SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

Form 10-K/A
AMENDMENT NO. 1

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to_____.

Commission File Number 0-26138

_________________

Dendrite International, Inc.

_________________

(Exact Name of Registrant as Specified in Its Charter)

New Jersey
(State or Other Jurisdiction of Incorporation or Organization)

22-2786386
(I.R.S. Employer Identification No.)

1200 Mt. Kemble Avenue
Morristown, NJ 07960-6797

_________________

(Address of Principal Executive Offices)
Registrant’s telephone number, including area code 973-425-1200

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Title of Class

Common Stock, no par value

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. [ X ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). [ X ]

The aggregate market value of the shares of the common stock held by non-affiliates of the registrant as of June 28, 2002 was approximately $357,004,000 based upon the closing price of the common stock, which was $9.67, on June 28, 2002. The number of shares of common stock outstanding as of March 18, 2003 was 40,468,641.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Note: Dendrite®, ForceAdministrator®, ForceAnalyzer®, ForceAnalyzerCG™, ForceCG™, ForceConfigurator™, ForceMobile™, ForceMobileCG™, ForcePharma™, j-force™, j-forceMOBILE™, j-forceNET™, j-forceWEB™, Medicheck™, NUCLEUS Pharma™, Organization Manager™, Sample Allocations™, SampleEnforcer™, Sample Guardian™, Sample Reporting™, ScripMaxIQ™, VisiForce™, ™™, WebForceCG™, are either trademarks or registered trademarks of Dendrite International, Inc. All other service marks, trademarks and trade names referred to in this document are the property of their respective owners. The Company and any of its U.S. or international subsidiaries are sometimes collectively referred to as “Dendrite”, “we”, “our”or “the Company”.

INTRODUCTORY NOTE

Dendrite International, Inc. (“Dendrite” or the “Company”) is filing this Amendment No. 1 on Form 10-K/A for fiscal year 2002 to correct an amount included in Note 16 to the Company’s Consolidated Financial Statements. During 2002, the Company incurred $3,170,000 to a subcontractor for outsourcing activities relating to its clinical services. Except for the above, no other changes are being made to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002. The Company's financial statements, including the consolidated balance sheets, statements of operations, statements of stockholders' equity and statements of cash flow were unaffected by the correction.

Item 8 (Financial Statements and Supplementary Data) of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 cross-references the Company’s Consolidated Financial Statements in Item 15, which is being amended by this Amendment No. 1 on Form 10-K/A. All other unaffected items have not been repeated in this Amendment No. 1.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) The following documents are filed as part of this report:

1.      Financial Statements:
          Report of Independent Auditors
          Consolidated Balance Sheets
          Consolidated Statements of Operations
          Consolidated Statements of Stockholders' Equity
          Consolidated Statements of Cash Flows
          Notes to Consolidated Financial Statements

2.      Financial Statement Schedules:

(a) Schedule II - Valuation and Qualifying Accounts

3. Exhibits:

The exhibits in the accompanying “Exhibit Index” are incorporated herein by reference.

(b) Reports on Form 8-K.

None

-2-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: April 25, 2003

DENDRITE INTERNATIONAL, INC.

By: KATHLEEN E. DONOVAN
——————————————
     Kathleen E. Donovan
     Senior Vice President and Chief
     Financial Officer
     (Principal Financial Offer)

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CERTIFICATIONS

I, John E. Bailye, certify that:

1. I have reviewed this annual report on Form 10-K/A of Dendrite International, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)	Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)	Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated: April 25, 2003

By: JOHN E. BAILYE
——————————————
[Signature]
Chairman and Chief Executive Officer

-4-

I, Kathleen E. Donovan, certify that:

1. I have reviewed this annual report on Form 10-K/A of Dendrite International, Inc.;

a)	Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)	Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

a)	All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Dated: April 25, 2003

By: KATHLEEN E. DONOVAN
——————————————
[Signature]
Senior Vice President and
Chief Financial Officer

-5-

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Dendrite International, Inc.

We have audited the accompanying consolidated balance sheet of Dendrite International, Inc. (the Company) and subsidiaries as of December 31, 2002 and the related consolidated statements of income, stockholders’ equity and cash flows for the year then ended. Our audit also included the financial statement schedule listed in the Index at Item 15(a)2. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit. The consolidated financial statements of Dendrite International, Inc. as of December 31, 2001 and for the years ended December 31, 2001 and 2000 were audited by other auditors who have ceased operations and whose report dated February 1, 2002 expressed an unqualified opinion on those statements before the restatement adjustments described in Note 1.

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

In our opinion, the 2002 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dendrite International, Inc. and subsidiaries as of December 31, 2002 and the results of their operations and cash flows for the year ended, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed above, the consolidated financial statements of Dendrite International, Inc. as of December 31, 2001 and for the years ended December 31, 2001 and 2000 were audited by other auditors who have ceased operations. As described in Note 1, in 2002 the Company adopted the provisions of EITF 01-14, “Income Statement Characterization of Reimbursements Received for Out-of-Pocket Expenses Incurred” which requires reclassification of comparative financial statements for prior periods. We audited the adjustments that were applied to restate revenues and cost of revenues in the 2001 and 2000 financial statements. Our procedures included (a) agreeing the amount of reimbursable expenses incurred to the Company’s underlying records obtained from management, and (b) testing the mathematical accuracy of the restated revenues and cost of revenues. In our opinion, such adjustments are appropriate and have been properly applied. In addition, as described in Note 1, these financial statements have been further revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142,Goodwill and Other Intangible Assets, which was adopted by the Company as of January 1, 2002. Our audit procedures with respect to the disclosures in Note 1 with respect to 2001 and 2000 included (a) agreeing the previously reported net income (loss) to the previously issued financial statements and the adjustments to reported net income (loss) representing amortization expense (including any related tax effects) recognized in those periods related to goodwill, to the Company’s underlying records obtained from management, and (b) testing the mathematical accuracy of the reconciliation of adjusted net income (loss) to reported net income (loss), and the related earnings-per-share amounts. In our opinion, the disclosures for 2001 and 2000 in Note 1 are appropriate. However, we were not engaged to audit, review or apply any procedures to the 2001 or 2000 financial statements of the Company other than with respect to such adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2001 or 2000 financial statements taken as a whole.

As discussed in Note 1 to the financial statements, in 2002 the Company changed its method of accounting for goodwill.

/s/ Ernst & Young LLP

MetroPark, New Jersey
January 29, 2003

THIS IS A COPY OF AN ACCOUNTANT’S REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP, AND HAS NOT BEEN REISSUED BY ANDERSEN. SEE EXHIBIT 23.2 FOR FURTHER INFORMATION.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Dendrite International, Inc.:

We have audited the accompanying consolidated balance sheets of Dendrite International, Inc. (a New Jersey corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Dendrite International, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

/s/ Arthur Andersen LLP

Philadelphia, Pa.,
February 1, 2002

DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS
	DECEMBER 31,
	2002			2001

CURRENT ASSETS:
Cash and cash equivalents	$	68,308		$	65,494
Short-term investments		1,295			6,383
Accounts receivable, net of allowance for doubtful
accounts of $926,000 and $736,000		39,853			35,009
Prepaid expenses and other current assets		5,922			5,258
Prepaid taxes		--			3,888
Deferred taxes		3,380			6,106
Facility Held for Sale		6,900			8,732

Total current assets		125,658			130,870
PROPERTY AND EQUIPMENT, net		26,377			23,594
OTHER ASSETS		753			100
LONG-TERM RECEIVABLE		6,314			--
GOODWILL		12,353			4,830
INTANGIBLE ASSETS, net		2,973			--
PURCHASED CAPITALIZED SOFTWARE, net		2,275			--
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, net		5,605			5,518
DEFERRED TAXES		6,168			1,571

	$	188,476		$	166,483


LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,274		$	2,455
Income Taxes Payable		5,659			--
Capital Lease Obligation		615			--
Accrued compensation and benefits		5,055			6,024
Other accrued expenses		16,749			16,241
Purchase accounting restructuring accrual		3,252			--
Accrued restructuring charge		260			2,950
Deferred revenues		7,861			9,479

Total current liabilities		40,725			37,149

CAPITAL LEASE OBLIGATIONS		275			--
OTHER NON-CURRENT LIABILITIES		717			487

STOCKHOLDERS’ EQUITY:
Preferred stock, no par value, 15,000,000 shares
authorized, none issued or outstanding		--			--
Common stock, no par value, 150,000,000 shares authorized:
authorized; 42,156,344 and 41,598,923 shares issued;
39,933,644 and 39,653,723.shares outstanding		93,037			89,613
Retained earnings		76,876			61,478
Deferred compensation		(76	)		(133	)
Accumulated other comprehensive loss		(2,202	)		(2,704	)
Less treasury stock, at cost		(20,876	)		(19,407	)

Total stockholders’ equity		146,759			128,847

	$	188,476		$	166,483

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

DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)

	YEAR ENDED DECEMBER 31,

	2002			2001			2000

REVENUES:
License fees	$	13,507		$	18,695		$	23,966
Services		212,249			208,667			194,093

		225,756			227,362			218,059

COSTS OF REVENUES:
Cost of license fees		4,730			4,897			3,420
Purchased software impairment		--			2,614			--
Cost of services		106,817			117,312			91,967

		111,547			124,823			95,387

Gross margin		114,209			102,539			122,672

OPERATING EXPENSES:
Selling, general and administrative		77,301			94,578			67,884
Research and development		10,396			11,104			10,875
Restructuring (benefit) charge		(47	)		6,110			--
Asset impairment		1,832			11,723			--

