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

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~June 30~~December 31, 2001

/ /	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: 01-~~19632~~10285

4-D NEUROIMAGING
(Exact name of registrant as specified in its charter)

California (State or other jurisdiction of incorporation or organization)		95-2647755 (IRS Employer Identification No.)
California (State of incorporation)		95-2647755 (I.R.S. Employer Identification No.)
9727 Pacific Heights Boulevard, San Diego, California (Address of principal executive offices)		92121-3719 (Zip code)
9727 Pacific Heights Boulevard San Diego, California (Address of principal executive offices)		92121-3719 (zip code)
(858) 453-6300 Registrant's telephone number, including area code)

(~~858) 453-6300 Registrant's~~Former name, ~~telephone~~former ~~number~~address and former fiscal year, ~~including~~if ~~area~~changed ~~code~~since last report)

(Former name, former address and formal fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / /

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes / / No / /

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares outstanding of the registrant's ~~common~~Common ~~stock~~Stock, no par value, as of ~~August~~February 178, ~~2001~~2002 was 145,~~018~~261,~~629~~667 shares.

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

4-D NEUROIMAGING CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

		June 30, 2001			September 30, 2000
		December 31, 2001			September 30, 2001
		(unaudited)
ASSETS
Cash and cash equivalents		$	~~1,025~~515		$	~~1,083~~178
Restricted cash			~~470~~381			~~312~~546
Accounts receivable, less allowance for doubtful accounts of $210			~~847~~702			13,~~246~~136
Inventories			65,~~828~~613			67,~~345~~311
Prepaid expenses and other			1,~~504~~116			~~1,068~~898
	Total current assets		108,~~674~~327			1012,~~054~~069
Property and equipment, net			~~1,535~~679			~~973~~728
Goodwill, net			8,~~504~~177			98,~~696~~177
Restricted cash			—			313
Deferred income taxes			567			588
Deferred income taxes			568			586
Other assets			246			262
Other assets			461			562
	Total assets	$	17,996		$	21,824
		$	21,742		$	22,184
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Notes payable		$	3,607		$	3,357
Notes payable		$	—		$	13,155
Accounts payable			2,256			2,357
Accounts payable			2,485			3,797
Accrued liabilities			1,130			1,239
Accrued liabilities			804			1,452
Accrued salaries and employee benefits			589			558
Accrued salaries and employee benefits			698			595
Customer deposits			3,747			6,459
Customer deposits			5,669			4,641
Deferred revenues			241			204
Deferred revenues			360			297
Current portion of royalty obligation			312			312
Current portion of royalty obligation			312			287
Current portion of capital lease obligations			16			16
	Total current liabilities		1011,~~344~~898			2414,~~240~~502
Notes payable			~~3,806~~471			481
Customer Deposits			1,707
Royalty obligation, net of current portion			1,143			1,122
Royalty obligation, net of current portion			1,102			1,488
Customer deposits			1,108			1,108
Deferred revenues			~~247~~43			~~134~~35
Capital lease obligations, net of current portion			2117			4217
	Total liabilities		1714,~~227~~680			2517,~~904~~265
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
SHAREHOLDERS' EQUITY
Common stock—no par value; 200,000,000 shares authorized; 145,018,629 shares issued and outstanding			112,700			100,102
Common stock—no par value; 200,000,000 shares authorized; 145,261,667 shares issued and outstanding as of December 31, 2001			112,733			112,700
Additional paid-in capital			3,~~008~~007			3,~~008~~007
Accumulated deficit			(~~110~~112,~~863~~128	)		(~~106~~110,~~413~~913	)
Accumulated other comprehensive loss			(~~330~~296	)		(~~417~~235	)
	Total shareholders' equity (deficit)		4,515			(3,720	)
	Total shareholders' equity		3,316			4,559
		$	21,742		$	22,184
	Total liabilities & shareholders' equity	$	17,996		$	21,824

See notes to consolidated financial statements.

4-D NEUROIMAGING
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share amounts)
(unaudited)

		Three Months Ended June 30,						Nine Months Ended June 30,
		Three Months Ended December 31,
		2001			2000			~~2001~~			~~2000~~
REVENUES
	Product sales	$	~~996~~2,409		$	52,~~073~~906		$	~~6,282~~		$	~~5,426~~
	Product services		~~169~~273			~~171~~224			~~482~~			~~427~~
			1,165			5,244			6,764			5,853
			2,682			3,130
COST OF REVENUES
	Product		~~694~~1,934			21,~~850~~381			~~4,368~~			~~3,903~~
	Product services		~~152~~298			63123			~~446~~			~~365~~
			846			2,913			4,814			4,268
			2,232			1,504
GROSS MARGIN			~~320~~450			21,~~331~~626			~~1,950~~			~~1,585~~
OPERATING EXPENSES
	Research and development		~~458~~367			~~653~~711			~~1,594~~			~~2,183~~
	Marketing and sales		~~449~~569			~~357~~514			~~1,381~~			~~1,492~~
	General and administrative		~~817~~722			~~869~~696			~~2,347~~			~~1,987~~
	Goodwill amortization		~~327~~—			~~351~~337			~~992~~			~~702~~
			2,051			2,230			6,314			6,364
			1,658			2,258
OPERATING PROFIT (LOSS)			(1,731	)		101			(4,364	)		(4,779	)
OPERATING LOSS			(1,208	)		(632	)
	Interest expense		(~~190~~71	)		(~~258~~330	)		~~(844~~	)		~~(529~~	)
	Interest income		~~(17~~5	)		25			50
	Loss from investment in Magnesensors		—			(21	)		—			(58	)
	Other income, net		59			202
	Other income (expense), net		196			(4	)		697			(86	)
LOSS BEFORE PROVISION FOR INCOME TAXES		$	(1,215	)	$	(735	)
LOSS BEFORE PROVISION FOR INCOME TAXES		$	(1,742	)	$	(182	)	$	(4,461	)	$	(5,452	)
	Provision for income taxes		1			75
	Provision(Benefit) for income taxes		17			—			(12	)		41
NET LOSS		$	(1,216	)	$	(810	)
NET LOSS		$	(1,759	)	$	(182	)	$	(4,449	)	$	(5,493	)
BASIC AND DILUTED NET LOSS PER SHARE		$	(0.01	)	$	(0.01	)
BASIC AND DILUTED NET LOSS PER SHARE		$	(0.01	)	$	(0.00	)	$	(0.04	)	$	(0.06	)
	Weighted average number of common shares outstanding		145,184			84,975
Weighted average number of common shares outstanding			127,537			84,851			99,380			84,033
COMPREHENSIVE LOSS:
COMPREHENSIVE LOSS:
	Net loss	$	(1,216	)	$	(810	)
	Net loss	$	(1,759	)	$	(182	)	$	(4,449	)	$	(5,493	)
	Cumulative translation adjustment		(61	)		(27	)
	Cumulative translation adjustment		(18	)		—			85			—
	Comprehensive loss	$	(1,277	)	$	(837	)
	Comprehensive loss	$	(1,777	)	$	(182	)	$	(4,364	)	$	(5,493	)

See notes to consolidated financial statements.

4-D NEUROIMAGING
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

				Nine Months Ended June 30,
				Three Months Ended December 31,
				2001			2000
OPERATING ACTIVITIES
	Net loss			$	(41,~~449~~216	)	$	(~~5,493~~810	)
	Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
		Depreciation			~~302~~101			~~285~~135
		Amortization of goodwill			~~1,192~~—			~~702~~337
		Amortization of minimum royalty obligation			~~(361~~21	)		—25
		Deferred income taxes			18			—
		Income from investment in Magnesensors			—			(200	)
		Deferred income taxes			22			75
	Changes in operating assets and liabilities excluding effects of acquisition:
		Restricted cash			~~155~~165			~~(506~~—	)
		Accounts receivable			~~399~~2,434			(51592	)
		Inventories			~~(483~~1,698	)		(~~829~~980	)
		Prepaid expenses and other			(~~436~~203	)		~~(338~~80	)
		Other assets			101			(292	)
		Accounts payable			(101	)		407
		Accounts payable			(1,313	)		(241	)
		Accrued liabilities			(109	)		71
		Accrued liabilities			(400	)		421
		Accrued salaries and employee benefits			30			253
		Accrued salaries and employee benefits			104			23
		Customer deposits			(2,712	)		1,696
		Customer deposits			2,735			1,970
		Deferred revenue			47			(80	)
		Deferred revenue			176			(126	)
			Net cash provided by operating activities		177			417
		Interest payable			(247	)		33
			Net cash provided by (used in) operating activities		(2,507	)		(4,442	)
INVESTING ACTIVITIES
	Change in short-term investments, net				—			2,698
	Purchases of property and equipment				(52	)		(298	)
	Purchases of property and equipment				(864	)		(216	)
			Net cash (used in) investing activities		(52	)		(298	)
	Loss from investment in Magnesensors				—			58
	Acquisition of Neuromag, net of cash acquired				—			(9,507	)
			Net cash used in investing activities		(864	)		(6,967	)
FINANCING ACTIVITIES
	Proceeds from notes payable				—240			~~11,828~~—
	Notes payable restructured				(9,226	)		—
	Proceeds from stock exchange for cancellation of debt				30			—
	Repayments of notes payable				(123	)		(21	)
	Proceeds from stock sale from ESPP				3			—
	Payments on capital lease obligations				(21	)		(26	)
	Repayments of notes payable				—			(123	)
	Proceeds from stock options exercised				—			687
	Payments on capital lease obligations				—			(6	)
	Proceeds from stock exchange for debt cancellation				12,598
	Borrowings on capital lease obligations				—			5
			Net cash (used in) provided by financing activities		~~3,228~~273			~~12,468~~(124	)
			Effect of exchange rate changes		85(61	)		—(24	)
Net increase (decrease) in cash and cash equivalents					~~(58~~337	)		~~1,059~~(29	)
Cash and cash equivalents at beginning of period					~~1083~~178			~~441~~1,083
Cash and cash equivalents at end of period				$	~~1025~~515		$	1,~~500~~054

See notes to consolidated financial statements.

4-D NEUROIMAGING
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(in thousands)
(unaudited)

SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

			Nine Months Ended June 30,
		Three Months Ended December 31,
		2001	~~2001~~		2000	~~2000~~
Minimum royalty obligation incurred in acquisition of Neuromag Oy			$	2,382		$	2,500
Royalty obligation incurred in acquisition of Neuromag Oy		$	—		$	—
Adjustment of acquisition liabilities to goodwill		$	$—	~~200~~	$	$200	—
Property and equipment transfer from inventories for customer sale/lease			$	790		$	—
Property and equipment transfer to inventories for customer sale		$	—		$	186
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	~~Cash paid for interest~~	$	$—	76	$	$56	~~575~~

See notes to consolidated financial statements.

4-D NEUROIMAGING
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 1. BUSINESS AND BASIS OF PRESENTATION

4-D Neuroimaging, ~~founded~~or in4-D, ~~1970~~(formerly asBiomagnetic Technologies, Inc.), a California corporation originally founded in 1970 to produce equipment for physics labs, iscurrently ~~engaged~~develops, ~~primarily~~manufactures, inmarkets and sells medical instrumentation that allows physicians to monitor how the ~~business~~body ofis ~~developing~~functioning, ~~manufacturing~~ and ~~selling~~provides an important tool to ~~medical~~neuroscientists ~~imaging~~helping ~~systems~~them to ~~medical~~unravel ~~institutions~~how the brain functions. The ~~magnetic~~basic ~~source~~technology ~~imaging~~is ~~("MSI")~~referred ~~systems~~to ~~(also~~as ~~known~~either asMagnetic ~~magnetoencephalography~~Source ~~("MEG")~~Imaging, ~~systems)~~or ~~developed~~MSI, byor when specific to the ~~Company~~brain Magnetoencephalography, or MEG. MEG/MSI systems locate and measure magnetic fields ~~created~~ generated by the human body, ~~for~~and assist in the noninvasive diagnosis of ~~certain~~a potentially broad range of medical disorders. These measurements provide useful information about the normal and abnormal functioning of the brain, heart, spine and other organs. Currently, the Company is focusing its efforts on MEG/MSI applications for the brain.

On December 22, 1999, 4-D Neuroimaging acquired all of the issued and outstanding capital stock ("Shares") of Neuromag Oy pursuant to the terms of a Share Purchase Agreement, by and between Marconi Medical Systems, Inc. ("Marconi") and 4-D (the "Share Purchase Agreement"). The acquisition of Neuromag Oy has been accounted for under the purchase method of accounting. The Company paid $10 million in cash and agreed to pay Marconi an interest-free minimum royalty obligation of $312,500 per year for eight ~~years,~~ (years totaling ~~a minimum of~~ $2.5 million, and a maximum of $5 million in royalties) and additional consideration dependent upon the occurrence of certain future events. The minimum royalty obligation was recorded at acquisition at a net present value of $1.7 million using an imputed interest rate of approximately 10 percent. The fair value of net assets acquired was approximately $1900,~~100,~~000. The purchase price in excess of the fair value of net assets acquired was recorded as goodwill totaling approximately $10.68 million and iswas ~~being~~ amortized ~~over~~through 8fiscal year ended September ~~years~~30, 2001. Thereafter, as required by SFAS No. 142, goodwill and certain intangible will no longer be amortized, but instead tested for impairment at least annually. The Company has early adopted SFAS in fiscal 2002. Management continues to review the impact of this Statement and will make any necessary adjustments, if appropriate. Similar to 4-D, Neuromag Oy is engaged in the research, development, manufacturing, and sales of MSI systems.

The unaudited consolidated condensed financial statements of 4-D Neuroimaging and its subsidiaries, Neuromag Oy, a wholly owned Finnish entity, and Biomagnetic Technologies, GmbH, an inactive wholly owned German entity, (together, the "Company", "we", "our", or "4-D") have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. The Company suggests that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-K for the fiscal year ended September 30, ~~2000~~2001.

In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting only of normal recurring entries, necessary to to present fairly its financial position at ~~June~~December 3031, 2001 and the results of its operations and its cash flows for the periods presented.

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Results for the interim periods presented in this report are not necessarily indicative of results which may be reported for any other interim period or for the entire fiscal year.

The accompanying statements of operations include the results of operations of Neuromag Oy for the nine months ended June 30, 2001.

NOTE 2. BASIC AND DILUTED NET LOSS PER SHARE

Shares used in computing basic and diluted net loss per share include the weighted average number of common shares outstanding. Potentially dilutive securities, including stock options, are antidilutive and are excluded from the computation of diluted net loss per share.

period. Actual results could differ from these estimates. Results for the interim periods presented in this report are not necessarily indicative of results which may be reported for any other interim period or for the entire fiscal year.

NOTE 2. BASIC AND DILUTED NET LOSS PER SHARE

Shares used in computing basic and diluted net loss per share include the weighted average number of common shares outstanding as of December 31, 2001. Potentially dilutive securities, including stock options, are antidilutive and are excluded from the computation of diluted net loss per share.

