,302 over
the same  period  in  fiscal  2002.  Overall  revenue  is lower  due to the poor
economy, especially in the medical imaging and healthcare industries.  Sales for
the quarter  ended  December 31, 2003  totaling  $86,981 is  primarily  sales of
software and monthly maintenance contracts.


                                       10


<PAGE>


GROSS PROFIT

For the quarter  ended  December 31 2003,  gross  profit on sales  decreased  to
$86,876, or 99.8% of net sales,  compared with $559,627,  or 75.1% of net sales,
for the same period in fiscal  2003,  due to lower sales and a change in product
mix. Sales during the quarter ended December 31, 2003  represented  revenue from
sales of software and monthly maintenance contracts.


RESEARCH & DEVELOPMENT

The Company spent $129,663 on research and development  (R&D) activities  during
the quarter ended  December 31, 2003 compared with $329,237 for the same quarter
in fiscal year 2003.  The decrease of $199,574 is primarily due to reductions in
personnel and other cost saving  measures.  The Company  intends to continue its
research and  development  efforts to maintain its  competitive  position in the
marketplace  since the Company's  operations  require  constant  improvement and
high-level development of the Company's software products.

SALES AND MARKETING

The Company's  sales and marketing  expenses for the quarter ended  December 31,
2003 were  $48,320  compared  with  expenses of $298,914 for the same quarter in
fiscal year 2003.  This  decrease of $250,594 was primarily due to a decrease in
the Company's sales force, a change in the compensation structure to commissions
only and a decrease in travel and entertainment expense.

GENERAL AND ADMINISTRATIVE

General and administrative expenses were $107,662 for the quarter ended December
31, 2003, which compares with $316,442 for the same quarter in fiscal 2003. This
decrease of $208,780, is primarily due to a reduction in office staff.

RESULTS OF OPERATIONS

Sales  decreased by $658,302 to $86,981 for the quarter ended  December 31, 2003
over the same quarter ended December 31, 2002.  The sales decline  resulted in a
corresponding  reduction  in  gross  profit.  Operating  expenses  decreased  by
$658,948, to $285,645 over the same quarter in fiscal year 2003. The decrease is
primarily due to cost saving  measures by the Company,  including a reduction in
salaries and  headcount.  This resulted an operating  loss of ($207,078) for the
three months ended  December 31, 2003, or $184,238 less than the operating  loss
of ($391,316) for the same period in fiscal year 2003.

LIQUIDITY AND CAPITAL RESOURCES

During the three  months ended  December  31,  2003,  net cash used by operating
activities was $277,833.  At December 31, 2003, the Company had $969,786 in cash
and cash equivalents.  Working capital at December 31, 2003 equaled a deficit of
($323,494) compared with a deficit of ($1,153,886) at September 30, 2003.

On December 31, 2003, the Company held accounts receivable of $236,966. Accounts
receivable are generally kept current through punctual collections efforts.

During the three  months ended  December 31, 2003,  the Company did not have any
investing activities.

During the three months ended  December 31, 2003, the Company raised $2M in cash
by issuing  25,050,000 shares of the Company's common stock to an Officer of the
Company in a private  financing  for $1M and entered into two notes for $500,000
each with the same  officer  of the  Company.  This was  offset by a payment  of
approximately  $793,850 to Board  Members for  outstanding  notes  entered  into
during previous years.


                                       11


<PAGE>


The Company  anticipates that cash  requirements for the remainder of the fiscal
year will be met by  current  capital  resources  and  operational  income  from
increasing revenues.  However, the Company's revenues for the foreseeable future
may not be sufficient to obtain  profitability,  and the Company may  experience
losses for the near term. The Company's  expectations as to its cash flows,  and
as to future cash balances,  are subject to a number of  assumptions,  including
assumptions  regarding  anticipated  revenue,  customer  purchasing  and payment
patterns,  and  improvements in general economic  conditions,  many of which are
beyond the  Company's  control.  If  revenues do not match  projections,  and if
losses exceed the Company's expectations,  the Company will implement additional
cost saving initiatives in order to preserve cash. If the Company  experiences a
continued decline in demand for its products,  from the level experienced during
fiscal 2003, then it would need to reduce  expenditures to a greater degree than
anticipated, or raise additional funds if possible.

The Company  operates in a highly  competitive  market  characterized by rapidly
changing  technology,  together  with  competitors  and  distributors  that have
significantly  greater financial resources than the Company. The Company intends
to incur  significant  expenses to develop  and promote new  products as well as
support existing products.  Failure to generate sufficient revenues from new and
existing products,  or reduce  discretionary  expenditures would have a material
adverse  effect  on  a  Company's  ability  to  achieve  its  intended  business
objectives.

 FOREIGN CURRENCY TRANSACTIONS

All of the  Company's  transactions  are  negotiated,  invoiced and paid in U.S.
dollars.  International  sales for the  quarter  ended  December  31,  2003 were
$58,000.