		89,482			123,515			78,759

Operating income (loss)		24,727			(20,976	)		43,913
INTEREST INCOME, net		1,085			2,439			3,541
OTHER (EXPENSE) INCOME		(149	)		3			5

Income (loss) before income tax expense (benefit)		25,663			(18,534	)		47,459
INCOME TAX EXPENSE (BENEFIT)		10,265			(6,063	)		16,848

NET INCOME (LOSS)	$	15,398		$	(12,471	)	$	30,611

NET INCOME (LOSS) PER SHARE:
Basic	$	0.39		$	(0.31	)	$	0.78

Diluted	$	0.38		$	(0.31	)	$	0.74

SHARES USED IN COMPUTING NET INCOME (LOSS) PER SHARE:
Basic		39,872			39,681			39,354

Diluted		40,127			39,681			41,344

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

DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(IN THOUSANDS)

	Common Stock				Retained			Deferred			Accumulated Other Comprehensive		Comprehensive			Treasury		Total Stockholders’
	Shares		Dollars		Earnings			Compensation			Loss		Income (Loss)			Stock		Equity

BALANCE, JANUARY 1, 2000	38,441		$61,550		$43,338		$	(777	)	$	(1,068	)	__		$	(1,927	)	$	101,116
Acquisition of Analytika	216		6,506		__			__			__		__			__			6,506
Issuance of common stock	1,471		9,050		__			__			__		__			__			9,050
Changes in deferred
Compensation	__		__		__			372			__		__			__			372
Stock option
tax benefits	__		6,264		__			__			__		__			__			6,264
Comprehensive income:
Net income	__		__		30,611			__			__		$ 30,611			__			30,611
Currency translation
adjustment	__		__		__			__			(621	)	(621	)		__			(621	)

Comprehensive income	__		__		__			__			__		$ 29,990			__			__

BALANCE, DECEMBER 31, 2000	40,128		83,370		73,949			(405	)		(1,689	)	__			(1,927	)		153,298
Purchase of treasury shares	(1,344	)	__		__			__			__		__			(17,480	)		(17,480	)
Issuance of common stock	870		4,309		__			__			__		__			__			4,309
Changes in deferred
Compensation	__		__		__			272			__		__			__			272
Stock option
tax benefits	__		1,934		__			__			__		__			__			1,934
Comprehensive loss:
Net loss	__		__		(12,471	)		__			__		$ (12,471	)		__			(12,471	)
Currency translation
adjustment	__		__		__			__			(1,015	)	(1,015	)		__			(1,015	)

Comprehensive loss	__		__		__			__			__		$ (13,486	)		__			__

BALANCE, DECEMBER 31, 2001	39,654		89,613		61,478			(133	)		(2,704	)	__			(19,407	)		128,847
Purchase of treasury shares	(277	)	__		__			__			__		__			(1,469	)		(1,469	)
Issuance of common stock	557		2,807		__			__			__		__			__			2,807
Changes in deferred
Compensation	__		__		__			57			__		__			__			57
Stock option
tax benefits	__		856		__			__			__		__			__			856
Acquisition of SAI	__		1,237		__			__			__		__			__			1,237
Stock options tax benefit
adjustment	__		(1,476	)	__			__			__		__			__			(1,476	)
Comprehensive income:	__		__		__			__			__		__			__			__
Net income	__		__		15,398			__			__		$ 15,398			__			15,398
Currency translation
adjustment	__		__		__						502		502			__			502

Comprehensive income	__		__		__			__			__		$ 15,900			__			__

BALANCE, DECEMBER 31, 2002	39,934		$93,037		$76,876			$ (76	)		$ (2,202	)	__		$	(20,876	)	$	146,759

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

DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

	YEAR ENDED DECEMBER 31,

	2002			2001			2000

OPERATING ACTIVITIES:
Net income (loss)	$	15,398		$	(12,471	)	$	30,611
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization		14,096			14,985			11,060
Asset impairment		1,832			14,337			--
Restructuring (benefit) charge		(47	)		6,110			--
Amortization of deferred compensation		68			150			309
Deferred income taxes (benefit)		(469	)		(6,648	)		(501	)
Changes in assets and liabilities, net of effect from
acquisitions:
(Increase) decrease in accounts receivable		(4,889	)		12,847			(20,058	)
Decrease (increase) in prepaid expenses and other
current assets		--			1,778			(2,250	)
Increase in other assets		(22	)		--			(76	)
Decrease (increase) in prepaid income taxes		4,744			(1,483	)		4,783
(Decrease) increase in accounts payable and accrued
expenses		(5,076	)		7,420			(752	)
Payments relating to restructuring charge		(2,643	)		(3,160	)		--
Increase in income taxes payable		4,257			--			--
(Decrease) increase in deferred revenues		(3,260	)		5,551			111
Increase in other non-current liabilities		200			475			25

Net cash provided by operating activities		24,189			39,891			23,262

INVESTING ACTIVITIES:
Purchases of short-term investments		(14,710	)		(20,230	)		(19,840	)
Sales of short-term investments		19,798			17,990			30,920
Acquisitions, net of cash acquired		(13,117	)		--			(2,318	)
Increase in other non-current assets		(700	)		--			(3,550	)
Purchases of property and equipment		(11,113	)		(17,727	)		(11,656	)
Investment in facility held for sale		--			(10,832	)		--
Additions to capitalized software development costs		(2,678	)		(3,198	)		(2,354	)

Net cash used in investing activities		(22,520	)		(33,997	)		(8,798	)

FINANCING ACTIVITIES:
Payments on capital lease obligations		(330	)		--			(285	)
Purchase of treasury shares		(1,469	)		(17,480	)		--
Issuance of common stock		2,807			4,433			9,113

Net cash provided by (used in) financing activities		1,008			(13,047	)		8,828

EFFECT OF EXCHANGE RATE CHANGES ON CASH		137			(583	)		(86	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		2,814			(7,736	)		23,206
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		65,494			73,230			50,024

CASH AND CASH EQUIVALENTS, END OF YEAR	$	68,308		$	65,494		$	73,230

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

DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

THE COMPANY

Dendrite International, Inc. and its subsidiaries (the “Company”) provide a broad array of sales force effectiveness solutions for the global life sciences industry. These solutions enable companies to manage, coordinate, and control activities of sales forces in complex selling environments, primarily in the pharmaceutical industry. The Company’s solutions combine software products with a wide range of specialized support services: software implementation, technical and hardware support, and help desk support.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Dendrite International, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Foreign Currency

The functional currency of the Company’s foreign operations are deemed to be the local country’s currency. As a result, assets and liabilities of the Company’s wholly-owned international subsidiaries are translated at their respective year-end exchange rates and revenues and expenses are translated at average currency exchange rates for the period. The resulting balance sheet translation adjustments are included in “Other Comprehensive Income (Loss)” and are reflected as a separate component of stockholders’ equity. Foreign currency transaction gains and losses are included in other expense on the accompanying statements of operations and are immaterial in each year. To date, the Company has not engaged in any foreign currency hedging activities.

Use of Estimates

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. On an ongoing basis, the Company evaluates its estimates, including those related to bad debts. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. The Company believes its critical accounting policies to be revenue recognition, accounting for restructuring and impairments and income taxes.

Revenue Recognition

The Company provides a comprehensive range of customer relationship management software products and support services to the pharmaceutical industry. New customers generally enter into a license contract and a services contract with the Company. The Company’s software licenses typically provide for a perpetual right to use the Company’s software and are contracted for within a license agreement that provides for license fees billable upon contract execution. When purchasing new software, customers also purchase implementation services, which are essential to the functionality of the Company’s software. These services are contracted for in a services contract, which generally provides for payment terms over the course of the implementation project.

The Company generally recognizes license fees as revenues using the percentage-of-completion method as prescribed by AICPA Statement of Position 81-1 (“SOP 81-1”), Accounting for Performance of Construction-Type and Certain Production-Type Contracts and pursuant to paragraph 7 of AICPA Statement of Position 97-2 (“SOP 97-2”). The Company’s arrangements are segmented, in accordance with paragraphs 40 and 41 of SOP 81-1, into two primary elements or profit centers; one being the perpetual license fee and implementation service element and the other being an ongoing sales force support services element. The Company does not defer performance costs related to its arrangements, as revenues are generally recognized as the associated costs are incurred. The Company uses a consistent methodology to measure progress-to-completion for all contract accounting arrangements. For the license fee and implementation services element, the input measure of labor incurred is used to monitor progress-to-completion. The Company uses the output measure of value delivered (i.e. completion of a month’s services) to measure progress-to-completion for the ongoing sales force support services element in contract accounting, partially due to the inherent difficulties in establishing input values for measuring progress-to-completion for recurring monthly services. Under the terms of its contracts with customers, the Company does not have the right to invoice for claims relating to overruns in its fixed fee implementation projects. To the extent that a customer submits a signed change of scope document, the Company will add the budgeted revenues and costs to its existing percentage-of-completion model, as a change in estimate, for that particular project. The expected gross margin for changes of scope generally approximates that for the overall project, and therefore project revenue recognition has not historically been impacted significantly by the addition of change of scope work orders. The Company evaluates its contract elements for losses using the same segmentation elements that it uses for revenue recognition. When it becomes evident that a contract element will result in a loss, the Company will provide for this loss in the period that such loss becomes evident. Contract profitability is measured at the gross margin level, with no allocation of overhead or other inclusion of indirect costs. The Company has offered limited price protection under services agreements. Any right to a future refund from such price protection is entirely within the Company's control. It is estimated that the likelihood of a future payout due to price protection is remote.