NOTE 3. BUSINESS RISKS AND UNCERTAINTIES

The Company ~~has~~continues ~~experienced~~to experience serious liquidity issues ~~over the last few years~~ and ~~has~~ incurred net losses of $84,~~127~~501,000, $78,~~464~~127,000, and $47,~~968~~464,000 in fiscal ~~2000~~ 2001, ~~1999~~2000 and ~~1998~~1999, respectively. The Company had negative cash flows from operations of $54,~~217~~153,000, $85,~~602~~217,000, and $58,~~520~~602,000 in fiscal ~~2000~~2001, ~~1999~~2000 and ~~1998~~1999, respectively. For the quarter ended ~~June~~ December 3031, 2001, the Company incurred a net loss of $1,~~759~~216,000 and had positive cash flows from operations of $177,000. At ~~June~~December 3031, 2001, the Company had an accumulated deficit of $~~110~~112,~~863~~128,000, shareholder equity of $3,316,000 and a ~~net~~working capital ~~equity~~deficiency of $43,~~515~~571,000. On December 31, ~~and~~2001 ~~positive~~the Company had restricted cash of $381,000, which includes a ~~working~~letter ~~capital~~of credit of $~~330~~195,000. ~~The~~for ~~increase~~two inyears ~~net~~of ~~equity~~minimum ~~and~~royalties ~~working~~due ~~capital~~Marconi Medical Systems, Inc. as ~~compared~~required toas ~~prior~~a ~~periods~~part ~~was~~of ~~due~~the ~~primarily~~agreement to ~~the~~purchase ~~issuance~~Neuromag ofOy ~~common~~in ~~stock~~December 1999. Neuromag inOy ~~exchange~~has ~~for~~bank ~~cancellation~~guarantees ofrelated ~~indebtedness (See~~to ~~Note 4)~~a system for approximately $140,000 and aother ~~reclassification~~miscellaneous of ~~notes~~approximately ~~payable~~$46,000.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed ~~below~~above and as shown in the accompanying consolidated financial statements, the Company has operating and liquidity concerns that raise substantial doubt about ~~the~~its ~~Company's~~ ability to continue as a going concern. There can be no assurance that the Company will be able to successfully improve its operating results and further restructure its indebtedness ~~(See Note 4)~~ or that its liquidity and capital resources will be sufficient to maintain ~~its~~ normal ~~operations~~operation. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

Based on the Company's current expectation of anticipated cash receipts related to firm orders received and anticipated bookings of up to two additional MEG/MSI systems, ~~the~~it ~~Company~~ expects to ~~have~~ have sufficient cash to continue operations through ~~at least the end September~~February ~~2001~~2002. Historically, the Company has raised additional capital through its majority shareholders and related parties to ~~fund~~ fund continuing operations. ~~There~~The Company is working with these shareholders and related parties to renegotiate, reduce or repay its debt obligations and to provide additional funding for operations. There can be no assurance that these sources of capital ~~will~~and ~~continue~~funds towill be available, or that its existing debt can be renegotiated on terms acceptable to the Company, if at all.

Realization of the Company's operating plans is dependent upon its ability to successfully close a number of MEG/MSI system sales in a highly competitive market for the limited number of systems being purchased worldwide. There can be no assurance that sufficient sales of ~~the Company's~~ MEG/MSI systems will be achieved in order to realize the current operating plans. Historically, there has been ongoing price competition from the Company's competitors for the currently limited number of whole head systems being purchased worldwide. This competition may affect potential future profitability of the ~~Company's~~ MEG/MSI systems, the extent of which is not presently determinable. Competitors may develop new or different products using technology or imaging modalities that may provide or be perceived as providing greater

To date, the Company has been engaged principally in research and development and marketing activities, and has made only low volume sales to clinical research institutions. The Company is dependent on its current MSI systems as its principal products for which there are currently limited clinical applications. Continued clinical applications development needs to be conducted with MSI systems at major medical centers for the Company to develop a commercial clinical market. There can be no assurance that a commercial market will develop for diagnostic or monitoring uses of the Company's MSI systems. A continued lack of clinical applications and a commercial market for the Company's MSI systems would have a material adverse impact on the Company's financial position, results of operations, and cash flows.

The Company's commercial success is also highly dependent on the availability of reimbursement for procedures performed by the Company's customers using MSI systems. As of June 30, 2001, there have been limited reimbursements from third party payors on a case-by-case basis. In February 2001, the American Medical Association approved the issuance of billing codes, commonly referred to as Current Procedural Terminology ("CPT") codes, for the use of MEG (also known as MSI), in the planning for the surgical treatment of epilepsy and for pre-surgical functional mapping of the brain prior to neurosurgery. 4-D regards the issuance of CPT codes to be a significant step in establishing routine reimbursement for MEG in the United States. Although the number of third party payors making reimbursements has increased, there is no assurance that third party reimbursements will become widely available. Routine reimbursements are not currently provided for MSI procedures by

the United States or Japanese governments or the governments in our other markets. If widespread availability of reimbursements from government and private insurers is not achieved, the Company's financial position, results of operations and cash flows would be materially adversely affected. The Company also cannot predict what legislation relating to its business or the health care industry may be enacted in the future, including legislation relating to third party reimbursements, or what effect such legislation may have on its financial position, results of operations and cash flows. The industry in which the Company operates is characterized by rapid technological change. New products using other technologies or improvements to existing products may reduce the size of the potential markets for the Company's products, and may render them obsolete or non-competitive. Competitors may develop new or different products using technology or imaging modalities that may provide or be perceived as providing greater value than the Company's products. Any such development could have a material adverse effect on ~~the~~its ~~Company's~~ financial position, results of operations and cash flows.

The ~~report of the~~ Company's ~~independent~~long-term ~~public~~commercial ~~accountants~~success onin the ~~Company's~~U.S. ~~financial~~is ~~statements~~dependent ~~included~~upon inobtaining ~~its~~routine ~~Form 10~~approval of reimbursement for clinical MEG/MSI procedures by third-Kparty payors. The Centers for Medicare and Medicaid Services, or CMS, formerly known as the ~~year~~Health ~~ended~~Care ~~September 30~~Financing Administration, or HCFA, which is responsible for the administration of Medicare, and the American ~~2000~~Medical ~~contained~~Association, or AMA, that administers the use of Current Procedural Terminology, or CPT, codes by most third-party payors, follow similar guidelines for determining whether a ~~modification~~specific procedure ~~related~~or tohealth care technology is "reasonable" and "necessary", and therefore reimbursable under Medicare or private insurance coverage. These guidelines generally include consideration of whether (i) the ~~Company's~~procedure ~~ability~~or technology is more or less costly than an alternative already covered by insurance, (ii) the added benefit of the procedure or technology is significant enough to ~~continue~~justify asthe aexpense, ~~going~~and (iii) the ~~concern~~procedure or technology provides significant medical benefits not otherwise available from other procedures or technologies.

In The ~~April 2001,~~Company ~~the~~has ~~Company~~worked ~~retired~~for ~~approximately~~several ~~$10.5 million~~years ofwith its ~~debt,~~customers ~~raised~~and ~~$2 million~~the American Academy of ~~working~~Neurology, ~~capital~~or ~~and~~AAN, ~~restructured~~to ~~approximately~~obtain ~~$3 million of~~CPT ~~its~~codes ~~remaining~~for ~~debt~~MEG. ~~owed~~These efforts came to ~~AIG~~a ~~Private~~successful ~~Bank~~fruition in February ~~Ltd.~~2001 ~~See~~when ~~Note 4~~the ~~and~~AMA ~~Part~~announced ~~II,~~that ~~Item~~it 2would ofassign ~~this~~the ~~report~~first ~~for~~three ~~additional~~CPT ~~information~~specific ~~regarding~~codes for the ~~debt~~use ~~restructuring~~of ~~and~~MEG. The codes for MEG were published in the ~~related~~Federal ~~private~~Register on November 1, ~~placement~~2001.

~~NOTE~~ In the 4publication of the CPT codes on November 1, 2001, the reimbursement level to be paid for the use of the equipment, also known as the Technical Component fee, was designated to be carrier based. ~~DEBT~~ ~~OBLIGATIONS~~ This means that each insurance carrier will independently assign a payment level. The Company will work with each of its customers and prospects to establish appropriate reimbursement levels with the carriers used by their patients. This has been the method of reimbursement that its customers have been using for up to 8 years and, with the Company's help, have been able to obtain satisfactory levels of reimbursement. The Company will continue to work with its customers, with the added advantage of having the CPT code available.

To In December 2001, ~~acquire~~ the ~~shares~~CMS ofpublished ~~Neuromag Oy,~~ the ~~Company~~Ambulatory ~~obtained~~Patient ~~a loan from AIG Private Bank Ltd.~~Cost, or ~~AIG~~APC, ~~totaling~~codes. ~~$11 million~~APC ~~that~~codes isare ~~secured~~cost-based bycodes ~~the entire~~that ~~share~~set ~~capital~~the oftechnical ~~Neuromag~~fee Oythat ~~and~~Medicare iswill ~~guaranteed~~pay byfor ambulatory anpatients ~~entity~~being ~~affiliated~~treated ~~with~~within ~~Martin Egli, a member of~~ the ~~Company's board of directors~~hospital. ~~Mr. Egli~~MEG ~~also serves on AIG's board of directors. The $11 million loan~~ was ~~restructured~~assigned ~~in July 2000 which extended the original maturity date from June 30, 2000~~ to ~~December 29, 2000 and~~ the ~~principal~~"New ~~amount~~Technology" ~~was~~section ~~increased to $11.4 million. On December 29, 2000, the Company did not make payment at maturity~~ of the ~~loan~~codes. ~~Effective~~Within ~~February 15,~~this ~~2001,~~section ~~the~~are ~~Company~~reimbursement ~~and~~levels ~~AIG~~from ~~reached~~$0 ~~an agreement in principle, extending the maturity date~~ to ~~July 20, 2001, increasing the loan principal to approximately~~ $~~12 million (capitalizing accrued interest of approximately $550~~6,000 ~~into~~per ~~the loan principal) and obtaining additional guarantees of indebtedness from another bank~~procedure. ~~On April 26, 2001 the Company reached an agreement with AIG in which $8.951 million of the principle and~~MEG ~~accrued interest of the loan~~ was ~~converted~~assigned ~~into~~to ~~shares~~what of the Company's ~~common~~believes ~~stock~~is asan ~~part~~inappropriately oflow alevel ~~private~~of ~~placement. The remainder,~~ approximately $~~3 million~~150 ofper ~~the loan, was restructured~~procedure. ~~As restructured,~~MEG ~~the~~users ~~loan~~and in the ~~principal~~AAN ~~amount~~are ~~of $3.357 million from AIG matures~~ in ~~July 2002 and~~ the ~~interest~~process rate is currently set at 6.8% per annum until April 26, 2002, at which time the interest accrued on the loan through such date will be due and payable and the interest rate will be readjusted for the remainder of ~~the~~appealing ~~loan~~this ~~term~~assignment. AsThe ~~amended,~~APC ~~the~~process ~~AIG loan~~ is ~~secured~~ ~~by a pledge and assignment by Scaloway Co. Ltd.~~new, orthus ~~Scaloway,~~there acan ~~guarantee~~be inno ~~the~~assurance ~~amount~~as ofto ~~USD~~when ~~$2,200,000~~or byif ~~Bank Julius Baer & Co. AG in Zurich, Switzerland, and all of~~ the ~~issued and~~CMS ~~outstanding~~will ~~shares~~make ofan ~~Neuromag~~appropriate Oyassignment, ~~4-D's wholly-owned subsidiary located in Helsinki~~however, ~~Finland.~~there Ifis ~~4-D~~considerable ~~defaults~~support ~~under~~among the ~~AIG~~AAN ~~loan,~~and ~~then~~MEG ~~AIG~~users ~~has the right~~ to ~~exercise~~effect ~~its security~~a ~~interest~~change ~~and~~to ~~take ownership of Neuromag Oy. In connection with~~ the ~~private placement transaction, Scaloway agreed to convert certain assets pledged and assigned by Scaloway into an indirect~~proper ~~ownership of all 42,623,810 shares of 4~~cost-~~D's~~based ~~common stock issued to AIG, Scaloway has sole voting and disposititve power over these shares~~level. ~~Martin Velasco, a member of 4-D's board of directors, is the beneficial owner of Scaloway.~~

In The ~~June~~CPT codes became available for use starting in January ~~2000,~~2002. They provide the ~~Company~~basis ~~obtained~~for ~~unsecured~~the ~~loans~~first ~~totaling~~routine ~~approximately~~reimbursement ~~$835,000~~for ~~from~~MEG. ~~BDN~~The ~~and~~first code is used ~~approximately~~primarily ~~$485,000~~for the evaluation of candidates for epilepsy surgery, while the ~~proceeds~~other totwo ~~pay~~codes ~~interest~~are ~~due~~used ~~under~~for ~~the~~pre-surgical ~~AIG loan~~functional atmapping ~~June 30,~~procedures. ~~2000~~The inCompany's ~~conjunction~~current ~~with~~sales ~~extending~~strategies in the ~~maturity~~U.S. offocus on the ~~loan~~development ~~from~~of ~~AIG~~commercially viable sales to ~~December 29,~~clinical ~~2000~~users. ~~BDN~~It is always difficult to predict the adoption rate of a ~~Spanish~~new ~~company~~modality, ~~owned~~but bywith ~~three~~the ~~members~~assignment of CPT codes the Company's ~~board~~believes ofthat ~~directors,~~it ~~Martin~~has ~~Egli,~~a ~~Enrique~~new and powerful sales approach.

In April 2001, the Company retired approximately $10.5 million of its debt, raised $2 million of working capital and restructured approximately $3 million of its remaining debt owed to AIG Private Bank Ltd. See Note 4 of this report for additional information regarding the debt restructuring and the related private placement.

The ~~Maso~~report ~~and~~of ~~Martin Velasco. The BDN loans were originally due on September 30, 2000. During October 2000,~~ the Company's ~~repaid~~independent ~~approximately~~public ~~$123,000~~accountants ofon ~~principal and $27,000 of interest for these loans and negotiated an extension of~~ the ~~maturity~~Company's offinancial ~~the~~statements ~~BDN~~included ~~loans until March 31, 2001. As part of a reduction~~ in its ~~capital~~Form 10-K ~~BDN~~for ~~reassigned its rights under~~ the ~~BDN~~year ~~loans~~ended ~~to Amaldos, S.A., MATRUST, S.L., International Sequoia Investments Limited and Swisspartners Investment Network~~September ~~Ltd. Dr. Maso is a majority shareholder in MATRUST~~30, ~~S.L. Mr. Velasco is a major~~2001 ~~investor~~contained ~~in International Sequoia Investments Limited, or Sequoia. Mr. Egli is~~ a ~~member~~modification ofrelated the board of directors and a managing partner of Swisspartners Investment Network Ltd., or Swisspartners. An additional $18,500 of interest and $1,500 of principal was repaid before the majority of these loans were reassigned to ~~the~~its ~~principals~~ability ~~of BDN on April 15, 2001, excluding $30,000. Subsequently these reassigned loans were converted~~ to ~~equity~~continue ~~on April 26, 2001~~ as ~~part of~~ a ~~private~~going ~~placement, and the remaining $30,000 of principal was repaid to BDN at that time~~concern.