INFLATION

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

FACTORS AFFECTING FUTURE OPERATING RESULTS

The  development  and  marketing  of products  requires  significant  amounts of
capital.  A decline in future  orders and revenues  might require the Company to
seek  additional  capital to meet its working capital needs during or beyond the
next  twelve  months if the  Company is unable to reduce  expenses to the degree
necessary to avoid incurring  losses.  If the Company needs  additional  capital
resources,  it may be required  to sell  additional  equity or debt  securities,
secure  lines of credit or obtain  other third party  financing.  The timing and
amount of such capital  requirements  cannot be determined at this time and will
depend  on a number  of  factors,  including  demand  for our  existing  and new
products and changes in technology in the medical imaging industry. There can be
no assurance that additional  financing will be available on satisfactory  terms
when needed, if at all. Failure to raise such additional  financing,  if needed,
may result in Company's inability to achieve our long-term business  objectives.
To the extent that  additional  capital is raised through the sale of additional
equity or convertible  debt  securities,  the issuance of these securities would
result in additional dilution to the Company's shareholders.

The Company operates in a rapidly changing  industry,  which is characterized by
intense competition from both established companies and start-up companies.  The
market for the Company's products is extremely  competitive both as to price and
capabilities.  The Company's  success  depends in part on its ability to enhance
existing  products and  introduce  new  technology  products.  This requires the
Company to accurately  predict future  technology  trends and  preferences.  The
Company  must also bring its  products to market at  competitive  price  levels.
Unexpected  changes in technological  standards,  customer demand and pricing of
competitive  products could adversely affect the Company's  operating results if
the Company is unable to respond effectively and timely to such changes.

The industry is also  dependent to a large  extent on  proprietary  intellectual
property rights.  From time to time the Company is subject to legal  proceedings
and  claims in the  ordinary  course of  business,  including  claims of alleged
infringement  of patents,  trademarks and other  intellectual  property  rights.
Consequently,  from time to time,  the Company  will be required to prosecute or
defend against alleged infringements of such rights.


                                       12


<PAGE>


________________________________________________________________________________

ITEM 3.  CONTROLS AND PROCEDURES

________________________________________________________________________________


Within  90 days  prior to the date of this  Form  10-QSB,  the  Company  made an
evaluation,  under  the  supervision  and with  participation  of the  Company's
management,   including  the  Company's   Chief   Executive   Officer,   of  the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
the Company's Chief Executive  Officer  concluded that the Company's  disclosure
controls  and  procedures  are  effective  in timely  alerting  them to material
information relating to the Company required to be included in this Form 10Q.

There has been no significant  change in the Company's  internal  controls or in
other factors, which could significantly affect the internal controls subsequent
to the date the Company carried out its evaluation.


________________________________________________________________________________

PART II. OTHER INFORMATION
________________________________________________________________________________


ITEM 1.  LEGAL PROCEEDINGS

The Company may from time to time be  involved  in various  claims and  lawsuits
incidental  to the  operation  of its  business.  The  Company is not  currently
involved in any litigation that it believes could have a material adverse effect
on its financial condition or the results of its operations.


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

(c)  RECENT SALES OF UNREGISTERED SECURITIES

     On October 24,  2003,  the Company  entered  into a Common  Stock  Purchase
     Agreement  with an Officer of the Company  pursuant  to which the  Company,
     subject to the terms and conditions set forth therein, raised $1,002,000 in
     cash through a private equity  offering of 25,050,000  shares of restricted
     common stock.  The shares were issued at a price of $0.04 per share,  which
     was a discount from the market price.  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 proceeds from this offering are being used to fund operations.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable.



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

No matter was submitted to the vote of security holders during the quarter ended
December 31, 2003.


ITEM 5.  OTHER INFORMATION

On December 15, 2003, the Company's Board of Directors appointed Aviel Faliks as
President and Chief Executive Officer of the Company.


                                       13


<PAGE>


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits.

         The Exhibits listed in the accompanying Exhibit Index are filed as part
         of this report.


     (b) There  were no  reports  on Form 8-K filed  during  the  quarter  ended
         December 31, 2003.


                                       14


<PAGE>


________________________________________________________________________________

                                   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.

                                   ACCUIMAGE DIAGNOSTIC CORPORATION




Date:  March 16, 2004              By:  /s/ AVIEL FALIKS
                                        ___________________________
                                            Aviel Faliks
                                            Chief Executive Officer



                                   By:  /s/ DR. C. ALLEN WALL
                                        ___________________________
                                            Dr. C. Allen Wall
                                            Chairman and Interim
                                            Chief Financial Officer


                                       15


<PAGE>


                                  EXHIBIT INDEX


EXHIBIT NO.                             DESCRIPTION


   10.01         Promissory Note between AccuImage Diagnostics  Corporation
                 and Aviel Faliks, dated October 23, 2003.

   10.02         Promissory Note between AccuImage Diagnostics  Corporation
                 and Aviel Faliks, dated November 6, 2003.

   10.03         Common Stock Purchase Agreement between AccuImage Diagnostics
                 Corporation and Aviel Faliks, dated October 24, 2003.

    31.1         Certification of Chief Executive  Officer,  pursuant to 18
                 U.S.C. Section 1350, as adopted pursuant to Section 302 of
                 the Sarbanes- Oxley Act of 2002.

    31.2         Certification of Chief Financial  Officer,  pursuant to 18
                 U.S.C. Section 1350, as adopted pursuant to Section 302 of
                 the Sarbanes- Oxley Act of 2002.

    32.1         Certification of Chief Executive  Officer,  pursuant to 18
                 U.S.C. Section 1350, as adopted pursuant to Section 906 of
                 the Sarbanes- Oxley Act of 2002.

    32.2         Certification of Chief Financial  Officer,  pursuant to 18
                 U.S.C. Section 1350, as adopted pursuant to Section 906 of
                 the Sarbanes- Oxley Act of 2002.