From time to time, the Company’s customers will expand their field sales force, and consequently, purchase additional user licenses from the Company. When the customer orders these additional licenses, there is no additional work effort required by the Company, the customer wishes only to extend their previously developed software to new users. The customer generally has the ability to create its own copies of the software for the new users, and therefore, there is no need for the Company to deliver anything. Based upon this, the related revenue is recognized at the time of the customer order.

The Company only relies on Vendor Specific Objective Evidence of fair value (“VSOE”) to allocate the portion of the arrangement fee that relates to post-contract customer support (“PCS”). The PCS-related services offered consist only of software maintenance and warranty services. The Company’s maintenance services consist primarily of the correction of errors in the software and the delivery of unspecified upgrades and enhancements over the maintenance term. The Company establishes VSOE of fair value for PCS using the maintenance renewal rate that is present in each of its service contracts. The Company’s maintenance is offered at a fee that is based upon a percentage of license fees paid. All elements other than PCS are accounted for under contract accounting.

The Company will sometimes provide for a warranty period within its arrangements. The services provided during the warranty period are the same as those provided under software maintenance. These activities include correcting errors or bugs in the software, ensuring that the software complies with defined specifications and providing unspecified upgrades or enhancements on a when-and-if-available basis, during the term of the warranty period. The warranties included in the Company’s arrangements generally coincide with the length of the projected software implementation period, typically 180 days from the execution of the license contract and always end on a specific date. The Company allocates a portion of the related license fee revenues to the value of services during the warranty period, and recognizes such amounts ratably over the warranty period. VSOE for the Company’s warranty services is established using the maintenance renewal rate that is present in each of the Company’s service contracts.

Deferred Revenues

Deferred revenues represent amounts collected from, or invoiced to, customers in excess of revenues recognized. This predominantly occurs in two situations a) annual billings of software maintenance fees; and b) upfront billings of license fees that are recognized over time. The value of deferred revenue will increase and decrease based on the timing of invoices and recognition of license revenues.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Supplemental Cash Flow Information

For the years ended December 31, 2002, 2001 and 2000, the Company paid interest of approximately $15,000, $0 and $13,000, respectively. For the years ended December 31, 2002, 2001 and 2000, the Company paid income taxes of approximately $5,895,000, $3,622,000, and $11,840,000, respectively.

The following table lists assets (other than cash) that were acquired and liabilities that were assumed as a result of the acquisitions in 2002 and 2000 as discussed in Note 4:

	December 31,
	2002			2000

Assets:
Accounts receivable	$	5,792,000		$	396,000
Prepaid expenses and other current assets		398,000			381,000
Deferred taxes		1,402,000			--
Property and equipment		1,689,000			410,000
Capitalized software development costs		2,441,000			2,890,000
Intangible assets		3,142,000			--
Goodwill		7,523,000			5,979,000

		22,387,000			10,056,000
Assumed liabilities:
Accounts payable and other accrued expenses		(5,604,000	)		(1,056,000	)
Capital leases		(1,220,000	)		--
Deferred revenues		(1,209,000	)		(176,000	)

Net assets acquired		14,354,000			8,824,000
Value of stock options issued		(1,237,000	)		--
Purchase price paid in stock		--			(6,506,000	)

Cash paid, net of cash acquired	$	13,117,000		$	2,318,000

Short-Term Investments

The Company holds investments in highly rated corporate and municipal bonds. These investments are carried at cost which approximates fair value.

Customer Acquisition Costs

Commissions related to execution of new contracts are deferred and recognized over the period of revenue recognition. All other commissions are expensed as incurred. Deferred commissions at December 31, 2002 and 2001 were less than 1/2% of current assets.

Impairment of Long-Lived Assets

In October 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” which became effective in fiscal 2002. SFAS 144 supersedes certain provisions of Accounting Principles Board (“APB”) Opinion 30, “Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” (“APB 30”) and supersedes SFAS 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”. Although retaining many of the fundamental recognition and measurement provisions of SFAS 121, the new rules significantly change the criteria that would have to be met to classify an asset as held-for-sale. The adoption of SFAS 144 had no impact on the Company’s consolidated financial statements.

The Company reviews its long-lived assets, including property and equipment, and intangible assets subject to amortization for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine the recoverability of its long-lived assets, the Company evaluates the estimated future undiscounted cash flows that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the long-lived asset. If the estimated future undiscounted cash flows demonstrate that recoverability is not probable, an impairment loss would be recognized. An impairment loss would be calculated based on the excess carrying amount of the long-lived asset over the long-lived asset’s fair value. See Note 3.

Property and Equipment

Fixed assets, including software developed for internal purposes, are stated at cost, net of depreciation. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the respective assets, which range from two to ten years. Leasehold improvements are amortized on a straight-line basis over the estimated useful life of the asset or the lease term, whichever is shorter. Maintenance, repairs and minor replacements that do not extend the life or functionality of the related assets are charged to expense as incurred.

Capitalized Software Development Costs

In accordance with SFAS 86, “Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,” the Company capitalizes certain costs related to the development of new software products or the enhancement of existing software products for sale or license. These costs are capitalized from the point in time that technological feasibility has been established, as evidenced by a working model or a detailed working program design, to the point in time that the product is available for general release to customers. Capitalized software development costs are amortized on a straight-line basis over the estimated economic lives of the products (no longer than four years), beginning with general release to customers. Research and development costs incurred prior to establishing technological feasibility and costs incurred subsequent to general product release to customers are charged to expense as incurred. The Company periodically evaluates whether events or circumstances have occurred that indicate that the remaining useful lives of the capitalized software development costs should be revised or that the remaining balance of such assets may not be recoverable. As of December 31, 2002, management believes that no revisions to the remaining useful lives or write-down of capitalized development costs are required.

Capitalized software development costs are presented in the accompanying consolidated balance sheets net of accumulated amortization of $11,949,000 and $9,348,000 at December 31, 2002 and 2001, respectively. Amortization of capitalized software development costs for the years ended December 31, 2002, 2001 and 2000 was $2,601,000, $2,072,000 and $1,627,000, respectively, and is included in cost of license fees in the accompanying consolidated statements of operations.

In connection with certain business acquisitions (see Note 4), the Company purchased software that was determined to have reached technological feasibility. The amount of purchased capitalized software remaining as of December 31, 2002 and 2001 is as follows:

	December 31,
	2002			2001
ABC	$	--		$	850,000
MMI		--			1,989,000
Analytika		--			2,890,000
SAI		2,441,000			--
		2,441,000			5,729,000

Less -- Accumulated amortization		(166,000	)		(5,729,000	)

	$	2,275,000		$	--

During the second quarter of 2001, the Company recorded an impairment charge relating to purchased capitalized software costs. See Note 3.

Subsequent to the Marketing Management International, Inc. (“MMI”) acquisition, the Company decided to offer the mid-tier pharmaceutical market a product more compatible with the Company’s vision of integrated customer relationship management (“CRM”) solutions. Accordingly, during 2001, the Company reduced the remaining useful life of the purchased capitalized software related to the MMI acquisition so that this asset was fully amortized as of December 31, 2001. Amortization expense of purchased capitalized software for the years ended December 31, 2002, 2001 and 2000 was $166,000, $1,530,000 and $1,145,000, respectively, and is included in cost of license fees in the accompanying consolidated statement of operations. Amortization for the year ended December 31, 2001 included $678,000 of accelerated amortization relating to the purchased capitalized software of MMI. See Note 3.

Goodwill and Intangible Assets

In July 2001, the FASB issued SFAS 142, “Goodwill and Other Intangible Assets”(“SFAS 142”). SFAS 142 requires goodwill to be tested for impairment on an annual basis and between annual tests in certain circumstances, and written down when impaired, rather than being amortized as previous accounting standards required. Furthermore, SFAS 142 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite.

SFAS 142 is effective for fiscal years beginning after December 15, 2001. In accordance with SFAS 142, the Company ceased amortizing goodwill. Amortization of goodwill for the years ended December 31, 2002, 2001 and 2000 was $0, $1,302,000, and $2,390,000, respectively and is included within selling, general and administrative expenses in the accompanying consolidated statements of operations. Based on the impairment tests performed, there was no impairment of goodwill in fiscal 2002; however, there can be no assurance that future goodwill impairment tests will not result in a charge to earnings.

Purchased intangible assets are carried at cost less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, generally two to five years.

The following table presents the impact of SFAS 142 on net income (loss) and net income (loss) per share had the accounting standard been in effect for years ended:

	December 31,
	2001			2000

Net (loss) income (as reported)	$	(12,471,000	)	$	30,611,000
Add back amortization of goodwill, net of income tax
effect		833,000			1,530,000

Adjusted net (loss) income	$	(11,638,000	)		32,141,000

Basic net (loss) income per common share:
Net (loss) income (as reported)	$	(0.31	)	$	0.78
Add back amortization of goodwill, net of income tax
effect		0.02			0.04

Adjusted net (loss) income	$	(0.29	)	$	0.82

Diluted net (loss) income per common share:
Net (loss) income (as reported)	$	(0.31	)	$	0.74
Add back amortization of goodwill, net of income tax
effect		0.02			0.04

Adjusted net (loss) income	$	(0.29	)	$	0.78

In the second quarter of 2001, the Company determined that the future undiscounted cash flows from goodwill associated with its acquisitions of Associated Business Computing, N.V. (“ABC”) and Analytika, Inc. (“Analytika”) would be negative, due primarily to the lack of future revenue to be generated and the costs required to support current contractual levels (see Note 3). Accordingly, the Company recorded an impairment charge of $6,173,000 relating to the goodwill of ABC and Analytika to reduce the respective net intangible assets to zero. This impairment charge is included within asset impairment in the accompanying consolidated statements of operations.