~~In September 2000,~~NOTE ~~the Company obtained an unsecured loan from Swisspartners~~4. InDEBT March 2001 Swisspartners loaned an additional $400,000 to the Company under the same loan arrangement. On April 26, 2001, Swisspartners converted the entire principal and all accrued interest of the loan to equity as part of a private placement. OBLIGATIONS

~~Prior to~~ To ~~its~~acquire ~~acquisition~~the byshares ~~4-D,~~of Neuromag Oy ~~borrowed~~in 1999, the Company obtained a ~~total~~loan offrom 3AIG Private Bank Ltd.,~~140~~ or AIG,~~000~~ intotaling ~~Finnish~~$11 million ~~Markka,~~that oris ~~FIM~~secured by the entire share capital of Neuromag Oy and is guaranteed by an entity affiliated with Martin Egli, ~~which~~a ~~equaled~~member ~~approximately~~of the Company's board of directors. Mr. Egli also serves on AIG's board of directors. The $~~449~~11 million loan was restructured in July 2000,~~000~~ ~~USD~~which atextended the original maturity date from June 30, ~~2001~~2000 to December 29, ~~from~~ ~~TEKES~~2000 atand the ~~Finnish~~principal ~~state~~amount was ~~base~~increased ~~interest~~to ~~rate~~$11.4 million. ~~minus~~On 1%December 29, ~~subject~~2000, tothe aCompany ~~minimum~~did ~~rate~~not make payment at maturity of 3%the loan. ~~The~~Effective ~~future~~February 15, ~~repayment~~2001, ~~date~~the ~~for~~Company ~~principal~~ and ~~related~~AIG ~~accrued~~reached ~~interest~~an agreement ~~outstanding~~in ~~under~~principle, ~~this~~extending ~~loan~~the ~~is dependent~~maturity ~~upon~~date ~~Neuromag~~to OyJuly 20, ~~generating~~2001, ~~sufficient~~increasing ~~distributable~~the ~~equity~~loan ~~based~~principal ~~upon~~to ~~the~~approximately ~~statutory~~$12 million ~~final~~(capitalizing ~~accounts~~accrued ~~prepared~~interest inof ~~accordance~~approximately ~~with~~$550,000 into ~~Finnish~~the ~~generally~~loan ~~accepted~~principal) ~~accounting~~and ~~principles,~~obtaining inadditional ~~the future~~guarantees of indebtedness from another bank.

~~4-D~~ On ~~issued 59~~April 26,~~549,081~~ ~~shares~~2001 the Company reached an agreement with AIG in which $8.951 million of ~~its~~the ~~common~~principal ~~stock~~and ~~representing~~accrued ~~approximately~~interest ~~41%~~of the loan was converted into shares of ~~its~~the Company's ~~outstanding~~common ~~voting~~stock ~~securities~~as inpart of a private placement. ~~transaction~~The ~~with~~remainder, ~~specified investors~~approximately $3 million of the loan, was restructured. As restructured, the loan in ~~accordance~~the ~~with~~principal ~~Rule 506~~amount of $3.357 million ~~Regulation~~from AIG matures in July D2002 and ~~Section~~the interest rate is currently set at 6.8% per annum until April ~~4(2)~~26, of2002, at which time the ~~Securities~~interest ~~Act~~rate will be readjusted for the remainder of ~~1933,~~the asloan term. As amended, ~~which~~the ~~was~~AIG ~~consummated~~loan ~~on or~~is ~~about~~secured ~~April 26,~~by ~~2001. The~~a ~~common~~pledge ~~stock~~and ~~was~~assignment ~~issued~~by atScaloway Co. Ltd., or Scaloway, a ~~per-share~~guarantee ~~price~~in the amount of $~~0.21~~2,200,000 by Bank Julius Baer & Co. AG in ~~exchange~~Zurich, ~~for~~Switzerland, ~~cancellations~~and all of ~~indebtedness~~the inissued ~~the~~and ~~aggregate~~outstanding ~~amount~~shares of ~~$10~~ Neuromag Oy,~~505~~ 4-D's wholly-owned subsidiary located in Helsinki,~~307~~ Finland. If 4-D defaults under the AIG loan, then AIG has the right to exercise its security interest and ~~cash~~take inownership of Neuromag Oy. In connection with the ~~aggregate~~April 2001 ~~sum~~private placement transaction, Scaloway agreed to convert certain assets pledged and assigned by Scaloway into an indirect ownership of $2all 42,~~000~~623,~~000~~810 shares of 4-D's common stock issued to AIG, asScaloway ~~described~~has insole ~~more~~voting and ~~detail~~dispositive inpower ~~Part II~~over these shares. Martin Velasco, ~~Item~~a 2member of ~~this~~4-D's ~~report~~board of directors, is the beneficial owner of Scaloway.

In June 2000, the Company obtained unsecured loans totaling approximately $835,000 from BDN and used approximately $485,000 of the proceeds to pay interest due under the AIG loan at June 30, 2000 in conjunction with extending the maturity of the loan from AIG to December 29, 2000. BDN is a Spanish company owned by three members of the Company's board of directors, Martin Egli, Enrique Maso and Martin Velasco. The BDN loans were originally due on September 30, 2000. During October 2000, the Company repaid approximately $123,000 of principal and $27,000 of interest for these loans and negotiated an extension of the maturities of the BDN loans until March 31, 2001. As part of a reduction in its capital BDN reassigned its rights under the BDN loans to Amaldos, S.A., MATRUST, S.L., International Sequoia Investments Limited and Swisspartners Investment Network Ltd. Dr. Maso is a majority shareholder in MATRUST, S.L. Mr. Velasco is a major investor in International Sequoia Investments Limited, or Sequoia. Mr. Egli is a member of the board of directors and a managing partner of Swisspartners Investment Network Ltd., or Swisspartners. An additional $18,500 of interest and $1,500 of principal was repaid before the majority of these loans were reassigned to the principals of BDN on April 15, 2001, excluding $30,000. Subsequently these reassigned loans were converted to equity on April 26, 2001 as part of a private placement, and the remaining $30,000 of principal was repaid to BDN at that time.

In September 2000, the Company obtained an unsecured loan from Swisspartners in the principal amount of $450,000. In March 2001 Swisspartners loaned an additional $400,000 to the Company under the same loan arrangement. On April 26, 2001, Swisspartners converted the entire principal and all accrued interest of the loan, in the total amount of $872,867, to equity as part of a private placement.

Prior to its acquisition by 4-D, Neuromag Oy borrowed a total of 3,140,000 in Finnish Markka, or FIM, which equaled approximately $471,000 USD at December 31, 2001, from TEKES at the Finnish state base interest rate minus 1%, subject to a minimum rate of 3%. The future repayment date for principal and related accrued interest outstanding under this loan is dependent upon Neuromag Oy generating sufficient distributable equity based upon the statutory final accounts prepared in accordance with Finnish generally accepted accounting principles, in the future.

NOTE 5. INVENTORIES

The composition of inventories is as follows (in thousands):

	June 30, 2001		September 30, 2000
	December 31, 2001		September 30, 2001
	(unaudited)
Raw materials	$	~~410~~715	$	~~1,018~~734
Work-in process		42,~~884~~586		43,~~852~~021
Finished goods		12,~~534~~312		~~475~~3,556
	$	65,~~828~~613	$	67,~~345~~311

NOTE 6. RESTATEMENT AND REISSUANCE OF THE FIRST AND SECOND QUARTER ENDED DECEMBER 31, 2000 AND MARCH 31, 2001 FINANCIAL STATEMENTS

The Company expensed certain project costs, which are associated with the production of Neuromag Oy's Vectorview units, during the quarter ended, December 31, 2000, thereby, overstating cost of revenues and understating inventory by approximately $482,000. These project costs should have been capitalized as inventory costs. These goods are currently being installed and the associated costs will be expensed when the associated revenue is recognized. Therefore, inventory and costs of revenues for the quarter ended, December 31, 2000 and the six month period ended March 31, 2001, were restated to capitalize these project costs as inventory; accordingly, inventory at June 30, 2001 reflects the inclusion of these project costs. The basic and dilutive loss per share decreased by $0.01 based upon this restatement.

9NOTE 7. SEGMENT AND GEOGRAPHIC INFORMATION

~~ITEM~~ The 2Company operates in one segment that includes developing, manufacturing and selling MSI products. ~~MANAGEMENT~~ The Company'Ss ~~DISCUSSION~~operations ~~AND~~can ~~ANALYSIS~~be OFdivided ~~FINANCIAL~~into ~~CONDITION~~three ~~AND~~markets: the ~~RESULTS~~basic OFresearch ~~OPERATIONS~~market, the clinical applications development market, and the commercial clinical market. Substantially all of its revenues have been derived from, and substantially all its assets have been devoted to, the basic

The following information should be read in conjunction with the condensed consolidated financial statements and the accompanying notes included in Item 1 of this quarterly report, and the audited financial statements, accompanying notes and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our annual report on Form 10-K for the fiscal year ended September 30, 2000. This report may contain predictions, estimates and other forward-looking statements that involve a number of risks and uncertainties including, but not limited to, those discussed at "Risks and Uncertainties" below. This outlook represents our current judgement on the future direction of our business. See "Risks and Uncertainties" for a discussion of some of the factors known to us that could cause reported financial information not to be necessarily indicative of future results. We are not obligated to publicly release the results of any revisions to forward-looking statements to reflect events and circumstances arising after the date this report is filed.

RESTATEMENT AND REISSUANCE OF THE FIRST AND SECOND QUARTER ENDED DECEMBER 31, 2000 AND MARCH 31, 2001 FINANCIAL STATEMENTS

The Company expensed certain project costs, which are associated with the production of Neuromag Oy's Vectorview units, during the quarter ended, December 31, 2000, thereby, overstating cost of revenues and understating inventory by approximately $482,000. These project costs should have been capitalized as inventory costs. These goods are currently being installed and the associated costs will be expensed when the associated revenue is recognized. Therefore, the quarter ended, December 31, 2000 and the six months period ended March 31, 2001, inventory and cost of revenues were restated to capitalize these project costs as inventory; accordingly, inventory at June 30, 2001 reflects the inclusion of these project costs.

OVERVIEW

4-D Neuroimaging is engaged primarily in the business of developing, manufacturing and selling innovative medical imaging systems to medical institutions. The MSI systems developed by the Company measure magnetic fields created by the human body for the noninvasive diagnosis of certain medical disorders.

The Company has experienced serious operating and liquidity issues. These issues are discussed in more detail under "Results of Operations" and "Liquidity and Capital Resources" below.

The measurement of the body's magnetic fields by MSI provides information about the normal and abnormal functioning of the brain, heart and other organs. The Company is focusing on the use of its technology for potential commercial market applications such as the diagnosis and planning for surgical treatment of epilepsy, and the functional mapping of areas of the brain at risk during surgery for tumors and other lesions. Currently, the medical industry is aware of only a few established diagnostic uses for MSI Systems. The Company is continuing to investigate the potential applications of its technology for problems of the heart, spine, and gastrointestinal system, as well as for disorders of the brain such as closed-head trauma, schizophrenia and other neuro-psychiatric disorders.

As of June 30, 2001, 56 MSI systems are installed in medical and research institutions worldwide, and more than 5,000 MSI examinations have been performed on patients and control subjects at the Company's application development sites. Related findings by 4-D and its collaborators have been published in more than 200 scientific and medical papers. Since the first reimbursement for MSI procedures was received in September 1993, more than 200 insurance companies have approved reimbursement on a case-by-case basis for certain MSI procedures performed with the Company's MSI systems.

Inresearch ~~fiscal 1995, 4-D announced development of the Magnes 2500 WH, an expansion of the existing Magnes I and Magnes II systems product line~~market. The ~~Magnes~~following ~~2500~~table WHsummarizes ~~allows for examination of~~ the ~~entire~~Company's ~~brain~~revenues ~~at once~~ and islong ~~designed~~lived ~~for evaluating ambulatory or critically ill patients in seated or fully reclined positions. As of June 30~~assets, ~~2001,~~excluding ~~the Company had shipped 15 Magnes 2500 WH systems and received 14 final acceptances from customers. In fiscal 2000~~intangible, ~~4-D~~deferred ~~completed~~tax ~~the development of the Magnes 3600 WH,~~ and ~~shipped~~prepaid ~~its~~assets: ~~first system to a customer. The Magnes 3600 increased the sensitivity of the Company's MSI system by increasing the number of detector channels.~~

On December 22, 1999, 4-D acquired all of the issued and outstanding capital stock ("Shares") of Neuromag Oy pursuant to the terms of a share purchase agreement, by and between Marconi Medical Systems, Inc. ("Marconi") and 4-D (the "Share Purchase Agreement"). Under the terms of the Share Purchase Agreement, 4-D paid a total of $10 million in cash to Marconi for the purchase of the Shares and agreed to pay between a minimum of $2,500,000 and a maximum of $5,000,000 in royalties to Marconi under an ancillary royalty agreement over the next 8 years. A royalty payment in the amount of $430,683 was made on March 19, 2001 for royalties due for the first year ended December 21, 2000. The acquisition was funded by a loan from AIG Private Bank Ltd.

		Three Months Ended December 31,
		2001		2000
Revenues:
	North America	$	37,646	$	1,053,644
	Europe		754,202		290,806
	Asia		1,890,488		1,785,563

		$	2,682,336	$	3,130,013

Long lived assets:
	North America	$	271,419	$	499,562
	Europe		613,007		807,246

		$	884,426	$	1,306,808

~~Similar to~~NOTE ~~4-D, Neuromag Oy is engaged in the research, development and manufacturing of MSI systems~~8. ~~Neuromag~~RECENT OyACCOUNTING is located in Helsinki, Finland. 4-D operates Neuromag Oy as a subsidiary of 4-D. Neuromag Oy developed and sold its first MSI system, the Neuromag 122, in 1994. Neuromag then introduced its next generation product, the Vectorview, in 1997. Both are whole head systems, designed to evaluate brain function. PRONOUNCEMENTS

~~The current~~ In ~~price~~June 2001, ofthe ~~4-D's~~Financial ~~MSI~~Accounting ~~systems~~Standards ~~ranges~~Board ~~from~~issued ~~approximately~~SFAS $1No.~~0 to $2.5~~ ~~million~~141, ~~depending~~Business ~~upon~~Combinations, and ~~system~~SFAS ~~configuration~~No. ~~A major portion of the Company's sales have been~~ 142, Goodwill and ~~are~~Other ~~expected~~Intangible toAssets. ~~be,~~SFAS ~~in foreign markets~~No. 141 ~~Although~~requires ~~the~~business ~~distributor~~combinations ~~agreements~~initiated ~~that~~after ~~the~~June 30, ~~Company has entered into in the Far East have required sales~~ 2001 to be ~~priced~~accounted infor ~~U.S.~~using ~~dollars,~~ the ~~Company~~ ~~has~~purchase ~~previously~~method ~~priced certain~~ of ~~its~~accounting. ~~European~~It ~~sales~~also inspecifies the ~~currency~~types of ~~the~~acquired ~~country~~intangible inassets ~~which~~that ~~the~~are ~~product~~required ~~was~~to ~~sold~~be recognized and ~~the~~reported ~~prices~~separately offrom ~~such products in U~~goodwill.S. ~~dollars varied as the value of the U.S.~~SFAS ~~dollar fluctuated against the quoted foreign currency price~~No. 142 ~~Additionally,~~requires ~~substantially~~that ~~all~~goodwill ofand ~~the~~certain ~~receivables~~intangibles ~~and~~no ~~payables~~longer ofbe ~~the~~amortized, ~~Company's~~but ~~foreign~~instead ~~subsidiaries~~tested ~~are~~for ~~denominated~~impairment inat ~~currencies~~least ~~other than U~~annually.S. ~~dollars~~SFAS No. 142 ~~Consequently,~~is ~~the~~required ~~Company's reported results are subject~~ to ~~various~~be ~~risks,~~applied ~~including~~starting ~~without~~with fiscal ~~limitation,~~years ~~foreign~~beginning ~~currency~~after ~~risks. Although at June~~December 3015, 2001, ~~the~~with ~~Company~~early ~~did~~application ~~not have~~permitted ~~any~~in ~~open~~certain ~~forward~~circumstances. ~~exchange~~The ~~contracts, the~~ Company ~~may~~has inearly ~~the~~adopted ~~future~~SFAS ~~enter~~No. 142 ~~into~~in ~~forward~~fiscal ~~exchange contracts to partially hedge, or protect against, such foreign currency exposure, if appropriate~~2002. ~~As part~~Management ~~of a comprehensive approach~~ continues to ~~risk~~review ~~management,~~ the ~~Company~~impact isof ~~presently evaluating alternatives to address~~ this ~~risk.~~Statement ~~See our discussion under "Risks~~ and ~~Uncertainties—If~~will ~~foreign currency~~make ~~rates~~any ~~fluctuate~~necessary ~~our return on sales in U.S. dollars may suffer" and Item 3 "Quantitative and Qualitative Disclosures About Market Risk"~~adjustments, ~~for~~if ~~more detailed discussions of the quantitative and qualitative disclosures about market risk~~appropriate.

~~The~~ In ~~Company~~October 2001, ~~believes that~~ the ~~relatively~~FASB ~~small~~issued ~~number~~SFAS ofNo. 144 ~~proven~~"Accounting ~~medical applications~~ for ~~its MSI systems,~~ the ~~lack~~Impairment ofor ~~routine~~Disposal ~~reimbursement for MSI procedures, and the uncertainty~~ of ~~product~~ ~~acceptance~~Long-Lived ~~in the U~~Assets".S. ~~market~~This ~~have~~statement ~~limited~~establishes ~~system sales. In February 2001,~~ the ~~American~~accounting ~~Medical~~model for ~~Association~~long-lived ~~approved~~assets ~~the~~to ~~issuance~~be disposed of ~~billing~~by ~~codes,~~sale ~~commonly~~and ~~referred~~applies to asall ~~Current Procedural~~long-lived ~~Terminology~~assets, ~~("CPT")~~including ~~codes,~~discontinued ~~for~~operations. ~~the~~This ~~use~~new ofstatement ~~MEG~~requires orthat ~~MSI,~~those long-lived inassets ~~the~~be ~~planning~~measured ~~for~~at the ~~surgical~~lower ~~treatment~~ of ~~epilepsy~~carrying ~~and~~amount ~~for~~or ~~pre-surgical~~fair ~~functional~~value ~~mapping~~less ofcost ~~the brain prior~~ to ~~neurosurgery.~~ ~~4-D~~sell, ~~regards~~whether ~~the~~reported ~~issuance of CPT codes to be a significant step~~ in ~~establishing~~continuing ~~routine~~operations ~~reimbursement~~or ~~for MEG~~ in ~~the~~discontinued ~~United States~~operations. ~~However~~Therefore, ~~it is not possible to reliably~~ ~~predict~~discontinued ~~the~~operations ~~timing~~will ~~and~~no ~~extent~~longer ofbe ~~future~~measured ~~product~~at ~~sales~~net ~~due~~realizable tovalue ~~the~~or ~~uncertainties~~include ofamounts ~~the~~for ~~acceptance~~operating oflosses ~~medical~~that ~~applications,~~have ~~reimbursement~~not ~~and~~yet ~~product acceptance~~occurred. The Company ~~does~~has ~~not~~adopted ~~anticipate~~SFAS ~~multiple sales~~No. 144 tofor ~~the~~fiscal year ~~same~~ending ~~end-user~~September 30, at2002. ~~current~~Management ~~sales~~continues ~~volumes,~~to ~~and~~assess the ~~sale~~impact of ~~one~~this ~~MSI~~Statement ~~system may have a significant impact on the Company's financial position~~ and ~~results~~will ofmake ~~operations during~~ any ~~reporting~~ ~~period.~~necessary ~~As a result~~adjustments, ~~quarterly~~if ~~and annual operating performance will continue to fluctuate significantly~~appropriate.

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

The following information should be read in conjunction with the condensed consolidated financial statements and the accompanying notes included in Item 1 of this quarterly report, and the audited financial statements, accompanying notes and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our annual report on Form 10-K for the fiscal year ended September 30, 2001. This report may contain predictions, estimates and other forward-looking statements that involve a number of risks and uncertainties including, but not limited to, those discussed in "Risks and Uncertainties." See "Risks and Uncertainties" for a discussion of some of the factors known to us that could cause reported financial information not to be necessarily indicative of

~~RESULTS~~ future OFresults. ~~OPERATIONS~~ We are not obligated to publicly release the results of any revisions to forward-looking statements to reflect events and circumstances arising after the date this report is filed.

Total revenues for the third quarter and first nine months of fiscal 2001 were $1,165,000 and $6,764,000, including $169,000 and $482,000 of service revenues, compared to $5,244,000 and $5,853,000 of total revenues, including $171,000 and $427,000 of service revenues, for the third quarter and first nine months of fiscal 2000. The decrease in revenues in the third quarter fiscal year 2001 as compared to fiscal 2000 was due to large system shipments in the third quarter of fiscal year 2000. The year to date increase in revenue for fiscal 2001 over fiscal year 2000 resulted from Neuromag Oy's revenues being included for only six months in fiscal year 2000 due to the December 22, 1999 acquisition date of Neuromag Oy. OVERVIEW

~~Cost of~~ 4-D ~~revenues~~Neuroimaging ~~for~~is ~~the~~engaged ~~third~~primarily ~~quarter~~in ~~and~~the ~~first~~business ~~nine months~~ of ~~fiscal 2001 were $846~~developing,~~000~~ ~~and $4~~manufacturing,~~814,000~~ ~~compared~~marketing ~~to $2,913,000~~ and ~~$4,268,000~~selling ~~for~~innovative ~~the~~medical ~~third~~imaging ~~quarter~~systems ~~and first nine~~to ~~months~~medical ofresearch ~~fiscal 2000~~institutions. The ~~cost~~MSI ofsystems ~~revenues~~developed asby athe ~~percentage~~Company ofmeasure ~~revenues~~magnetic ~~remains~~fields ~~high~~created ~~primarily~~by ~~due~~the tohuman ~~overall~~body ~~low~~for ~~sales~~the ~~volume~~noninvasive ~~and~~diagnosis ~~higher~~of ~~resulting~~certain ~~overheads~~medical disorders.

The Company's ~~results~~is ofexperiencing ~~operations~~serious ~~for the quarter ended June 30, 2001 reported a reduction of gross margin, and higher~~ operating ~~loss~~ and ~~net~~liquidity ~~loss~~issues. asThese ~~compared~~issues toare ~~the~~discussed ~~quarter ended June 30, 2000 due to reduced sales volume~~ in ~~the~~more ~~third~~detail ~~quarter~~under of"Results ~~2001. The first nine months~~ of ~~fiscal~~Operations" ~~2001~~and ~~recorded~~"Liquidity ~~a positive gross margin of $1,950,000 as compared to 1,585,000 the prior year. These improved results are primarily due to increased sales volume~~ and ~~related~~Capital ~~improved~~Resources" ~~gross margin~~below.

~~Research~~ The ~~and~~measurement ~~development~~of ~~expenses~~the ~~for~~body's ~~the~~magnetic ~~third~~fields ~~quarter~~by ~~and~~MEG/MSI ~~first~~provides ~~nine~~information ~~months~~about ofthe ~~fiscal~~normal ~~2001~~and ~~amounted~~abnormal tofunctioning ~~$458,000~~of ~~and~~the $1brain,~~594,000~~ ~~compared~~heart toand ~~$653,000~~other ~~and~~organs. ~~$2,183,000~~We ~~for~~are focusing on the ~~third~~use ~~quarter~~of ~~and~~our ~~first~~technology ~~nine~~for ~~months~~potential ofcommercial ~~fiscal~~market ~~2000.~~applications ~~The~~such ~~reduction~~as inthe ~~research~~diagnosis and ~~development~~planning ~~expenses~~for ~~primarily~~surgical ~~results~~treatment ~~from~~of ~~continuing~~epilepsy, ~~cost~~and ~~control~~the ~~measures~~functional ~~implemented~~mapping byof areas of the ~~Company~~brain ~~during~~at ~~the~~risk ~~Company's~~during ~~liquidity~~surgery ~~difficulties~~for tumors and other lesions. ~~Reductions~~We ~~also~~continue ~~result~~to ~~from~~investigate ~~reduced~~the ~~spending~~potential onapplications ~~new~~of ~~product~~our ~~development~~technology ~~due~~for toproblems of the ~~fact~~heart, ~~that~~spine, ~~current~~and ~~hardware~~other ~~product~~organs, ~~lines~~as ~~fulfill~~well ~~current~~as ~~marketing~~for neuro-psychiatric disorders of the brain such as schizophrenia and ~~sales~~closed-head ~~requirements~~trauma, and problems of the gastrointestinal system.

~~Marketing~~ As ~~and~~of ~~sales~~December 2001, ~~expenses~~fifty-seven ~~for~~(57) MEG/MSI ~~the~~systems ~~third~~are ~~quarter~~installed ~~and~~in ~~first~~medical ~~nine~~and ~~months~~research ofinstitutions ~~fiscal~~worldwide, ~~2001~~and ~~amounted~~more tothan ~~$449~~5,000 ~~and~~MEG/MSI ~~$1,381,000,~~examinations ~~compared~~have tobeen performed ~~$357,000~~on patients and ~~$1,492,000~~control ~~for~~subjects ~~the~~at ~~third~~our ~~quarter and~~application ~~first~~development ~~nine~~sites. ~~months~~Related offindings ~~fiscal~~by ~~2000.~~us, ~~The~~and ~~2001~~our ~~quarter~~collaborators, ~~increase~~have ~~was~~been ~~primarily~~published ~~due~~in tomore ~~higher~~than ~~travel~~200 scientific and ~~consulting~~medical ~~expenses,~~papers. Since ~~while~~ the ~~year~~first toreimbursement ~~date~~for ~~decrease~~MEG/MSI procedures was received in ~~marketing~~September 1993, ~~and~~more ~~sales~~than ~~expenses~~200 ~~primarily results~~insurance ~~from~~companies ~~continuing~~have ~~cost~~approved ~~control~~reimbursement ~~measures~~on ~~implemented~~a case-by-case basis ~~the~~for ~~Company~~certain ~~during~~MEG/MSI ~~the~~procedures ~~Company's~~performed ~~liquidity~~with ~~difficulties~~our MEG/MSI systems.

~~General~~ Magnes® and ~~Administrative~~Biomagnetic ~~expenses~~Technologies® ~~for~~with the ~~third~~logo ~~quarter~~are ~~and~~registered ~~first~~trademarks ~~nine months~~ of ~~fiscal~~the ~~2001~~Company ~~were~~by ~~$817,000~~registration ~~and~~with ~~$2,347,000~~the ~~compared~~State toof ~~$869,000~~California and ~~$1,987,000~~by ~~for~~registration with the ~~same prior year periods~~U.S. ~~The~~Patent ~~decrease~~and ~~for~~Trademark ~~the~~Office. ~~third~~Biomagnetic ~~quarter~~Technologies™ ofand ~~fiscal~~Magnetic ~~2001,~~Source asImaging™ ~~compared~~are toregistered ~~fiscal~~trademarks ~~2000,~~in ~~was~~the ~~primarily~~State ~~due~~of toCalifornia. ~~continuing~~Neuromag™ ~~cost~~and Vectorview™ ~~control~~are ~~measures~~registered ~~implemented~~trademarks byof the Company. ~~The~~by ~~increase~~registration ~~for~~with the ~~nine-month~~ ~~fiscal~~Finnish ~~period~~National ~~ended~~Board ~~June 30,~~of ~~2001,~~Patents asand ~~compared~~Registration. toThe ~~fiscal~~Company ~~2000,~~has ~~was~~applied ~~primarily~~for ~~the~~trademark ~~result~~registration ofwith the ~~Neuromag~~U.S. OyPatent ~~being~~and ~~included~~Trademark Office for ~~only~~the ~~three~~following ~~months~~marks: in4-D ~~fiscal~~Neuroimaging™, ~~2000~~with ~~due~~and towithout the ~~December 22~~ logo, ~~1999~~and ~~acquisition date~~Vectorview™.

~~Goodwill~~ Our ~~amortization~~current ~~for~~Magnes ~~the~~product ~~third~~line ~~quarter~~consists ~~and~~of ~~first~~the ~~nine~~Magnes ~~months~~2500 ofWH, ~~fiscal~~the ~~2001~~Magnes ~~were~~3600 ~~$327~~WH,~~000~~ and ~~$992,000~~the ~~compared~~Magnes to1300 ~~$351,000~~C. ~~and~~The ~~$702,000~~Magnes 2500 WH allows for ~~fiscal~~examination ~~year~~of ~~2000.~~the ~~The~~entire ~~increase~~brain ~~for~~at once and is ~~the~~designed ~~nine~~for ~~month~~evaluating ~~period~~ambulatory ~~ended~~or ~~June~~critically ill patients in seated or fully reclined positions. As of December 31, 2001, aswe ~~compared~~had toshipped 14 Magnes 2500 WH systems and received 12 final acceptances from customers. In fiscal 2000, ~~was~~we ~~primarily~~completed the ~~result~~development of ~~Neuromag~~our Oynext ~~being~~generation ~~included~~system, the Magnes 3600 WH that provides additional capabilities for ~~only~~the ~~six~~research ~~months~~market, and have delivered our first system to our customer. There are currently 2 Magnes 1300 C's in ~~fiscal~~the ~~2000~~field ~~due~~primarily being used to look at organs in the ~~December 22,~~body ~~1999 acquisition~~other ~~date~~than the brain.