Guarantees

The Company provides certain indemnification provisions within its software licensing agreements, to protect its customers from any liabilities or damages resulting from a claim of misappropriation or infringement by third parties relating to its software. These provisions continue in perpetuity, along with the Company’s software licensing agreements. The Company has never incurred a liability relating to one of these indemnification provisions in the past and management believes that the likelihood of any future payout relating to these provisions is remote. Therefore, the Company has not recorded a liability during any period for these indemnification clauses.

Income Taxes

The Company accounts for income taxes in accordance with SFAS 109, “Accounting for Income Taxes”. Under SFAS 109, deferred tax assets and liabilities are based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates that are expected to be in effect when the differences reverse. In addition, in accordance with SFAS 109, a valuation allowance is required to be recognized if it is not believed to be “more likely than not” that a deferred tax asset will be realized.

At December 31, 2002, there were approximately $5,479,000 of undistributed earnings of non-U.S. subsidiaries that are considered to be reinvested indefinitely. If such earnings were remitted to the Company, the applicable United States federal income and foreign withholding taxes may be wholly or partially offset by foreign tax credits. As a result, the determination of potential U.S. deferred income taxes on these unremitted earnings is not practicable at December 31, 2002.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and short-term investment balances and trade accounts receivable. The Company invests its excess cash with large banks. The Company’s customer base principally comprises companies within the ethical pharmaceutical industry. As a result, the Company derives its revenues from a limited number of large pharmaceutical companies. The Company performs evaluations of its customers’ financial condition. The Company does not require collateral from its customers. See Note 17.

Stock Based Compensation

In December 2002, the FASB issued SFAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” (“SFAS 148”). SFAS 148 amends SFAS 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require more prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The additional disclosure requirements of SFAS 148 are effective for fiscal years ending after December 15, 2002. The Company has elected to continue to follow the intrinsic value method of accounting as prescribed by APB 25, “Accounting for Stock Issued to Employees,” to account for employee stock options. In accordance with SFAS 148 the following table illustrates the effects on net income/(loss) and income/(loss) per share if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation:

	December 31,

	2002			2001			2000

Net income (loss) as reported	$	15,398,000		$	(12,471,000	)	$	30,611,000
Add: Deferred compensation
recognized in accordance with APB
25, net of related tax effects		41,000			96,000			198,000

Deduct: Total stock-based employee compensation expense
determined under the fair value
based method for all awards, net
of related tax effects		(15,126,000	)		(17,468,000	)		(12,789,000	)

Pro forma net income (loss)	$	313,000		$	(29,843,000	)	$	18,020,000

Earnings (loss) per share:
Basic - as reported	$	0.39		$	(0.31	)	$	0.78
Basic - pro forma	$	0.01		$	(0.75	)	$	0.46
Diluted - as reported	$	0.38		$	(0.31	)	$	0.75
Diluted - pro forma	$	0.01		$	(0.75	)	$	0.44

Advertising Costs

Advertising costs are expensed as incurred. Advertising expense was $3,245,000, $4,351,000 and $1,755,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

Net Income (Loss) Per Share

The Company calculates net income (loss) per share pursuant to SFAS 128, “Earnings Per Share”.

Basic net income (loss) per share was computed by dividing the net income (loss) for each year by the weighted average number of shares of common stock outstanding for each year. Diluted net income per share was computed by dividing net income for each year by the weighted average number of shares of common stock and common stock equivalents outstanding during each year. For the year ended December 31, 2001, approximately 601,000 common stock equivalents were anti-dilutive and were, therefore, excluded from the computation of net loss per share.

The computation of basic and diluted net income (loss) per share is as follows:

	Year Ended December 31,

	2002						2001

	Income (Numerator)		Shares (Denominator)		Per Share Amount		Loss (Numerator)			Shares (Denominator)		Per Share Amount

	(In Thousands, Except Per Share Data)

Net income (loss)	$	15,398					$	(12,471	)
Basic net income
(loss) per share				39,872	$	0.39					39,681	$	(0.3	1)

Effect of dilutive
stock options				255							--

Diluted net income
(loss) per share				40,127	$	0.38					39,681	$	(0.3	1)

	Year Ended December 31, 2000

	Income (Numerator)	Shares (Denominator)	Per Share Amount

	(In Thousands, Except Per Share Data)

Net income	$30,611
Basic net income
per share		39,354	$0.78

Effect of dilutive
stock options		1,990

Diluted net income
per share		41,344	$0.74

Reclassifications

Certain reclassifications have been made to prior year amounts to conform with current year presentation.

Recent Accounting Pronouncements

In June 2002, the FASB issued SFAS 146, “Accounting for Costs Associated with Exit or Disposal Activities” effective for exit or disposal activities initiated after December 31, 2002. SFAS 146 nullifies Emerging Issues Task Force (“EITF”) Issue 94-3 “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” Under SFAS 146 a liability for a cost associated with an exit or disposal activity shall be recognized and measured initially at its fair value in the period in which the liability is incurred rather than the date an entity commits to an exit plan. We expect the adoption of SFAS 146 will have an impact on the timing of the recording of any future restructuring charges.

In November 2002, the FASB issued Interpretation 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (FIN 45). FIN 45 changes current practice in the accounting for, and disclosure of, guarantees. The Interpretation requires certain guarantees to be recorded at fair value, which is different from current practice, which is generally to record a liability only when a loss is probable and reasonably estimable, as those terms are defined in FASB Statement 5, “Accounting for Contingencies” (SFAS 5). The Interpretation also requires a guarantor to make significant new disclosures, even when the likelihood of making any payments under the guarantee is remote, which is another change from current practice. The Company has not issued any guarantee that meets the initial recognition and measurement requirements of FIN 45. The Company has adopted the disclosure requirements of FIN 45 for the year ended December 31, 2002, as required.

In November 2002, the FASB issued EITF Issues 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables” (EITF 00-21). EITF 00-21 addresses the accounting for arrangements that involve the delivery or performance of multiple products, services or rights to use assets. This consensus is applicable to arrangements entered into on or after June 15, 2003 and requires companies to account for existing arrangements as the cumulative effect of a change in accounting principles in accordance with APB Opinion 20, “Accounting Changes.” The Company is currently assessing the impact of EITF 00-21, but does not believe that it will have a material impact on its consolidated financial statements.

In November 2001, the FASB issued EITF 01-14, “Income Statement Characterization of Reimbursements Received for “Out-of-Pocket” Expenses Incurred” (EITF 01-14). EITF 01-14 requires that in cases where the contractor acts as a principal, reimbursements received for out-of-pocket expenses incurred be characterized as revenue and the associated costs be included as cost of services in the income statement. The Company applied EITF 01-14 and, as required, has reclassified comparative financial information for the years ended December 31, 2001 and 2000. The impact of applying this pronouncement was to increase both revenues and cost of services by $3,989,000, $3,405,000 and $3,733,000 for the years December 31, 2002, 2001 and 2000, respectively. The implementation of EITF 01-14 had no impact upon earnings.

2. RESTRUCTURING CHARGE

On June 14, 2001, the Company announced a restructuring of its business operations to reflect a lower expected revenue growth model in the near term. As a result the Company re-examined its cost structure and determined that there were duplicate employee costs and excess overhead costs. The restructuring plan consisted of a reduction of 155 delivery and staff positions and the termination of 35 independent contractors across various departments in the United States and Europe. In addition, 192 additional positions were eliminated as part of the closing of other Company facility in Stroudsburg, PA. The Stroudsburg, PA operations were relocated to the Company’s facilities in New Jersey, Virginia and a new facility in Bethlehem, PA. The exit costs consisting of costs to retrofit the Stroudsburg facility, lease termination costs and the write-off of leasehold improvements were included in the restructuring charge while the moving and other start-up costs were not included in this restructuring charge and were expensed as incurred.