~~Interest~~ In ~~expense~~December 1999, ~~totaled~~we ~~$190,000~~acquired ~~for~~all of the ~~third~~issued ~~quarter~~and ofoutstanding ~~fiscal~~capital ~~2001~~stock, ~~compared~~or ~~to $258~~Shares,~~000~~ ~~during~~of ~~the~~Neuromag ~~third~~Oy ~~quarter~~pursuant to the terms of ~~fiscal~~a ~~2000.~~share ~~The~~purchase ~~decrease~~agreement, inby ~~the~~and ~~third~~between Marconi ~~quarter~~Medical ofSystems, Inc., ~~fiscal~~or ~~2001 was~~Marconi, ~~primarily~~and 4-D. Under the ~~result~~terms of ~~reduced~~the ~~borrowings~~share ~~due~~purchase toagreement, ~~the~~we ~~common~~paid ~~stock~~a total of $10 million in ~~exchange~~cash ~~for~~to ~~cancellation~~Marconi offor ~~indebtedness~~the inpurchase ~~April 2001.~~of ~~The~~the Shares ~~nine~~and ~~month~~agreed ~~fiscal~~to ~~period~~pay ~~ending~~between ~~June 30,~~a ~~2001 totaled~~minimum of $~~844~~2,500,000 asand ~~compared~~a tomaximum of $~~529~~5,000,000 ~~for~~in ~~the~~royalties ~~same~~to ~~period~~Marconi inunder ~~2000.~~an ~~The~~ancillary ~~increase~~royalty inagreement ~~2001~~over ~~was~~the ~~primarily~~next ~~the~~8 years ~~result~~and ofadditional consideration ~~Neuromag~~dependent Oyupon ~~being~~the ~~included~~occurrence ~~for~~of ~~only~~certain ~~six~~future ~~months~~events. inThe ~~fiscal~~acquisition ~~2000~~was ~~due~~funded toby ~~the December 22,~~a ~~1999~~loan ~~acquisition~~from ~~date~~AIG Bank.

Similar ~~Other~~to ~~income (expense) totaled $196~~us,~~000~~ inNeuromag ~~the~~Oy ~~third~~is ~~quarter~~engaged ~~of fiscal 2001 and $697,000~~ in the ~~first nine months of fiscal 2001~~research, ~~compared~~development ~~to ($4,000) in the third quarter of fiscal 2000~~ and ~~($86,000)~~manufacturing ~~in the first nine months~~ of ~~fiscal~~MEG/MSI ~~2000~~systems. ~~The~~Neuromag ~~increase~~Oy ~~in other income~~ is ~~primarily~~located ~~attributable~~in ~~to $200~~Helsinki,~~000~~ inFinland. ~~income~~We ~~from~~operate ~~investment~~Neuromag inOy ~~Magnesensors~~as ~~and the reversal of $125,000~~a ~~previously~~subsidiary. ~~reserved~~Neuromag ~~against~~Oy adeveloped ~~collaboration~~and ~~agreement~~sold ~~which~~its ~~was never completed. During the~~ first ~~quarter~~MEG/MSI ~~of fiscal 2001~~system, ~~4-D notified Magnesensors that it would no longer continue to provide a $200,000 guarantee of indebtedness due to~~ the ~~termination~~Neuromag of122 ~~its~~in ~~contractual obligations to do so and 4-D's liquidity concerns~~1994. ~~4-D had been providing the guarantee,~~Neuromag ~~and~~then ~~under~~introduced ~~the equity method of accounting for~~ its ~~investment~~next ingeneration ~~Magnesensors~~product, ~~had previously recorded its proportionate share of Magnesenors' losses to~~ the ~~extent~~Vectorview, ofin ~~4-D's debt guarantee~~1997. ~~The~~ ~~remainder~~Both ofare ~~the~~whole ~~increase~~head insystems, ~~the~~designed ~~nine month period of fiscal 2001 compared~~ to ~~fiscal~~evaluate ~~2000~~brain ~~was due primarily to rental income from a sublease of the property and foreign currency translations~~function.

The ~~provision~~current ~~for~~prices ~~income~~of ~~taxes~~our ~~totaled~~MEG/MSI systems generally range from approximately $171.0 to $2.5 million,~~000~~ depending upon system configuration. Major portions of our sales have been in foreign ~~the~~markets. ~~third~~We ~~quarter~~have previously priced certain of ~~fiscal~~our ~~2001~~European ~~compared~~sales toin the ~~provision~~currency of the country in which the ~~third~~product ~~quarter~~was sold and the prices of ~~fiscal~~such ~~2000~~products in dollars varied as the value of the $0dollar fluctuated against the quoted foreign currency price. These value fluctuations may result in either a negative or positive cumulative translation adjustment. There can be no assurances that currency fluctuations will not reduce the dollar return to the Company on such sales if made in the future. The ~~tax~~foreign ~~benefit~~currency loss for the ~~year~~first quarter of fiscal 2002 was $61,000. Although at December 31, 2001 ~~pertains~~and to2000, ~~Finnish~~we ~~taxes~~did ~~for~~not have any open forward exchange contracts we may in the ~~Company's~~future ~~Neuromag~~enter Oyinto ~~subsidiary~~forward exchange contracts to partially hedge such foreign currency exposure, if appropriate.

~~Net~~ Since ~~loss~~concentrating ~~for~~on the ~~third~~development ~~quarter~~of ~~and~~our ~~first~~MEG/MSI ~~nine~~systems, ~~months~~our corporate strategy and commitment of ~~fiscal~~resources ~~2001~~have ~~amounted~~focused toon ~~$1,759,000~~long-term product applications and ~~$4,449,000~~continued product ~~compared~~development. toWe asubstantially ~~net~~completed ~~loss~~the development of ~~$182,000~~our ~~and~~Magnes ~~$5,493,000~~2500 ~~for~~WH ~~the~~system ~~comparable periods~~ in ~~the~~fiscal ~~prior~~1996 and decreased expenditures in fiscal ~~year.~~1998 ~~The~~and ~~increase~~1999 inas ~~net~~part ~~loss~~of ~~for~~our ~~the~~restructuring ~~third~~and ~~quarter~~focus on developing a market for sale of ~~fiscal~~our ~~2001~~Magnes as2500 ~~compared~~WH tosystem. ~~the~~In ~~prior~~fiscal ~~year~~1999, ~~period~~research isand ~~primarily~~development expenditures increased due to development efforts to enhance the ~~reduced~~Magnes ~~sales~~2500 ~~volume~~WH inand efforts to substantially complete the ~~quarter~~development of the Magnes 3600 WH system, which were successful. ~~The~~In ~~reduction of~~fiscal ~~net~~2002, ~~loss~~2001 inand ~~the~~2000, ~~nine-month~~we ~~period~~again ~~was~~decreased ~~due~~our ~~primarily~~expenditures toin ~~increased~~research ~~sales~~and ~~volumes~~development asdue ~~well~~to asboth an ~~the~~increased ~~continuing~~focus ~~cost~~on ~~control~~marketing ~~measures~~and ~~implemented~~sales byand ~~the~~our ~~Company~~liquidity position.

~~LIQUIDITY~~ We believe ~~AND~~that ~~CAPITAL~~to ~~RESOURCES~~ date the relatively small number of proven medical applications for MEG/MSI systems, the lack of routine reimbursement for MEG/MSI procedures, and the uncertainty of product acceptance in the U.S. market have limited system sales through fiscal 2001. With the issuance of CPT codes for MEG, we believe clinical acceptance of MEG/MSI systems may increase. It is not possible to reliably predict the timing and extent of future product sales due to the long sales cycles and the uncertainties in the rate of impact the CPT codes will have on the market. We do not anticipate multiple sales to the same end-user at current sales volumes, and the sale of one MEG/MSI system may have a significant impact on our financial position and results of operations during any reporting period. As a result, quarterly and annual operating performance will continue to fluctuate significantly.

~~The~~RESTATEMENT ~~Company~~AND ~~has~~REISSUANCE ~~experienced~~OF ~~serious~~FINANCIAL liquidity issues over the last few years and has incurred net losses of $8,127,000, $7,464,000, and $4,968,000 in fiscal 2000, 1999 and 1998, respectively. The Company had negative cash flows from operations of $5,217,000, $8,602,000, and $5,520,000 in fiscal 2000, 1999 and 1998, respectively. For the quarter ended June 30, 2001, the Company incurred a net loss of $1,759,000. At June 30, 2001, the Company had an accumulated deficit of $110,863,000, a net capital equity of $4,515,000 and a positive working capital of $330,000. The increase in net equity and working capital as compared to prior periods was due primarily to the issuance of common stock in exchange for cancellation of indebtedness (see Note 4), the restructured AIG loan and the reclassification of long term customer deposits. STATEMENTS

~~4-D~~ The Company expensed certain project costs, which are associated with the production of Neuromag Oy's Vectorview units, during the quarter ended ~~issued~~December 31, 592000,~~549~~ thereby,~~081~~ ~~shares~~overstating cost of ~~its~~revenues ~~common~~and ~~stock~~understating ~~representing~~inventory by approximately ~~41%~~$482,000. ofThese ~~its~~project ~~outstanding~~costs ~~voting~~should ~~securities~~have inbeen acapitalized ~~private~~as ~~placement~~inventory ~~transaction~~costs ~~with~~and ~~specified~~expensed ~~investors~~when inthe ~~accordance~~revenue ~~with~~for ~~Rule 506~~this ofunit ~~Regulation D~~is recognized. Therefore, inventory and ~~Section 4(2)~~cost of ~~the~~revenues ~~Securities~~for ~~Act~~the ofquarter ~~1933~~ended December 31, as2000 ~~amended,~~were ~~which~~restated ~~was~~to ~~consummated~~capitalize onthese orproject ~~about~~costs ~~April 26,~~to ~~2001~~inventory. The ~~common~~basic ~~stock~~and ~~was~~diluted ~~issued~~loss ~~at a~~ per- share ~~price~~decreased ofby $0.~~21,~~01 inbased ~~exchange~~upon ~~for~~this ~~cancellations~~restatement. ofIn ~~indebtedness~~addition, inthe gross margin for the ~~aggregate~~period ~~amount~~ended ofDecember 31, 2000 increased $10482,~~505~~000 to $1,~~307~~626,000. ~~and~~The ~~cash~~gross inmargin ~~the~~percentage ~~aggregate~~is ~~sum~~52% reflecting the sale of ~~$2,000,000~~systems to the Asian market where margins have historically been higher.

~~The $10,505,307~~RESULTS inOF cancellations of indebtedness consisted of a partial cancellation of indebtedness in the amount of USD $8,951,000 by AIG according to a letter agreement dated on or about April 25, 2001 between AIG and 4-D, full cancellations of indebtedness in the amounts of USD $872,867 and $224,875 by Swisspartners Investment Network Ltd., or Swisspartners, a full cancellation of indebtedness in the amount of USD $224,875 by MATRUST, S.L., a full cancellation of indebtedness by International Sequoia Investments Limited, or Sequoia, in the amount of USD $224,875, and a full cancellation of indebtedness in the amount of $6,815 from Amaldos, S.A. The full cancellations of indebtedness entered into between 4-D and each of Amaldos, S.A., MATRUST, S.L., Sequoia and Swisspartners represent the portion of the debt assigned to each such entity by BDN upon its reduction of capital. Martin Egli, a member of 4-D's board of directors is also a member of the board of OPERATIONS

Total revenues for the first quarter of fiscal 2002 were $2,682,000, including $273,000 of service revenues, compared to $3,130,000 of total revenues, including $224,000 of service revenues, for the first

~~directors~~quarter of ~~AIG~~fiscal ~~and is a managing partner of Swisspartners~~2001. ~~Dr. Maso,~~This adecrease ~~member of 4-D's board of directors, is a majority shareholder~~ in ~~MATRUST,~~total ~~S.L.~~revenues ~~Mr. Velasco,~~was adue ~~member of~~primarily ~~4-D's~~to ~~board~~the ofrecognition ~~directors, is a major investor in Sequoia. See Note 4 and Part II, Item 2~~ of ~~this~~revenue ~~report~~ for ~~additional~~one ~~information~~new ~~with~~MSI ~~regard~~system ~~to the loans 4-D obtained from AIG, Swisspartners~~ and ~~BDN~~one ~~and~~refurbished ~~the~~system ~~reassignment~~in of2002 ~~portions~~as ofcompared ~~the BDN loans~~ to ~~Amaldos,~~two ~~S.A.,~~new ~~MATRUST,~~systems Sin 2001.~~L.,~~ ~~Sequoia and Swisspartners upon BDN's reduction of capital.~~

~~The~~ Cost ~~remainder~~ of ~~the~~revenues ~~AIG~~for ~~loan was restructured. As restructured,~~ the ~~loan~~first inquarter ~~the principal amount~~ of ~~$3.357 million~~fiscal ~~from AIG matures in July~~ 2002 ~~and~~were ~~the interest rate is currently set at 6.8% per annum until April 26~~$2, ~~2002~~232, ~~at which time the interest accrued on the loan through such date will be due and payable and the interest rate will be readjusted for the remainder of the loan term. As amended~~000, ~~the~~compared ~~AIG~~to ~~loan is secured by a pledge and assignment by Scaloway Co. Ltd., or Scaloway, a guarantee in the amount of USD~~ $21,~~200~~504,000 byfor ~~Bank Julius Baer & Co. AG and all of~~ the ~~issued~~first ~~and~~quarter ~~outstanding shares~~ of ~~Neuromag~~fiscal ~~Oy, 4-D's wholly-owned subsidiary~~2001. IfThe ~~4-D~~increase ~~defaults~~in ~~under~~cost ~~the AIG loan, then AIG has the right to exercise its security interest and take ownership~~ of ~~Neuromag~~revenues ~~Oy.~~was Inrelated ~~connection with the private placement transaction, Scaloway agreed~~ to ~~convert certain assets pledged and assigned by Scaloway into~~the aninclusion ~~indirect ownership~~ of ~~all~~Magnetically ~~42,623,810~~Shielded ~~shares~~Rooms ~~of 4-D's common stock issued to AIG. Scaloway has sole voting and dispositive power over these shares. Martin Velasco~~("MSR"), awhich ~~member~~contribute oflittle ~~4-D's board of director~~margin, isin ~~the~~both ~~beneficial~~sales ~~owner~~for ofthis ~~Scaloway.~~quarter ~~See~~as ~~Note 4~~opposed ~~and~~to ~~Part~~only ~~II,~~one ~~Item~~sale ~~2 of this report~~ for ~~additional~~last ~~information~~quarter, ~~with~~as ~~regard~~well toas ~~the~~reduced ~~AIG~~sales ~~loan~~volume and increased ~~the~~related ~~private~~unabsorbed ~~placement transaction~~overhead..