During the second quarter of 2001, the Company recorded a charge of $6,134,000 associated with this restructuring. This charge was reduced by $24,000 to $6,110,000 in the fourth quarter of 2001 due to the variance between the amounts originally recorded and management’s revised estimate of the total costs of the restructuring. This reduction of $24,000 was recorded within restructuring charge on the accompanying consolidated statements of operations. During the fourth quarter of 2002, the Company again reduced the restructuring accrual by an additional $47,000 due to a revised estimate of the total costs of the restructuring. Of the restructuring charge, $260,000 and $2,950,000 related primarily to severance that had not been paid as of December 31, 2002 and 2001, respectively and, accordingly, is classified as accrued restructuring charge in the accompanying consolidated balance sheet. The restructuring charges were based upon formal plans approved by the Company’s management using the information available at the time. Management of the Company believes this provision will be adequate to cover the costs incurred relating to the restructuring. The Company anticipates that the accrued restructuring balance of $260,000 as of December 31, 2002 will be paid in 2003. The activity in accrued restructuring for the periods ended December 31, 2002 and 2001 is summarized in the tables below:

	Accrued restructuring as of January 1, 2002		Cash Payments in 2002		Reversal of accrual in 2002			Accrued Restructuring as of December 31, 2002

Termination payments to employees	$	2,218,000	$	1,911,000	$	(47,000	)	$	260,000
Facility exit costs		495,000		495,000		--			--
Contract termination and other
restructuring costs		237,000		237,000		--			--

	$	2,950,000	$	2,643,000	$	(47,000	)	$	260,000


	Restructuring Charge		Cash Payments in 2001		Accrued Restructuring as of December 31, 2001

Termination payments to employees	$	5,064,000	$	2,846,000	$	2,218,000
Facility exit costs		623,000		128,000		495,000
Contract termination and other
restructuring costs		423,000		186,000		237,000

	$	6,110,000	$	3,160,000	$	2,950,000

3. ASSET IMPAIRMENTS

During the year ended December 31, 2001, the Company reviewed the carrying values of its long-lived assets, including its minority investments in start-up ventures, identifiable intangibles and goodwill. In connection with the Company’s investments in two start-up ventures, the Company followed APB 18, “The Equity Method of Accounting for Investments in Common Stock”, which states that when a series of operating losses of an investee or other factors indicate that a decrease in value of the investment has occurred which is other than temporary, an impairment should be recognized. During the review of both start-up ventures, the Company became aware of a series of operating losses and the need of each start-up venture to obtain additional financing to continue operations which became especially severe in the second quarter of 2001. In addition, prior to the end of 2001 both start-up ventures filed for bankruptcy. As a result, during the year ended December 31, 2001, the Company wrote off $3,450,000 of cost method investments in these two start-up ventures due to an other than temporary decline in the fair value of these investments.

As part of its partnership with Oracle Corporation the Company announced on June 14, 2001 its intention to market an integrated CRM solution to meet the specialized needs of the worldwide pharmaceutical industry. As a result, the Company’s vision and product platform changed. The Company determined that it would no longer offer the Analytika and ABC products, but would continue to support both products until existing customer contract terms expired. As a result, no revenues were forecasted for either product for the future other than those under existing contracts. Further, despite the lack of future revenue the Company needed to maintain the infrastructure required to support our Analytika and ABC product for the term of each contract. Since the forecasted revenue base was significantly reduced yet the infrastructure and administrative costs remained relatively fixed, these operations transitioned from positive to negative cash flows. In accordance with SFAS 121 the Company reviewed the future undiscounted net cash flows of the ABC and Analytika products and determined the cash flows to be negative due to the fact the projected revenue generated from new sales for each operation was zero. As a result, all of the goodwill associated with ABC and Analytika was impaired during the quarter ended June 30, 2001. Accordingly, the Company recorded a goodwill impairment charge of $6,173,000 during the year ended December 31, 2001.

During the third quarter of 2002 and the fourth quarter of 2001, the Company recorded an asset impairment of $1,832,000 and $2,100,000, respectively, related to a facility held for sale. See Note 7.

4. ACQUISITIONS

On September 19, 2002, the Company acquired Software Associates International (“SAI”), a privately held company based in New Jersey. SAI provided software products and solutions that enabled corporate-wide sales and marketing analysis and complements the CRM initiatives of pharmaceutical companies. These solutions are generally complementary to the Company’s core suite of business products. The results of SAI’s operations have been included in the Consolidated Financial Statements since the acquisition date.

The aggregate purchase price was approximately $16,739,000 which included: cash of approximately $15,092,000 (approximately $1,600,000 in escrow as of December 31, 2002); accrued professional service fees of approximately $410,000 and options to purchase Dendrite common stock valued at approximately $1,237,000. The fair value of the stock options was estimated using the Black-Scholes valuation model. The Company is in the process of finalizing a third-party valuation of certain intangible assets, its evaluation of acquired facilities and personnel for redundancy, and therefore, the purchase price allocation is preliminary and subject to adjustment.

The Company recorded $7,523,000 of goodwill and $4,694,000 of acquired intangible assets, of which approximately $732,000 was assigned to registered trademarks that are not subject to amortization. The remaining $3,962,000 of acquired intangible assets includes purchased software development costs of approximately $2,441,000 (4 year estimated useful life), approximately $328,000 of non-compete agreements (3 year estimated useful life) and approximately $1,193,000 of customer relationship assets (3 year estimated useful life). The weighted-average amortization period for the intangible assets subject to amortization is approximately 3 years.

The following table summarizes the estimated fair value of the assets acquired and the liabilities assumed in connection with the SAI acquisition:



Current Assets	$	8,358,000
Property, plant, and equipment		1,659,000
Intangible assets		4,694,000
Goodwill		7,523,000
Deferred tax assets		1,402,000
Other non-current assets		217,000

Total assets acquired		23,853,000
Current liabilities		3,205,000
Purchase restructuring reserve		3,252,000
Lease Obligations-LT		657,000

Total liabilities assumed		7,114,000

Net assets acquired
	$	16,739,000

On August 12, 2002, the Company acquired Pharma Vision LLC (“Pharma Vision”) for cash consideration of approximately $700,000 which includes approximately $50,000 of professional service fees. Pharma Vision collected and sold data for customer targeting that pharmaceutical representatives use in Europe and support to pharmaceutical customers in Belgium and The Netherlands. The results of Pharma Vision’s operations have been included in the Consolidated Financial Statements from the date of acquisition.

On January 6, 2000, the Company purchased all of the assets and assumed certain liabilities of Analytika, Inc., a provider of advanced analytical products, consulting services and outsourced operations services to the pharmaceutical industry. Under the terms of the acquisition agreement, the Company paid $2,318,000 in cash, which included transaction costs, and Dendrite common stock valued at $6,506,000. The acquisition was accounted for using the purchase method with the purchase price allocated to the assets acquired and liabilities assumed based on their respective fair market values at the acquisition date. Of the purchase price, $2,890,000 was allocated to purchased capitalized software development costs. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill ($5,979,000) based upon a third-party appraisal. Analytika’s results of operations have been included in the Company’s Consolidated Financial Statements from the date of acquisition.

The Company’s unaudited pro forma results of operations for the years ended December 31, 2002, 2001 and 2000 assuming that the acquisition of SAI described above occurred on January 1, 2000 are as follows (in thousands, except per share data):

	December 31,

	2002		2001			2000(A)

Revenue	$	240,096	$	249,013		$	239,115
Net Income/(Loss)		15,101		(12,114	)		33,295
Basic Income/(Loss) per share	$	0.38	$	(0.31	)	$	0.85
Diluted Income/(Loss) per share	$	0.38	$	(0.31	)	$	0.81

(A) Net income includes a gain recognized by SAI on the sale of common units in a subsidiary, net of tax, of approximately $2,100,000.

5. PURCHASE ACCOUNTING RESTRUCTURING ACCRUAL

In connection with the acquisition of SAI, discussed in Note 4, the Company developed an exit plan to close the facility in Mt. Arlington, New Jersey and to relocate the operations to the Company’s facilities in New Jersey. The Company accrued as part of the acquisition costs, the costs to terminate certain leases amounting to $3,252,000. The Company anticipates finalizing the close of the facility during the first quarter of 2003. As of December 31, 2002, the Company has made no payments or adjustments to the accrual.

6. PROPERTY AND EQUIPMENT

	December 31,

	2002			2001

Computer hardware, software and other
equipment	$	38,127,000		$	32,971,000
Furniture and fixtures		5,149,000			3,917,000
Leasehold improvements		13,942,000			10,839,000
Capital Leases		992,000			--

		58,210,000			47,727,000
Less -- Accumulated depreciation and
Amortization		(31,833,000	)		(24,133,000	)

	$	26,377,000		$	23,594,000

Depreciation expense, including amortization expense of capital leases, for the years ended December 31, 2002, 2001 and 2000 was $11,161,000, $10,082,000 and $5,898,000, respectively.

7. FACILITY HELD FOR SALE

In April 2001, the Company paid $10,832,000 to purchase a 145,000 square foot building in New Jersey for the purpose of establishing a new U.S. operations facility to accommodate the Company’s growth. In connection with its 2001 restructuring, the Company made the decision to shift its operations to other existing facilities and therefore decided to sell the new facility (see Note 2). This building is classified as facility held for sale in the accompanying consolidated balance sheets. This facility has been actively for sale since the second quarter of 2001. Due to economic events, and the related impact on the value of real estate, the Company recorded an asset impairment of $2,100,000 to reduce the carrying value of this facility to its estimated fair market value during the fourth quarter of 2001. During the third quarter of 2002, the Company determined an additional impairment existed due to the continued increase in vacancy rates in the surrounding area. Accordingly, the carrying value of the facility held for sale was adjusted the new fair value less costs to sell of approximately $6,900,000, based upon a third party valuation. The resulting $1,832,000 impairment loss is included in the asset impairment charge within the accompanying consolidated statements of operations. See Note 3.

8. GOODWILL AND INTANGIBLE ASSETS

Effective July 1, 2001 the Company adopted SFAS 141, “Business Combinations,” and effective January 1, 2002 the Company adopted SFAS 142, “Goodwill and other Intangible Assets.” SFAS 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting. It also specifies the types of acquired intangible assets that are required to be recognized and reported separate from goodwill. SFAS 142 requires that goodwill and certain intangibles no longer be amortized, but instead tested for impairment at least annually. SFAS 142 also requires that intangible assets with finite useful lives be amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS 121, which was superceded by SFAS 144. Based on the Company’s analysis, there was no impairment of goodwill upon adoption of SFAS 142 on January 1, 2002. The Company conducts its annual impairment testing of goodwill on October 1 of each year. For the year ended December 31, 2002 there was no impairment recorded.

The total gross carrying amount and accumulated amortization for goodwill and intangible assets are as follows:

	As of December 31, 2002						As of December 31, 2001
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net

INANGIBLE ASSETS SUBJECT TO
AMORTIZATION
Purchased capitalized software	$	2,441,000	$	166,000	$	2,275,000		--		--		--
Capitalized software
development costs		17,546,000		11,941,000		5,605,000	$	14,866,000	$	9,348,000	$	5,518,000
Customer relationship assets		1,193,000		132,000		1,061,000		--		--		--
Non-compete covenants		1,217,000		37,000		1,180,000		--		--		--

Total		22,397,000		12,276,000		10,121,000		14,866,000		9,348,000		5,518,000
INTANGIBLE ASSETS NOT SUBJECT
TO AMORTIZATION
Goodwill		12,353,000				12,353,000		7,235,000		2,405.000		4,830,000
Trademarks		732,000		--		732,000		--		--		--

Total		13,085,000				13,085,000		7,235,000		2,405,000		4,830,000

Total goodwill and intangible
assets	$	35,482,000	$	12,276,000	$	23,206,000	$	22,101,000	$	11,753,000	$	10,348,000

The changes in the carrying amount of goodwill for the year ended December 31, 2002 are as follows:



Balance as of January 1, 2002	$	4,830,000
Goodwill acquired		7,523,000

Balance as of December 31, 2002	$	12,353,000

Aggregate annual amortization expense for intangible assets is estimated to be:


Year ending December 31,
2003	$	4,253,000
2004		3,468,000
2005		1,726,000
2006		674,000
2007		--
Thereafter		--

9. LONG TERM RECEIVABLE

During the year ended December 31, 2002, the Company recorded a long term receivable of $6,314,000 from a major U.S. pharmaceutical company as part of a five-year contract. This long term receivable will be paid as the scheduled maturities come due through January 2005. The Company has imputed interest and accordingly, interest income will be recognized as earned within interest income on the Consolidated Statement of Operations.

10. NOTE RECEIVABLE FROM OFFICER OF THE COMPANY

In May 2002, the Company entered into a note receivable with an officer of the Company in the amount of $500,000 in connection with his relocation. The principal is secured by real estate and marketable securities and payable in four installments through December 31, 2005. Interest will be calculated on the principal balance and paid with each installment payment at a rate equal to 7.25% per annum. The note receivable is included within Other Assets on the accompanying Consolidated Balance Sheet.

11. REVOLVING CREDIT

The Company maintains a revolving line of credit agreement with The Chase Manhattan Bank, N.A., which provides for borrowings of up to $15,000,000 and is available to finance working capital needs and possible future acquisitions. The agreement requires, among other covenants, that the Company maintain a minimum consolidated net worth, measured quarterly, equal to $105,000,000 plus 50% of the Company’s net income earned after January 1, 2002, and 75% of the net proceeds to the Company of any stock offerings after September 30, 2001. This covenant has the effect of limiting the amount of cash dividends the Company may pay. As of December 31, 2002 and 2001, approximately $31,092,000 and $23,013,000, respectively, were available for the payment of dividends under this covenant. The line of credit expires on November 30, 2003. The Company has never had any borrowings under this revolving line of credit.

As of December 31, 2002, the Company also had letters of credit for approximately $475,000 outstanding.

12. INCOME TAXES

The components of income before income tax expense (benefit) were as follows:

	December 31,

	2002		2001			2000

Domestic	$	18,869,000	$	(18,259,000	)	$	46,227,000
Foreign		6,794,000		(275,000	)		1,232,000

	$	25,663,000	$	(18,534,000	)	$	47,459,000

The components of income taxes were as follows:

	December 31,

	2002			2001			2000

Current Provision
(Benefit):
Federal	$	4,594,000		$	(1,034,000	)	$	14,588,000
State		1,628,000			256,000			1,453,000
Foreign		3,911,000			2,495,000			1,075,000

		10,133,000			1,717,000			17,116,000
Deferred Provision
(Benefit):
Federal		354,000			(5,195,000	)		(777,000	)
State		(86,000	)		(1,320,000	)		(307,000	)
Foreign		(136,000	)		(1,265,000	)		816,000

		132,000			(7,780,000	)		(268,000	)

	$	10,265,000		$	(6,063,000	)	$	16,848,000

The reconciliation of the statutory Federal income tax rate to the Company’s effective income tax rate is as follows:

		December 31,

	2002			2001			2000

Federal statutory tax rate		35	.0%		(35	.0%)		35	.0%
Difference between U.S. and non-U.S. rates		4	.2		4	.8		0	.8
State income taxes, net of federal tax benefit		5	.1		(3	.5)		1	.6
Nondeductible expenses		0	.3		2	.9		0	.7
Tax credits utilized		(6	.5)		(2	.7)		(1	.3)
Other		1	.9			.8		(1	.3)

		40	.0%		(32	.7%)		35	.5%

The tax effect of temporary differences that give rise to deferred income assets and liabilities is as follows:

	December 31,

	2002			2001

Gross deferred tax asset:
Depreciation and amortization	$	1,502,000		$	2,165,000
Foreign net operating losses		3,225,000			2,984,000
State net operating losses		2,846,000			2,807,000
Federal capital loss carryover		1,208,000			333,000
Federal foreign tax credit
carryover		763,000			--
Accruals and reserves not currently
deductible		4,424,000			4,360,000
Other		1,614,000			2,065,000
		15,582,000			14,714,000

Less: Valuation allowance		(4,482,000	)		(3,336,000	)

	$	11,100,000		$	11,378,000

Gross deferred tax liability:
Capitalized software development costs	$	(1,552,000	)	$	(1,949,000	)
Other		--			(1,752,000	)

	$	(1,552,000	)	$	(3,701,000	)

As of December 31, 2002 and 2001, the Company has recorded a valuation allowance against its net deferred tax assets of approximately $4,482,000 and $3,336,000 respectively. The valuation allowance relates primarily to the state net operating loss carryforwards, foreign tax credit carryforwards and capital loss carryforwards.

As of December 31, 2002, the Company has available state net operating loss carryforwards of approximately $35,000,000 and foreign net operating loss carryforwards of approximately $8,600,000 which expire in varying amounts beginning in 2003 through 2022. Additionally, the Company also has available foreign tax credit carryforwards of approximately $763,000 which expire in 2007.

13. STOCKHOLDERS’ EQUITY

STOCK OPTION PLANS

The Company has various stock option plans (the “Plans”) that provide for the granting of options, the awarding of stock and the purchase of stock. Under the Plans, the total number of shares of common stock that may be granted is 14,050,002. During 2002, the Company obtained shareholder approval to increase the number of options available under the Plans by 1,500,000 shares to 15,550,002 shares. Options granted under the Plans generally vest over a four-year period and are exercisable over a period not to exceed ten years as determined by the Board of Directors. Incentive stock options are granted at fair value. Nonqualified options are granted at exercise prices determined by the Board of Directors.

Information with respect to the options under the Plans is as follows:


	Shares			Weighted Average Exercise Price

Outstanding December 31, 1999		6,258,155		$	10.56
Granted		2,531,396			24.91
Exercised		(1,569,016	)		(7.10)
Canceled		(671,509	)		(16.72)

Outstanding December 31, 2000		6,549,026			16.54
Granted		2,474,754			12.46
Exercised		(785,285	)		(5.57)
Canceled		(666,820	)		(22.58)

Outstanding December 31, 2001		7,571,675			15.88
Granted		2,023,871			10.03
Exercised		(407,373	)		(4.44)
Canceled		(1,339,278	)		(17.47)

Outstanding December 31, 2002		7,848,895		$	14.68

At December 31, 2002, 2001 and 2000 there were 4,871,509, 3,361,772 and 2,325,272 options exercisable with a weighted average exercise price of $14.81, $14.92 and $9.95, respectively. As of December 31, 2002 there were 4,179,521 shares available for future grants under the Plans.

The Company has adopted the disclosure requirements of SFAS 123 as amended by SFAS 148. The Company applies APB 25 and related interpretations in accounting for stock options granted under the Plans. Accordingly, compensation cost has been computed for the Plans based on the intrinsic value of the stock option at the date of grant, which represents the difference between the exercise price and the fair value of the Company’s stock. As the exercise price of all stock options granted equaled the fair value of the Company’s stock at the date of option issuance, no compensation cost has been recorded in the accompanying statements of operations. The pro forma information presented in Note 1 has been determined as if employee stock options were accounted for under the fair value method of SFAS 123. The fair value for these options were estimated at the date of grant using a Black-Scholes option pricing model with the following assumption:

	December 31,

	2002		2001		2000

Expected dividend yield		0.0%		0.0%		0.0%
Expected stock price volatility		80.0%		80.0%		70.0%
Risk free interest rate		3.8%		4.7%		5.5%
Expected life of the option		6 yrs		6 yrs		6 yrs

The weighted average fair value of options granted was $7.98, $8.96 and $17.26 for the years ended December 31, 2002, 2001 and 2000, respectively.