~~Swisspartners,~~ Research ~~one~~and ofdevelopment ~~4-D's~~expenses ~~principal~~for ~~shareholders, invested $2 million in cash into~~ the ~~Company~~first ~~through~~quarter ~~its purchase~~ of ~~additional~~fiscal ~~common~~2002 ~~stock.~~amounted Into ~~connection~~$367,000, ~~with the~~compared ~~purchase~~to ~~by Swisspartners~~$711,000 ~~4-D's~~for ~~board~~the first quarter of ~~directors~~fiscal ~~approved~~2001. anThe ~~increase~~reduction in ~~the~~research ~~current~~and development ~~size~~expense ofin ~~its~~fiscal ~~board~~2002 ofas ~~directors~~compared ~~from eight~~ to ~~nine~~fiscal to2001 ~~appoint~~was ~~Mr. Hans-Ueli Rihs~~due to ~~serve as~~ a ~~member~~reduction ofin ~~the~~research ~~board~~and ofdevelopment ~~directors~~personnel ~~effective~~and ~~May 2001.~~expense ~~Mr. Hans-Ueli~~associated ~~Rihs~~with iscertain ~~also~~research ~~a member of the board of directors of Swisspartners~~programs. ~~4-D~~Current hardware ~~currently~~product ~~intends~~lines tofulfill ~~use~~current ~~the~~marketing ~~cash~~and ~~proceeds~~sales ~~for~~requirements ~~general~~and ~~corporate~~do ~~purposes,~~not ~~marketing,~~require ~~and~~additional ~~continued product~~ research and development, asexpenditures itat ~~deems~~this ~~necessary~~time.

~~Immediately~~ Marketing ~~following~~and ~~the~~sales ~~private~~expenses ~~placement~~amounted ~~transaction,~~to ~~the Company had 145~~$569,~~018,629~~000 ~~shares~~for ~~issued~~the ~~and~~first ~~outstanding.~~quarter ~~The distribution~~ of ~~the~~fiscal 592002,~~549,081~~ ~~shares~~compared ofto ~~common~~$514,000 ~~stock~~for ~~issued in~~ the ~~private~~first ~~placement~~quarter ~~transaction and the resulting beneficial ownership~~ of ~~the~~fiscal ~~purchasers~~2001. inMarketing ~~the~~and ~~private~~sales ~~placement~~expenses ~~transaction~~increased due isto ~~discussed~~higher inrecruitment ~~more detail in Note 4~~expense.

~~Prior~~ General toand ~~its~~administrative ~~acquisition~~expenses bytotaled ~~4-D~~$722,000 ~~Neuromag~~for Oythe ~~borrowed~~first aquarter ~~total~~ of ~~3,140,000~~fiscal ~~in Finnish Markka~~2002, orcompared ~~FIM,~~to ~~which equaled approximately~~ $~~449~~696,000 ~~USD~~for ~~at June 30, 2001, from TEKES at~~ the ~~Finnish~~first ~~state~~quarter ~~base~~of ~~interest~~fiscal ~~rate minus 1%,~~ 2001~~, subject to a minimum rate of 3%~~. ~~The~~This ~~future~~increase ~~repayment date for principal and related accrued interest outstanding under this loan~~ is primarily ~~dependent~~attributable ~~upon~~to ~~Neuromag~~increased Oyconsulting ~~generating~~costs ~~sufficient distributable equity based upon the statutory final accounts prepared~~ in ~~accordance~~fiscal ~~with~~2002 ~~Finnish~~as ~~generally~~compared ~~accepted~~to ~~accounting~~fiscal ~~principles, in the future~~2001.

~~Based~~ We onhave ~~the~~early ~~Company's~~adopted ~~current~~SFAS ~~expectation~~No. 142 ofin ~~anticipated~~fiscal ~~cash~~2002 ~~receipts~~which ~~related~~requires tothat ~~firm~~goodwill ~~orders received~~ and ~~anticipated~~certain ~~bookings~~intangibles ofno ~~additional~~longer ~~MSI~~be ~~systems~~amortized, ~~the~~but ~~Company~~instead ~~expects~~be totested ~~have sufficient~~for ~~cash~~impairment ~~to continue operations through~~ at least ~~September 2001~~ annually. ~~Historically~~Therefore, ~~the~~there ~~Company~~was ~~has~~no ~~raised~~goodwill ~~additional~~amortization ~~capital~~in ~~through~~the ~~its~~first ~~majority~~quarter ~~shareholders~~of ~~and~~fiscal ~~related~~2002, ~~parties~~compared to ~~fund continuing~~$337,000 ~~operations.~~in ~~There~~the ~~can~~first bequarter ~~no assurance that these sources~~ of ~~capital~~fiscal ~~will~~2001. ~~continue~~Management continues to bereview ~~available,~~the orimpact ~~that~~of ~~existing~~this statement ~~debt~~and ~~can~~will bemake ~~renegotiated~~any onnecessary ~~terms~~adjustments ~~acceptable to the Company,~~ if ~~at all~~appropriate.

~~The~~ Interest ~~accompanying~~expense ~~consolidated~~totaled ~~financial~~$71,000 ~~statements~~for ~~have~~the ~~been~~first ~~prepared~~quarter ~~assuming~~of ~~that~~fiscal ~~the~~2002, ~~Company~~compared ~~will~~to ~~continue~~$330,000 asduring athe ~~going~~first ~~concern.~~quarter Asof ~~discussed~~fiscal ~~above~~2001. ~~and~~The asdecrease ~~shown~~ in the ~~accompanying consolidated~~first ~~financial~~quarter ~~statements,~~of ~~the~~fiscal ~~Company~~2002 ~~has~~was the ~~operating~~result ~~and~~of ~~liquidity concerns that raise doubt about~~ the ~~Company's~~cancellation ~~ability~~of toindebtedness ~~continue~~in asreturn afor ~~going~~issuance ~~concern.~~of ~~There~~common ~~can~~stock bein ~~no assurance that~~ the ~~Company~~ ~~will~~third bequarter ~~able~~of tofiscal ~~successfully~~2001. ~~improve its operating results and further restructure its~~

Other income totaled $59,000 in the first quarter of fiscal 2002, compared to $202,000 in the first quarter of fiscal 2001. The decrease is primarily attributable to no income from our investment in Magnesensors during the first quarter of fiscal 2002 compared to $200,000 in income during the first quarter of fiscal 2001. During the first quarter of fiscal 2001, we notified Magnesensors that we would no longer continue to provide a $200,000 guarantee of indebtedness due to the termination of our contractual obligations to do so and our liquidity concerns. We had been providing the guarantee, and under the equity method of accounting for our investment in Magnesensors, had previously recorded our proportionate share of Magnesenors' losses to the extent of our debt guarantee.

Provision for income taxes totaled $1,000 in the first quarter of fiscal 2002, compared to $75,000 in the first quarter of fiscal 2001. The reduced tax provision in the first quarter of 2002 was due to the use of tax loss carryforwards at the Company's Neuromag Oy subsidiary in fiscal 2002 as compared to the first quarter of fiscal 2001.

Net loss for the first quarter ended December 31, 2001 amounted to $1,216,000 compared to a net loss of $810,000 for the comparable period in the prior fiscal year. The increase in net loss for the first quarter of fiscal 2002 as compared to the prior year period is primarily due to the reduced sales volume and associated margins as well as increased marketing and general and administrative costs in the quarter.

~~indebtedness~~LIQUIDITY orAND ~~that~~CAPITAL its liquidity and capital resources will be sufficient to maintain its normal operations. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. RESOURCES

~~The report~~ We continue to experience serious liquidity issues and incurred net losses of ~~the~~$4,501,000, ~~Company's~~$8,127,000 ~~independent~~and ~~public~~$7,464,000 ~~accountants~~in onfiscal ~~the~~2001, ~~Company's~~2000 ~~financial~~and ~~statements~~1999, ~~included~~respectively. We had negative cash flows from operations of $4,153,000, $5,217,000 and $8,602,000 in ~~its~~fiscal ~~Form 10-K~~2001, ~~for~~2000 and 1999, respectively. For the ~~year~~quarter ended ~~September~~December 3031, ~~2000~~ ~~contained~~2001 the Company incurred a net ~~modification~~loss ~~related~~of to$1,216,000 ~~the~~and ~~Company's~~had ~~ability~~positive tocash ~~continue~~flows asfrom aoperations ~~going~~of ~~concern~~$177,000. InAt ~~addition~~December 31, 2001 the ~~reader~~Company ishad ~~encouraged~~an toaccumulated ~~refer~~deficit toof ~~the~~$112,128,000, ~~Management's~~shareholder ~~Discussion~~equity of $3,316,000 and working ~~Analysis~~capital deficiency of ~~Financial Condition~~$3,571,000. ~~and~~On ~~Results~~December 31, 2001 the Company had restricted cash of ~~Operation~~$381,000, ~~under~~which ~~Item~~includes 2a letter of ~~Part~~credit of $195,000 for two years of minimum royalties due Marconi Medical Systems, IInc. as required as a part of ~~this~~the ~~quarterly~~agreement ~~report~~to ~~for~~purchase ~~additional~~Neuromag ~~risks~~Oy orin December 1999. Neuromag Oy has bank guarantees related to a system for approximately $140,000 and other ~~considerations~~miscellaneous of approximately $46,000.

At The ~~June 30,~~report ~~2001,~~of ~~the~~our ~~Company~~independent ~~had~~public aaccountants ~~positive~~on ~~working~~our ~~capital~~financial ofstatements ~~$330,000~~included asin ~~compared~~the toForm 10-K afor ~~negative~~the ~~working~~year ~~capital~~ended ~~of $14,186,000 at June~~September 30, ~~2000.~~2001 ~~The~~contained ~~Company's~~a ~~increased~~modification ~~working~~related ~~capital~~to ~~primarily~~our ~~resulted~~ability ~~from~~to ~~the~~continue ~~issuance~~as ofa ~~common~~going ~~stock in exchange for cancellation of indebtedness, the restructured AIG loan and the reclassification of long term customer deposits~~concern.

~~Capital~~ In ~~equipment~~an ~~expenditures~~effort ~~totaled~~to ~~$815,000~~address ~~for~~our ~~the~~operational ~~third~~and ~~quarter~~liquidity ~~of fiscal 2001~~issues, ~~compared~~management continues to ~~$15~~work with our lenders,~~000~~ ~~for~~is ~~the~~attempting ~~third~~to ~~quarter~~raise ofadditional ~~fiscal~~capital ~~2000.~~and ~~Capital~~is ~~expenditures~~developing ~~include~~cost reduction measures on a ~~transfer from~~worldwide ~~inventory~~basis to abring ~~customer~~our ~~lease~~cost ofstructure ~~$790,000~~more in ~~the~~line ~~third~~with ~~quarter~~expected ~~of 2001~~revenues. ~~For~~If ~~the~~management ~~nine~~is ~~months~~not ~~ended~~successful ~~June 30,~~in ~~2001~~initiating ~~expenditures~~and ~~were~~executing ~~$864~~these plans,~~000~~ asmanagement ~~compared~~anticipates tothat capital, ~~the~~working ~~prior~~capital ~~year~~and ~~2000~~debt ~~for~~service ~~$169,000 which~~requirements ~~included~~in afiscal ~~transfer~~2002 ~~from~~will ~~inventory~~substantially toexceed acash ~~customer~~projected ~~lease~~to ofbe ~~$790,000~~generated inby ~~the~~MSI ~~third~~systems ~~quarter of 2001~~sales.

Based on our current expectation of anticipated cash receipts related to firm orders received and anticipated bookings of up to two additional MEG/MSI systems, we expect to have sufficient cash to continue operations through February 2002 without taking into account cash requirements for maturities of our notes payable. Historically, we have raised additional capital through its majority shareholders and related parties to fund continuing operations. We are working with these shareholders and related parties to renegotiate, reduce or repay our debt obligations and to provide additional funding for operations. There can be no assurance that these sources of capital and funds will be available or that existing debt can be renegotiated on terms acceptable to the Company, if at all.

On or about April 26, 2001, we issued 59,549,081 shares of common stock, representing approximately 41% of our outstanding voting securities, in a private placement transaction with specified investors in accordance with Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended. The common stock was issued at a per-share price of $0.21, in exchange for cancellations of indebtedness in the aggregate amount of $10,505,307 and cash in the aggregate sum of $2,000,000.

The $10,505,307 in cancellations of indebtedness consisted of a partial cancellation of indebtedness in the amount of $8,951,000 by AIG Bank according to a letter agreement dated on or about April 25, 2001, between AIG Bank and 4-D, full cancellations of indebtedness in the amounts of $872,867 and $224,875 by Swisspartners Investment Network Ltd., or Swisspartners, a full cancellation of indebtedness in the amount of $224,875 by MATRUST, S.L., a full cancellation of indebtedness by International Sequoia Investments Limited, or Sequoia, in the amount of $224,875, and a full cancellation of indebtedness in the amount of $6,815 from Amaldos, S.A. The full cancellations of indebtedness entered into between 4-D and each of Amaldos, S.A., MATRUST, S.L., Sequoia and Swisspartners represent the portion of the debt assigned to each such entity by BDN, a Spanish company owned by three members of our board of directors, Martin Egli, Enrique Maso and Martin Velasco, upon its reduction of capital. Mr. Egli is also a member of the board of directors of AIG Bank and is a managing partner of Swisspartners. Dr. Maso is a majority shareholder in MATRUST, S.L. Mr. Velasco is a major investor in Sequoia.

The remainder of the AIG Bank loan was restructured. As restructured, the loan in the principal amount of $3,357,000 from AIG Bank matures in July 2002 and the interest rate is currently set at 6.8% per annum until April 26, 2002, at which time the interest rate will be readjusted for the remainder of the loan term. As amended, the AIG Bank loan is secured by a pledge and assignment by Scaloway, a guarantee in the amount of $2,200,000 by Bank Julius Baer & Co. AG and all of the issued and outstanding shares of Neuromag Oy, our wholly-owned subsidiary. If we default under the AIG Bank loan, then AIG Bank has the right to exercise its security interests and take ownership of Neuromag Oy. In connection with the private placement transaction, Scaloway agreed to convert certain assets pledged and assigned by Scaloway into an indirect ownership of all 42,623,810 shares of our common stock issued to AIG Bank. Scaloway has sole voting and dispositive power over these shares. Mr. Velasco, a member of our board of directors, is the beneficial owner of Scaloway.

Swisspartners, one of our principal shareholders, invested $2 million in cash into 4-D through its purchase of additional common stock. In connection with the purchase by Swisspartners, our board of directors approved an increase in the current size of our board of directors from eight to nine to appoint Mr. Hans-Ueli Rihs to serve as a member of the board of directors effective May 2001. Mr. Hans-Ueli Rihs is also a member of the board of directors of Swisspartners. The $2 million was used for general corporate purposes and to begin to focus our marketing efforts and leveraging the issuance of CPT codes for MEG.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed above and as shown in the accompanying consolidated financial statements, the Company has operating and liquidity concerns that raise substantial doubt about the Company's ability to continue as a going concern. There can be no assurance that we will be able to successfully improve our operating results and restructure our indebtedness or that our liquidity and capital resources will be sufficient to maintain our normal operations. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

At December 31, 2001, the Company had a working capital deficit of $3,571,000 as compared to $2,433,000 at September 30, 2001. The Company's working capital deficiency primarily resulted from continued losses incurred in the first quarter of fiscal year 2002.

Capital equipment expenditures totaled $52,000 for the first quarter of fiscal 2002, compared to $298,000 for the first quarter of fiscal 2001. Capital expenditures have remained low due to the Company's liquidity concerns, as well as planned reductions in capital equipment requirements.