Information with respect to the options outstanding under the Plans at December 31, 2002 is as follows:


Exercise Per Share	Share		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Number of Vested Shares

$0.00 - $3.32		41,112	$	2.50		3.0		41,112
$3.33 - $6.64		956,052		6.04		3.5		916,052
$6.65 -- $9.95		1,508,666		8.18		6.8		758,993
$9.96 - $13.27		1,783,354		12.08		7.9		627,530
$13.28 - $16.60		556,336		14.94		6.1		446,437
$16.61 - $19.91		1,238,496		17.66		6.6		953,176
$19.92 - $23.23		630,531		21.70		7.9		333,797
$23.24 - $26.55		529,070		23.62		7.0		364,116
$26.56 - $29.87		169,200		27.32		7.3		113,745
$29.88 - $34.00		436,078		33.16		6.6		316,551

		7,848,895	$	14.68		6.6		4,871,509

EMPLOYEE STOCK PURCHASE PLAN

In 1997, the Company established an employee stock purchase plan that provides full-time employees the opportunity to purchase shares at 85% of fair value on dates determined by the Board of Directors, up to a maximum 10% of their eligible compensation or $21,250, whichever is less. During 2002, the Company obtained shareholder approval to increase the number of authorized shares available for purchase under this plan from 450,000 to 900,000, of which 150,048, 156,876 and 93,687 were purchased in 2002, 2001 and 2000, respectively. There were 419,511 and 119,559 shares available for issuance under the plan as of December 31, 2002 and 2001, respectively.

ANNIVERSARY STOCK PROGRAM

The Company grants 200 shares of the Company’s common stock to all employees who commenced employment prior to December 31, 1998 in July following their fifth anniversary of employment. The cost of the anniversary stock plan is accrued over the employment period of the employees.

COMMON STOCK REPURCHASE PROGRAM

On January 31, 2001, the Company announced that its Board of Directors authorized a stock repurchase program of up to $20,000,000 of its outstanding common stock over a two-year period (the “2001 Stock Repurchase Plan”). As of December 31, 2001, the Company has repurchased a total of 1,343,700 shares under the 2001 Stock Repurchase Plan for a total value of $17,480,000. On July 29, 2002, the Board of Directors cancelled the 2001 Stock Repurchase Plan.

On July 31, 2002, the Company announced that its Board of Directors had authorized the Company to repurchase up to $20,000,000 of its outstanding common stock over a two-year period (the “2002 Stock Repurchase Plan”). Under the 2002 Stock Repurchase Plan, the Company will repurchase shares on the open market or in privately negotiated transactions from time to time. Repurchases of stock under the 2002 Stock Repurchase Plan are at management’s discretion, depending upon price and availability. The repurchased shares are held as treasury stock, which may be used to satisfy the Company’s requirements under its equity incentive and other benefit plans and for other corporate purposes. As of December 31, 2002, the Company has repurchased under the 2002 Stock Repurchase Plan 277,500 shares of the Company’s common stock at a purchase price of approximately $1,469,000.

SHAREHOLDER RIGHTS PLAN

On February 16, 2001, the Company’s Board of Directors adopted a shareholder rights plan (the “Rights Plan”). The Rights Plan is designed to deter coercive or unfair takeover tactics and to prevent a person or group from acquiring control of the Company without offering a fair price to all shareholders. The adoption of the Rights Plan was not in response to any known effort to acquire control of the Company.

Under the Rights Plan, each shareholder of record on March 5, 2001 received a distribution of one Right for each share of common stock of the Company (“Rights”). At present, the Rights are represented by the Company’s common stock certificates, are not traded separately from the common stock and are not exercisable. The Rights will become exercisable only if a person acquires, or announces a tender offer that would result in ownership of 15% or more of the Company’s common stock, at which time each Right would enable the holder to buy one one-hundredth of a share of the Company’s Series A preferred stock at an exercise price of $120, subject to adjustment. Following the acquisition of 15% or more of the Company’s common stock, the holders of Rights (other than the acquiring person or group) will be entitled to purchase shares of the Company’s common stock at one-half of the market price, and in the event of a subsequent merger or other acquisition of the Company, to buy shares of common stock of the acquiring entity at one-half of the market price of those shares.

The Company may redeem the Rights for $0.01 per Right, subject to adjustment, at any time before the acquisition by a person or group of 15% or more of the Company’s ordinary shares. The Rights will expire on February 20, 2011.

14. SAVINGS AND DEFERRED COMPENSATION PLANS

The Company maintains Employee Savings Plans (the “Plans”) that cover substantially all of its full-time U.S., U.K. and Belgium employees. All eligible employees may elect to contribute a portion of their wages to the Plans, subject to certain limitations. In addition, the Company contributes to the plans at the rate of 50% of the employee’s contributions up to a maximum of 3% of the employee’s salary. The Company’s contributions to the Plans were $1,233,000, $1,191,000 and $773,000 in the years ended December 31, 2002, 2001 and 2000, respectively.

The Company also maintains a noncontributory pension plan that covers substantially all of its full-time Japanese employees. All contributions to this pension plan are made by the Company in accordance with prescribed statutory requirements. The Company’s contributions to the plan were $169,000, $24,000 and $421,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

In 1998, the Company created a deferred compensation plan. Under the plan, eligible, highly compensated employees (as defined) can elect to defer a portion of their compensation and determine the nature of the investments, which will be used to calculate earnings on the deferred amounts.

15. COMMITMENTS AND CONTINGENCIES

The Company leases office facilities and equipment under various capital and operating leases with remaining lease terms generally in excess of one year. Rent expense was $11,438,000, $10,547,000 and $8,410,000 for the years ended December 31, 2002, 2001 and 2000, respectively. Future minimum rental payments on these leases including amounts accrued for in purchase accounting restructuring accruals are as follows:


	Capital Leases		Operating Leases

2003	$	659,000	$	9,784,000
2004		258,000		7,637,000
2005		32,000		4,102,000
2006		--		3,391,000
2007		--		2,955,000
Thereafter		--		10,342,000

Total		949,000	$	38,211,000

Less: Amount representing
interest		59,000

Present value of net minimum
lease payments		890,000

Less: Current portion of
obligation under capital leases		615,000

Obligations under capital
leases, excluding current
portion	$	275,000

From time to time, the Company is involved in certain legal actions arising in the ordinary course of business. In the Company’s opinion, the outcome of such actions will not have a material adverse effect on the Company’s financial position or results of operations.

The Company has employment agreements with certain officers that provide for, among other things, salary, bonus, severance and change in control provisions.

The Company has an agreement with a venture capital fund with a commitment to contribute $1,000,000 to the fund, callable in $100,000 increments. As of December 31, 2002, $300,000 has been paid with $700,000 of commitment remaining. The agreement has a termination date of December 11, 2010, subject to extension by the limited partners.

16. RELATED-PARTY TRANSACTIONS

For the years ended December 31, 2002, 2001 and 2000, the Company incurred approximately $434,000, $304,000 and $257,000, respectively, of costs for rental and use of aircraft for Company business payable to certain third party charter companies. While none of these third party charter companies are affiliated with the Company or any of its officers or directors, in some instances, the aircraft provided by these third party companies was leased from an entity whose members are the Company’s Chairman and Chief Executive Officer and his spouse. As of December 31, 2002 and 2001 approximately $0 and $127,000, respectively, of rental charges were included in other accrued expenses.

For the years ended December 31, 2002, 2001 and 2000, the Company also incurred approximately $236,000, $592,000 and $338,000, respectively, of costs for air travel for Company business payable to the entity owned by the Chairman and Chief Executive Officer and his spouse. These costs, which were incurred either directly or indirectly through expense reimbursements, were charged to the Company on a reimbursement rate basis, in accordance with FAA expense reimbursement rates. As of December 31, 2002 and 2001 approximately $0 and $192,000, respectively, of air travel costs were included in other accrued expenses.

During the year ended December 31, 2002 and 2001, the Company incurred $3,170,000 and $1,432,000, respectively, to a subcontractor for certain outsourcing activities related to its clinical services. The Chairman and Chief Executive Officer of the Company and a member of the Company’s Board of Directors serve on the Board of Directors of this subcontractor. One of the Company’s Director’s is also the Managing Partner of a venture fund which is a 52% shareholder of this subcontractor. The Company terminated its relationship with this subcontractor in October 2002. As of December 31, 2002 and 2001, approximately $426,000 and $644,000, respectively, of outsourcing activities were included in other accrued expenses.

For the years ended December 31, 2002, 2001, and 2000, the Company incurred approximately $912,000, $851,000 and $459,000, respectively, to a third party contractor that provides consultants for computer programming services. The father of the Chairman and Chief Executive Officer of the Company was a 43% shareholder of this contractor; however, during the third quarter of 2002 he divested himself of all such ownership interest. As of December 31, 2002 and 2001 approximately $89,000 and $200,000, respectively, of consulting costs were included in other accrued expenses.

17. CUSTOMER AND GEOGRAPHIC INFORMATION

For the year ended December 31, 2002, the Company derived approximately 36% and 9% of its revenue from its two largest customers. In the year ended December 31, 2001, the Company derived approximately 41% and 10% of its revenue from its two largest customers. In the year ended December 31, 2000, the Company derived approximately 31%, 11% and 10% of its revenues from its three largest customers.

See Note 1 for a brief description of the Company’s business. The Company is organized by geographic locations and has one reportable segment. All transfers between geographic areas have been eliminated from consolidated revenues. Operating income consists of total revenues recorded in the location less operating expenses and does not include interest income, other expense or income taxes. This data is presented in accordance with SFAS 131, “Disclosure About Segments of an Enterprise and Related Information”.