FACTORS THAT MAY AFFECT FUTURE RESULTS

This quarterly report on Form 10-Q may contain forward-looking statements that involve risks and uncertainties. Such statements include, but are not limited to, statements containing the words "believes", "anticipates", "expects", "estimates", and words of similar import. The Company's results could differ materially from any forward-looking statements, which reflect management's opinions only as of the date hereof, as a result of factors, such as those more fully described under "Risks and Uncertainties". The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements. Readers should carefully review the risk factors set forth below as ~~well as other factors addressed in this report, its annual report on Form 10-K and in other documents the that Company files from time to time with the Securities and Exchange Commission.~~

well as other factors addressed in this report, our annual report on Form 10-K and in other documents we file from time to time with the Securities and Exchange Commission.

RISKS AND UNCERTAINTIES

We face the following risks associated with our business operations:

We are uncertain with respect to additional funding and may not be able to meet our future capital needs. As a result, there is substantial doubt about ~~the~~our ~~Company's~~ ability to continue to operate as a going concern.

We require additional capital to fund ~~the Company's capital,~~ working capital and debt service ~~requirements~~ on an ongoing basis. We restructured our loans in April 2001 and have a principal balance due to AIG Private Bank, Ltd., Zurich Switzerland, or AIG, in July 2002 of $3,357,000 plus related interest. We will need to obtain additional financing to fund operations and repay ~~our~~the ~~existing~~notes ~~debt~~and interest. If we default under the AIG loan, AIG could exercise its rights in its security interests and take ownership of Neuromag Oy. We may not be able to arrange additional financing or restructure our debt on terms acceptable to us, if at all.

If we continue to incur operating losses and negative cash flows from operations, we may be unable to continue our operations.

Our financial position reflects that we have been focused on research and development and a commercial MEG/MSI market has not yet developed, resulting in ~~low~~only low volume sales to medical research institutions. Our net losses in the last three ~~fiscal~~ years have been as follows:

•: $4,501,000 of losses in fiscal 2001,
•: $8,127,000 of losses in fiscal 2000, and
•: $7,464,000 of losses in fiscal 1999

15 In the last three years our negative cash flows from operations have been as follows:

•: $4,153,000 in fiscal 2001,
•: $5,217,000 in fiscal 2000, and
•: $8,602,000 in fiscal 1999

In At December 31, 2001, our accumulated deficit was $112,128,000, our shareholders' equity was $3,316,000 and we had negative working capital of $3,571,000. Our negative working capital at December 31, 2001 resulted primarily from continued losses incurred in the ~~last~~first ~~three~~quarter of fiscal ~~years~~year 2002. In an effort to address our operational and liquidity issues, management continues to work with our ~~negative~~lenders, is attempting to raise additional capital and is developing cost reduction measures on a worldwide basis to bring our cost structure more in line with expected revenues. If management is not successful in initiating and executing these plans, management anticipates that capital, working capital and debt service requirements in fiscal 2002 will substantially exceed cash ~~flows~~projected ~~from~~to ~~operations~~be ~~have~~generated ~~been~~by asMEG/MSI ~~follows:~~systems sales.

~~At June 30,~~If ~~2001~~we ~~our~~fail ~~accumulated~~to ~~deficit~~obtain ~~was~~an ~~$110,863,000,~~adequate ~~our~~level ~~shareholders'~~of ~~equity~~reimbursement ~~was~~for ~~$4,515,000~~MEG/MSI ~~and~~procedures ~~the~~by ~~Company~~third ~~had~~party apayors, ~~positive~~sales ~~working~~will ~~capital of $330,000~~suffer.

Our commercial success is also highly dependent on reimbursement for procedures using the MEG/MSI systems. With the issuance of CPT codes by the AMA MEG/MSI has moved one step closer to having routine reimbursement. The level of reimbursement currently established is not sufficient to provide for an economically viable MEG/MSI installation. This assignment is currently under review but there can be no assurance that an adequate level of reimbursement for MEG/MSI will result from

the review. Without adequate reimbursement levels we will be more dependent on sales in the research market.

Our management and controlling shareholders, which together control a majority of our common stock, may control our operations and make decisions that you do not consider in your best interest.

Our present directors, executive officers and principal shareholders and their affiliates beneficially own a majority of our outstanding common stock. As a result, if all or some of these shareholders were to act together, they would be able to exercise significant influence over all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. Such concentration of ownership may also have the effect of delaying or preventing a change in our control that may be favored by other shareholders.

If we are unable to identify additional clinical applications for our MEG/MSI systems, there will be no commercially viable markets for our products.

Currently, there are only a few established diagnostic uses for MEG/MSI systems known by the medical industry. A commercial market may never develop for multiple uses of our products. A continued lack of clinical applications and commercial market for our MEG/MSI systems will have a material adverse impact on our financial position, results of operations and cash flows.

Our vendors may not continue providing favorable credit terms.

Due to our liquidity issues, we have extended vendor payments beyond normal credit terms. If our major vendors were to decline further credit or require cash on delivery payments, our financial position, results of operations and cash flows would be adversely impacted.

Integrating 4-D Neuroimaging and Neuromag Oy will be difficult.

Our acquisition of Neuromag Oy in December 1999 brought together two previous international competitors. Risks common to such mergers include:

•: Difficulties in attempting to integrate the technologies or operations.
•: Difficulties in achieving the possible financial and strategic advantages such a merger may provide or imply.
•: New competitors enter the market.
•: Product brand recognition and customer awareness or satisfaction deteriorates.
•: Management is unable to make the changes necessary without their attention being diverted from normal business operations.
•: Employee relationships suffer, and we risk the potential loss of key employees of the acquired company.
•: Geographic separation, language barriers and cultural differences inhibit effective communication and management effectiveness.
•: Increased currency risk exposure.

Also, it is possible that despite a successful integration, future results of operations of the merged Company do not meet expectations, due to other risks discussed in this report or other documents filed with the SEC, and other factors.

If we are unable to satisfy customer performance and service requirements, we may be unable to compete effectively.

Our success may be limited by our ability to satisfy customer performance requirements for our systems,; as well as by our ability to complete, in a timely fashion, product developments and enhancements to satisfy customer requirements. In addition, if we or our distributors are not able to respond in a timely manner to service requirements, our competitiveness may be adversely impacted.

If we are unable to identify additional clinical applications for our MSI systems, there will be no commercially viable markets for our products.

Currently, there are only a few established diagnostic uses for MSI systems of which the medical industry is aware. Although we have started our own clinical research and testing to identify new and broader application areas, we cannot assure you that a commercial market will develop for multiple uses of our products. A continued lack of clinical applications and commercial market for our MSI systems will have a material adverse impact on our financial position, results of operations and cash flows.

If we are unable to develop additional products, our ability to commercialize our products will be adversely impacted.

Our success may be limited by our dependence on our current line of MEG/MSI systems. We are currently dependent on sales of our MEG/MSI systems to basic research institutions that represent a market of limited size. Our current product line may not fully meet the needs of a commercial clinical market and we may ~~need~~be required to develop additional products directly suited to an emerging set of needs from this market. Our financial results may be materially adversely affected if our current line of MEG/MSI products does not fully meet the ~~needs of~~ commercial applications that emerge, or we are not able to offer new products in a timely and cost effective manner ~~that meet these emerging needs~~.

If we fail to obtain an adequate level of reimbursement for MSI procedures by third party payors, sales will suffer.

Our commercial success is also highly dependent on reimbursement for procedures using the MSI system. Currently, Medicare, insurance companies and other healthcare providers approve payment for MSI procedures on a case-by-case basis. As of June 30, 2001, these third party payors have only approved limited reimbursements in the United States. Although third party payors have increasingly approved reimbursements, we cannot assure you that third party reimbursements will become widely available. In February, the American Medical Association approved the issuance of billing codes, commonly referred to as Current Procedural Terminology ("CPT") codes, for the use of MEG in the planning for the surgical treatment of epilepsy and for pre-surgical functional mapping of the brain prior to neurosurgery. This is the first step is establishing routine reimbursement for MEG in the United States. The United States government does not currently reimburse for MSI procedures. If reimbursement does not become more widely available, our financial position and results of operations will be materially adversely affected. Further, if the Federal government or any state legislature enacts

legislation relating to our business or the health care industry, including legislation relating to third party reimbursement, our financial position and results of operations could be negatively affected. In addition, there is currently no reimbursement for MSI procedures outside of the United States.

Our vendors may not continue providing favorable credit terms.

Due to the Company's liquidity issues, the Company has extended vendor payments beyond normal credit terms. If the Company's major vendors were to decline further credit or require cash on delivery payments, the Company's financial position, results of operations and cash flows would be adversely impacted.

If discoveries or developments of new technologies occur, our products and technology may become obsolete.

Our industry is characterized by rapid technological change, which may also impact our commercial success. Competitors may develop products using other technologies or may improve existing products. This competition may reduce the size of the potential market for our products or make them obsolete or non-competitive. Competitors may also develop new or different products using technology or imaging modalities that provide, or are perceived as providing, greater value than the Company's products. Our financial position and results of operations will be materially adversely affected if such competitive developments occur.

If we fail to compete successfully, our revenues and operating results will be adversely affected.

Historically, our industry has been characterized by ongoing price competition. Our competitors compete with us for the currently limited number of whole head systems being purchased worldwide. The future profitability of our systems may be negatively impacted by this competition.

If new government legislation is enacted or unfavorable medical industry trends arise, we may be unable to sell our products and our revenues will suffer.

We cannot predict what adverse effect, if any, future legislation or FDA regulations may have on the MEG/MSI market and our financial results. Medical industry cost containment trends may impose restrictions on sizeable third-party reimbursements for diagnostic procedures, limiting the market opportunity. Further, if ~~any~~federal ~~Federal~~ government agencies or any state legislature enacts legislation or guidelines relating to our business or the health care industry that create additional business hurdles, including legislation relating to third party reimbursement, our financial position and results of operations could be negatively affected.

If foreign currency exchange rates fluctuate, our return on sales in U.S. dollars may suffer.

A significant portion of our sales to date have been in foreign markets. Revenues from international sales represented 9957% of our revenues of MEG/MSI systems for the ~~fiscal~~ year ended September 30, ~~2000. In fiscal~~ 2001, ~~through~~compared ~~June 30,~~to ~~2001, 55~~99% ofin ~~our~~fiscal ~~revenues are from international sales~~2000. We expect that revenues from international sales will continue to represent a significant portion of our annual revenues. Because we sell in foreign markets, we are exposed to potential risks of increases and decreases in foreign currency exchange rates. Although at ~~June~~ December 3031, 2001 and 2000 we did not have any open forward exchange contracts, on occasion, we may enter into forward exchange contracts to partially hedge (or protect) against such foreign currency exchange risks. Fluctuations may reduce the return in U.S. dollars that we actually receive on our sales and could impact operating results through translation of the Company's subsidiaries' financial statements. These risks may become material as our sales increase or dramatic currency fluctuations occur from outside events.

~~The Company's success is dependent upon its ability to attract and retain qualified scientific and management personnel.~~19

~~The~~ ~~loss~~upon ofoccasion, ~~services~~we ofmay ~~any~~enter ~~one~~into offorward ~~our~~exchange ~~executive~~contracts ~~management~~to partially hedge (or ~~key~~protect) ~~scientific~~against ~~personnel~~such ~~would~~foreign ~~delay~~currency exchange risks. Fluctuations may reduce the return in U.S. dollars that we actually receive on our ~~ability~~sales. toWe ~~execute~~believe that a hypothetical 10% change in foreign currency exchange rates would not materially change our ~~business~~current ~~plans~~financial position and ~~reduce~~results of operations. However, these risks may become material as our ~~ability~~sales toincrease ~~successfully develop~~or ~~and~~dramatic currency fluctuations occur from outside events.

17Our success is dependent upon our ability to attract and retain qualified scientific and management personnel.

~~commercialize~~ The ~~products,~~loss ~~maintain~~of ~~good~~services ~~customer~~of ~~relationships~~any ~~and~~one ~~compete~~of inour ~~the~~executive ~~marketplace.~~management Weor ~~also~~key ~~face~~scientific ~~increasing~~personnel ~~difficulties~~would indelay ~~recruiting~~our ~~qualified~~ability ~~personnel~~to inexecute ~~the~~our ~~software~~business plans and ~~hardware~~reduce ~~design~~our ~~areas~~ability ~~because~~to ofsuccessfully ~~intense~~develop ~~competition~~and ~~for~~commercialize ~~such~~products, ~~personnel~~maintain ingood ~~today's~~customer ~~job~~relationships ~~market~~and compete in the marketplace. There can be no assurance that ~~the~~we ~~Company~~ will be able to hire, train or retain such qualified personnel.

In addition, the loss of the services of ~~the~~Dr. Buchanan, who currently serves as our President, Chief Executive Officer and Principal Financial Officer, ~~D. Scott Buchanan,~~ would have a ~~materially~~ material adverse effect on our prospects. Currently none of the executive officers of the Company have an employment agreement or contract with ~~the Company~~us; all are "at-will" and under no specified term arrangements.

Our stock price is highly volatile and subject to swings based on sales and other market conditions.

The market prices for securities of companies with newly emerging markets have historically been highly volatile, and their stock price from time to time has experienced significant price and volume fluctuations that are unrelated to the operating performance of such companies. Moreover, 4-D's relatively low trading volume increases the likelihood and severity of volume fluctuations which likely will result in a corresponding increase in the volatility of 4-D's common stock price. Factors such as announcements of complex technological innovations or new sales, governmental regulations, developments in patent or other proprietary rights, developments in the Company's relationships with collaborative partners, general market conditions and the timing of decisions by existing 4-D stockholders to sell large positions of our common stock may have a significant effect on the market price of the Company's common stock. Fluctuations in financial performance from period to period, or acceleration of any of our debt by our lenders, also may have a significant impact on the market price of the common stock.

If our products produce unreliable diagnostic information, it may result in a liability, which would adversely impact our financial condition.

Although our products are noninvasive and diagnostic in nature, treatment courses based on the information generated by our instruments may be unreliable or result in adverse effects. This possibility exposes us to the risk of product liability claims. While we carry product liability insurance, there is no assurance that such insurance will be adequate, will be available in the future at a level and cost that is appropriate, or available at all, or that a product liability claim would not adversely affect our business, prospects, financial position, results of operations, and cash flows.

~~Integrating~~Our ~~4-D~~stock ~~Neuroimaging~~price is highly volatile and ~~Neuromag~~subject Oyto ~~has~~swings ~~been~~based ~~difficult~~on sales and other market conditions.

~~Our acquisition~~ The market prices for securities of ~~Neuromag~~companies Oywith ~~brought~~newly ~~together~~emerging ~~two~~markets ~~previous~~have ~~international~~historically ~~competitors~~been highly volatile, and their stock price from time to time has experienced significant price and volume fluctuations that are unrelated to the operating performance of such companies. ~~Ongoing~~Moreover, ~~factors~~our relatively low trading volume increases the likelihood and severity ~~risks~~of volume fluctuations, which ~~may~~likely ~~arise~~will result in a corresponding increase in the volatility of our common stock price. Factors such as announcements of complex technological innovations or new sales, governmental regulations, developments in patent or other proprietary rights, developments in the Company's relationships with collaborative partners, general market conditions and the timing of decisions by our existing shareholders to sell large positions of our common stock may have a ~~result~~significant effect on the market price of the Company's common stock. Fluctuations in financial performance from period to period, or acceleration of any of our ~~merger~~debt by our lenders, also may ~~include:~~have a significant impact on the market price of the common stock.

Also, it is possible that despite a successful integration, future results of operations of the merged Company do not meet expectations, due to other risks discussed in this quarterly report or other documents filed with the SEC, and other factors.

Our board of directors, executive officers and controlling shareholders, which together control a large portion of our common stock, may control our operations and may make decisions which you do not consider in your best interest.

Our present directors, executive officers and principal shareholders and their affiliates beneficially own a significant portion of our outstanding common stock. As a result, if all or some of these shareholders were to act together, they would be able to exercise significant influence over all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. Such concentration of ownership may also have the effect of delaying or preventing a change in our control that may be favored by other shareholders.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

On March 31, 2001, the Company had approximately $12.6 million outstanding under London Interbank Offered Rate based variable rate indebtedness. Subsequent to March 31, 2001, ~~the~~we ~~Company~~ retired approximately $10.5 million of ~~its~~our outstanding debt and restructured approximately $3.357 million of ~~its~~our remaining debt owed to ~~AIG~~ AIG Private Bank Ltd. in connection with a private placement transaction which was consummated on or about April 26, 2001. Under the restructured loan terms, the maturity date has been extended to July 31, 2002 and the interest rate on the AIG loan has currently been fixed at 6.8% per annum until April 26, 2002, at which time the interest accrued on the loan through such date will be due and payable and the interest rate will be readjusted for the remainder of the loan term. Because a major portion of the Company's current indebtedness is at a fixed rate, the Company does not expect changes in interest rates to have a material adverse effect on the Company during the 2001 fiscal year. See Note 4 and Part II, Item 2 of this report for additional detail with regard to the restructuring of the AIG loan and the private placement transaction.

For additional information required by this item regarding market risks related to fluctuations in foreign currency exchange rates, see our discussion under "Risks and Uncertainties—If foreign currency exchange rates fluctuate, our return on sales in U.S. dollars may suffer" under Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations.

PART II. OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

4-D issued 59,549,081 shares of its common stock representing approximately 41% of its outstanding voting securities in a private placement transaction with specified investors in accordance with Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended, which was consummated on or about April 26, 2001. The common stock was issued at a per-share price of $0.21, in exchange for cancellations of indebtedness in the aggregate amount of $10,505,307 and cash in the aggregate sum of $2,000,000. 4-D currently intends to use the cash proceeds for general corporate purposes, marketing and continued product research and development, as it deems necessary. The 59,549,081 shares of common stock were distributed as set forth in the table below. Except as otherwise noted in the table below, each purchase by cancellation of indebtedness was made in United States Dollars, or USD, according to a Full Cancellation of Indebtedness dated as of April 26, 2001 between 4-D and the respective purchaser. The percentage ownership is calculated based on 145,018,629 shares issued and outstanding immediately following the private placement transaction.

Purchasers	Number of Shares Acquired in Transaction	Source and Amount of Consideration	Total Number of Shares Owned following Transaction	Percentage Ownership of Outstanding Voting Securities following Transaction (%)
AIG Private Bank Ltd. ("AIG")	42,623,810	Partial Cancellation of Indebtedness in the amount of USD $8,951,000 pursuant to that certain letter agreement dated on or about April 25, 2001 between AIG and 4-D (the "Letter Agreement").	42,623,810	29.4
Swisspartners Investment Network Ltd. ("Swisspartners")	14,751,153	USD $2,000,000 cash and Full Cancellations of Indebtedness in the amounts of USD $872,867 and USD $224,875.	36,468,755	25.1
MATRUST, S.L.	1,070,833	Full Cancellation of Indebtedness in the amount of USD $224,875.	1,070,833	0.7
International Sequoia Investments Ltd.	1,070,833	Full Cancellation of Indebtedness in the amount of USD $224,875.	1,070,833	0.7
Amaldos, S.A.	32,452	Full Cancellation of Indebtedness in the amount of USD $6,815.	32,452	Less than 0.1
TOTAL:	59,549,081		81,266,683	56.0

The Letter Agreement acknowledges AIG's receipt of 42,623,810 shares of 4-D's common stock as partial payment in the amount of USD $8,951,000 against a loan 4-D obtained on or about December 21, 1999, as subsequently amended August 10, 2000, February 15, 2001 and April 26, 2001, from AIG in the principal amount of $11,951,000. In connection with the private placement transaction,

the AIG loan was amended effective as of April 26, 2001 to, among other things, extend its maturity date to July 31, 2002 and re-establish the interest rate based on AIG's refinancing costs in line with the current market conditions plus a fixed margin of 2.5% per annum. The interest rate is currently set at 6.8% per annum until April 26, 2002, at which time the interest accrued on the loan through such date will be due and payable and the interest rate will be ~~re-adjusted~~readjusted for the remainder of the loan term. AsBecause ~~amended,~~a ~~the~~major ~~AIG~~portion ~~loan~~of isthe ~~secured~~Company's bycurrent aindebtedness ~~pledge~~is ~~and assignment~~at ~~by Scaloway,~~ a ~~guarantee~~fixed inrate, the ~~amount~~Company ofdoes USnot ~~$2,220,000~~expect bychanges ~~Bank~~in ~~Julius~~interest ~~Baer &~~rates ~~Co.~~to AGhave ina ~~Zurich,~~material ~~Switzerland,~~adverse ~~and~~effect ~~all~~on of the ~~issued and outstanding shares of Neuromag Oy, 4-D's~~Company ~~wholly-owned~~during ~~subsidiary~~the ~~located~~2001 infiscal ~~Helsinki, Finland~~year. IfSee ~~4-D~~Part I, ~~defaults~~Item ~~under the AIG loan~~2, ~~then~~"Liquidity ~~AIG has the right to exercise its security interest~~ and ~~take~~Capital ~~ownership~~Resources" of ~~Neuromag~~this ~~Oy.~~report Infor ~~connection~~additional detail with ~~the~~ ~~private~~regard ~~placement transaction, Scaloway agreed~~ to ~~convert~~the ~~certain~~restructuring ~~assets pledged and assigned by Scaloway into an indirect ownership~~ of ~~all~~the ~~42,623,810 shares of 4-D's common stock issued to~~ AIG~~. Scaloway~~ ~~has~~loan ~~sole voting~~ and ~~dispositive power over these shares. Martin Velasco, a member of 4-D's board of directors, is~~ the ~~beneficial~~private placement ~~owner of Scaloway~~transaction.

~~The~~ For ~~Full~~additional ~~Cancellation~~information ofrequired ~~Indebtedness entered into between 4-D and Amaldos, S.A. in the amount of $6,815 represents the portion of the debt assigned to it~~ by ~~BDN~~this ~~upon~~item ~~its reduction~~regarding ofmarket ~~capital.~~risks ~~The~~related ~~Full Cancellations of Indebtedness entered into between 4-D and each of MATRUST, S.L., Sequoia and Swisspartners each in the amount of USD $224,875 represent the portion of the debt assigned~~ to ~~each~~fluctuations ~~such purchaser by BDN upon its reduction of capital. In June 2000, 4-D obtained unsecured loans~~ in ~~principal~~foreign ~~amounts~~currency ~~totaling~~exchange ~~$834~~rates,~~595~~ ~~from~~see ~~BDN,~~our adiscussion ~~Spanish~~under ~~company owned~~"Risks ~~by three members of 4-D's board of directors, Martin Egli, Enrique Maso~~ and ~~Martin Velasco. 4-D repaid approximately $200,000 of the BDN loans. BDN subsequently executed a reduction of capital~~ ~~and~~Uncertainties—If ~~redistributed~~foreign ~~its~~currency ~~rights~~exchange ~~under~~rates ~~the BDN loans to Amaldos~~fluctuate, ~~S.A.,~~our ~~MATRUST,~~return ~~S.L.,~~on ~~Sequoia~~sales ~~and Swisspartners. Dr. Maso is a majority shareholder~~ in ~~MATRUST,~~ U.S.~~L.,~~ ~~Mr.~~dollars ~~Velasco~~may issuffer" aunder ~~major~~Item ~~investor~~2-Management's ~~in Sequoia,~~Discussion and ~~Mr.~~Analysis ~~Egli is a managing partner~~ of ~~Swisspartners. Of the 36,468,755 shares reported as beneficially owned by Swisspartners in the table above, 18,717,602 shares are owned by Dassesta~~Financial ~~International~~Condition ~~S.A.,~~and orResults ~~Dassesta. Swisspartners owns 100%~~ of ~~the capital stock of Dassesta~~Operations. ~~Dr. Maso, a majority owner of MATRUST, S.L., also owns 25,000,000 shares of 4-D's common stock.~~

In connection with the purchase by Swisspartners, 4-D's board of directors approved an increase in the current size of its board of directors from eight to nine to appoint Mr. Hans-Ueli Rihs to serve as a member of the board of directors effective May 2001. Mr. Hans-Ueli Rihs is also a member of the board of directors of Swisspartners.

The description of the private placement transaction set forth above is qualified in its entirety by reference to the Company's current report on Form 8-K filed with the SEC on or about May 11, 2001, as amended by the current report on Form 8-K/A filed on or about June 20, 2001 and the form of Common Stock Purchase Agreement, the Letter Agreement, the April 26, 2001 amendment to the AIG loan and the Full Cancellations of Indebtedness, copies of which are filed as exhibits to such reports.

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

The Company held its annual meeting of shareholders on March 23, 2001 and proxies for such meeting were solicited pursuant to Regulation 14. There was no solicitation in opposition to the Company's nominees for directors as listed in the proxy statement and all such nominees were elected. In addition, the following matters were adopted by the shareholders at the annual meeting.

~~I. Election~~ of ~~Directors:~~ PART II. OTHER INFORMATION

Nominees	Votes For	Votes Withheld	Votes Abstained	Unvoted
D. Scott Buchanan	58,154,186	119,705	—	—
Martin P. Egli	58,155,186	118,705	—	—
Enrique Maso	58,155,186	118,705	—	—
Galleon Graetz	58,155,186	118,705	—	—
Antti Ahonen	58,155,186	118,705	—	—
Felipe Fernandez Atela	58,155,186	118,705	—	—
Martin Velasco	58,155,186	118,705	—	—

II. Ratification and approval of the selection of Arthur Andersen LLP as independent accountants for the fiscal year ending September 30, 2001.

Votes For		Votes Against		Votes Abstain		Unvoted
58,206,791		59,650		7,450		—

As reported by the Company on a current report on Form 8-K filed with the Securities and Exchange Commission on March 29, 2001, as subsequently amended, the Company's current auditors are Swensen Advisors, LLP.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

a) Exhibit No.		Description
a) EXHIBIT NO.		DESCRIPTION
3.1	(1)	Fifth Amended and Restated Articles of Incorporation
3.1 (1)		Fifth Amended and Restated Articles of Incorporation
3.2	(2)	Restated By-Laws
3.2 (2)		Restated By-Laws
10.1		Letter Agreement dated on or about April 25, 2001 between 4-D and AIG Private Bank, Ltd., which is incorporated herein by reference to Exhibit 99.2 to our current report on Form 8-K filed with the SEC on or about May 11, 2001, as subsequently amended.
10.2		Amendment to Loan Agreement dated on or about April 26, 2001 between 4-D and AIG Private Bank, Ltd., which is incorporated herein by reference to Exhibit 99.3 to our current report on Form 8-K filed with the SEC on or about May 11, 2001, as subsequently amended.
10.3		Full Cancellation of Indebtedness effective as of April 26, 2001 between 4-D and Swisspartners Investment Network Ltd., which is incorporated herein by reference to Exhibit 99.4 to our current report on Form 8-K filed with the SEC on or about May 11, 2001, as subsequently amended.
10.4		Full Cancellation of Indebtedness effective as of April 26, 2001 between 4-D and Swisspartners Investment Network Ltd., which is incorporated herein by reference to Exhibit 99.5 to our current report on Form 8-K filed with the SEC on or about May 11, 2001, as subsequently amended.
10.5		Full Cancellation of Indebtedness effective as of April 26, 2001 between 4-D and MATRUST, S.L., which is incorporated herein by reference to Exhibit 99.6 to our current report on Form 8-K filed with the SEC on or about May 11, 2001, as subsequently amended.
10.6		Full Cancellation of Indebtedness effective as of April 26, 2001 between 4-D and International Sequoia Investments Limited, which is incorporated herein by reference to Exhibit 99.7 to our current report on Form 8-K filed with the SEC on or about May 11, 2001, as subsequently amended.
10.7		Full Cancellation of Indebtedness effective as of April 26, 2001 between 4-D and Amaldos, S.A., which is incorporated herein by reference to Exhibit 99.8 to our current report on Form 8-K/A filed with the SEC on or about June 20, 2001.
10.8		Form of Common Stock Purchase Agreement, which is incorporated herein by reference to Exhibit 99.1 to our current report on Form 8-K filed with the SEC on or about May 11, 2001, as subsequently amended.

(1): This exhibit was previously filed as apart of, and is hereby incorporated by reference to the same numbered exhibit in the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2000 filed with the Securities and Exchange Commission on May 15, 2000.
(2): This exhibit was previously filed as a part of, and is hereby incorporated by reference to, the same numbered exhibit in the Registration Statement filed pursuant to the Securities Act of 1933 on Form S-1 Registration Statement No. 33-29095, filed June 7, 1989, as amended by Amendment No. 1, filed June 13, 1989, Amendment No. 2, filed July 21, 1989 and Amendment No. 3, filed July 28, 1989.

b): Reports on Form 8-K

~~The Company filed a current report on Form 8-K/A with the SEC on April 5, 2001 in connection with the change in its certifying accountant~~ None. ~~The Company also filed a current~~ report on Form 8-K with the SEC on May 11, 2001, as subsequently amended by the Company's current report on Form 8-K/A filed with the SEC on June 20, 2001 with regard to the Company's sale and issuance of its common stock in a private placement transaction.

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SIGNATURES

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

4-D NEUROIMAGING
August 20, 2001 Date		/s/ D. SCOTT BUCHANAN D. Scott Buchanan President, Chief Executive Officer, Principal Financial Officer
February12, 2002 Date		/s/ D. SCOTT BUCHANAN D. Scott Buchanan President, Chief Executive Officer, Principal Financial OfficerTitle Goes Here
August 20, 2001 Date		/s/ EUGENE C. HIRSCHKOFF Eugene C. Hirschkoff Vice President Corporate Secretary
February12, 2002 Date		/s/ EUGENE C. HIRSCHKOFF Eugene C. Hirschkoff Vice President Corporate Secretary

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PART I FINANCIAL INFORMATION
4-D NEUROIMAGING CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
4-D NEUROIMAGING CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per-share amounts) (unaudited)
4-D NEUROIMAGING CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
4-D NEUROIMAGING CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (in thousands) (unaudited)
4-D NEUROIMAGING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

SIGNATURES

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