	December 31,

	2002		2001			2000

Revenues:
United States	$	178,603,000	$	184,749,000		$	167,731,000
All Other		47,153,000		42,613,000		$	50,328,000

	$	225,756,000	$	227,362,000			218,059,000

Operating (loss) income:
United States	$	15,448,000	$	(15,868,000	)	$	37,255,000
All Other		9,279,000		(5,108,000	)	$	6,658,000

	$	24,727,000	$	(20,976,000	)	$	43,913,000

Identifiable assets:
United States	$	161,477,000	$	145,321,000		$	155,843,000
All Other		26,999,000		21,162,000			20,060,000

	$	188,476,000	$	166,483,000		$	175,903,000

For segment reporting purposes, license revenues have been allocated to the sales office of the respective country in which the sale is made, although the actual contract is with the U.S. entity for legal and tax purposes.

DENDRITE INTERNATIONAL, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

	Balance at the Beginning of the year	Additions charged to expense or other accounts	Deductions from reserves	Balance at the End of the year

Year Ended December 31, 2002:
Allowance for doubtful
accounts	$ 736,000	$ 348,000	$ 158,000	$ 926,000
Deferred tax valuation
allowance	$3,336,000	$1,146,000		$4,482,000

Year Ended December 31, 2001:
Allowance for doubtful
accounts	$ 593,000	$ 180,000	$ 37,000	$ 736,000
Deferred tax valuation
allowance	$1,171,000	$2,165,000		$3,336,000

Year Ended December 31, 2000:
Allowance for doubtful
accounts	$ 415,000	$ 362,000	$ 184,000	$ 593,000
Deferred tax valuation
allowance	$1,091,000	$ 169,000	$ 89,000	$1,171,000

EXHIBIT INDEX

3. Exhibits:

Articles of Incorporation and By-Laws:

3.1

Restated Certificate of Incorporation of Dendrite International, Inc. (incorporated herein by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (the "Commission") on August 14, 1996)

3.1

(a) Certificate of Amendment to the Restated Certificate of Incorporation of Dendrite International, Inc. (incorporated herein by reference to Exhibit 3.1(a) to the Company's Current Report on Form 8-K, filed with the Commission on March 30, 2001)

3.1

(b) Certificate of Amendment to the Restated Certificate of Incorporation of Dendrite International, Inc. (incorporated herein by reference to Exhibit 3.1 (b) to the Company's Current Report on Form 8-K, filed with the Commission on March 30, 2001)

3.1

(c) Certificate of Amendment to the Restated Certificate of Incorporation of Dendrite International, Inc. Setting Forth the Terms of Series A Junior Participating Preferred Stock (incorporated herein by reference to Exhibit 3.1 (c) to the Company’s Current Report on Form 8-K, filed with the Commission on March 30, 2001)

3.2

Amended and Restated By-laws of Dendrite International, Inc. (incorporated herein by reference to Exhibit 3 to the Company's Current Report on Form 8-K, filed with the Commission on February 21, 2001)

Instruments Defining Rights of Security Holders, including Indentures:

4.1

Specimen of Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1, filed with the Commission on May 17, 1995)

4.2

Registration Rights Agreement dated October 2, 1991 between the several purchasers named therein and the Company (incorporated herein by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1, filed with the Commission on May 17, 1995)

4.3

Amendment to Registration Rights Agreement dated April 23, 1992 between the Company and the parties named therein as shareholders of the Company (incorporated herein by reference to Exhibit 4.3 of Amendment 1 to the Company’s Registration Statement on Form S-1, filed with the Commission on May 17, 1995)

4.4

Rights Agreement dated as of February 20, 2001 between Dendrite International, Inc. and Registrar and Transfer Company, as Rights Agent, which includes, as Exhibit A the Form of Certificate of Amendment to Restated Certificate of Incorporation, as Exhibit B the Form of Rights Certificate and as Exhibit C the Form of Summary of Rights (incorporated herein by reference to Exhibit 4 of the Company’s Current Report on Form 8-K, filed with the Commission on February 21, 2001)

Material Contracts and Compensatory Plans and Arrangements:

10.1

1992 Stock Plan, as amended (incorporated herein by reference to Exhibit 10.36 to the Company’s Registration Statement on Form S-1, filed with the Commission on May 17, 1995; Exhibit A to the Company’s Definitive Proxy Statement for the 1999 Annual Meeting of Shareholders, filed with the Commission on April 16, 1999; and Exhibit 10.1 to the Company’s Annual Report on Form 10-K, filed with the Commission on March 30, 2000)*

10.2

1992 Senior Management Incentive Stock Option Plan, as amended (incorporated herein by reference to Exhibit 10.37 to the Company’s Registration Statement on Form S-1, filed with the Commission on May 17, 1995; Exhibit B to the Company’s Definitive Proxy Statement for the 1999 Annual Meeting of Shareholders, filed with the Commission on April 16, 1999; and Exhibit 10.2 to the Company’s Annual Report on Form 10-K, filed with the Commission on March 30, 2000)*

10.3

1997 Stock Incentive Plan, as amended (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on August 14, 1997; Exhibit 4.2 to the Company’s Registration Statement on Form S-8, filed with the Commission on September 16, 1997; Exhibit 4.2 to the Company’s Registration Statement on Form S-8, filed with the Commission on November 10, 1997; Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on November 14, 1997; Exhibit 4.2 to the Company’s Registration Statement on Form S-8, filed with the Commission on April 21, 1998; Exhibit A to the Company’s Definitive Proxy Statement for the 1998 Annual Meeting of Shareholders, filed with the Commission on April 30, 1998; Appendix A to the Company’s Definitive Proxy Statement for the 1999 Annual Meeting of Shareholders, filed with the Commission on April 16, 1999; Exhibit 10.3 to the Company’s Annual Report on Form 10-K, filed with the Commission on March 30, 2000; Appendix A to the Company’s Definitive Proxy Statement for the 2000 Annual Meeting of Shareholders, filed with the Commission on April 17, 2000; Exhibit 4 to the Company’s Registration Statement on Form S-8, filed with the Commission on October 20, 2000; and Appendix A to the Company’s Definitive Proxy Statement for the 2001 Annual Meeting of Shareholders, filed with the Commission on April 13, 2001 )*

10.4

1997 Employee Stock Purchase Plan (incorporated herein by reference to; Exhibit 4.2 to the Company’s Registration Statement on Form S-8, filed with the Commission on April 1, 1997; Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on August 14, 1997; and Exhibit A to the Company’s Definitive Proxy Statement for the 1999 Annual Meeting of Shareholders, filed with the Commission on April 16, 1999)*

10.5

Lease of 1200 Mount Kemble Avenue, Morristown, New Jersey (incorporated herein by reference to Exhibit 10.40 to the Company’s Registration Statement on Form S-1, filed with the Commission on May 17, 1995)

10.6

Amended and Restated Credit Agreement, entered into as of November 30, 1998, between the Company and The Chase Manhattan Bank, N.A. (incorporated herein by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K, filed with the Commission on March 26, 1999)

10.7

Employment Agreement dated as of March 25, 1997, between Dendrite International, Inc. and John E. Bailye (incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q/A, filed with the Commission on May 16, 1997)*

10.8

Employment Agreement dated as of June 2, 1997, between Dendrite International, Inc. and George T. Robson (incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, filed with the Commission on August 14, 1997)*¹

10.9

Deferred Compensation Plan dated as of September 1, 1998 (incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q, filed with the Commission on August 14, 1998)*

10.10

Deferred Compensation Plan Trust Agreement dated as of September 1, 1998 (incorporated herein by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q, filed with the Commission on August 14, 1998)*

10.11

Employment Agreement dated as of August 7, 1997, between Dendrite International, Inc. and Kathleen Donovan (incorporated herein by reference to Exhibit 10.17 of the Company’s Current Report on Form 8-K, filed with the Commission on March 30, 2001)*

10.12

Employment Agreement dated as of September 8, 1998, between Dendrite International, Inc. and Christine Pellizzari (incorporated herein by reference to Exhibit 10.18 of the Company’s Current Report on Form 8-K, filed with the Commission on March 30, 2001)*

10.13

Amendment to Employment Agreement dated as of May 26, 1999, between Dendrite International, Inc. and George T. Robson (incorporated herein by reference to Exhibit 10.22 of the Company’s Current Report on Form 8-K, filed with the Commission on March 30, 2001)^*1

10.14

Amendment to Employment Agreement dated as of January 25, 2000, between Dendrite International, Inc. and Kathleen Donovan (incorporated herein by reference to Exhibit 10.23 of the Company’s Current Report on Form 8-K, filed with the Commission on March 30, 2001)^*

10.15

Amendment to Employment Agreement dated as of August 1, 2000, between Dendrite International, Inc. and Christine Pellizzari (incorporated herein by reference to Exhibit 10.24 of the Company’s Current Report on Form 8-K, filed with the Commission on March 30, 2001)^*

10.16

Employment Agreement dated as of August 7, 2000, between Dendrite International, Inc. and Marc Kustoff (incorporated herein by reference to Exhibit 10.25 of the Company’s Current Report on Form 8-K, filed with the Commission on March 30, 2001)*

10.17

Agreement of Purchase and Sale between Dendrite International, Inc. and Townsend Property Trust Limited Partnership dated January 5, 2001 (incorporated herein by reference to Exhibit 10.26 of the Company’s Current Report on Form 8-K, filed with the Commission on March 30, 2001)*

10.18

Deed of Lease between Liberty Property Limited Partnership and Dendrite International, Inc. for Dendrite Building I of the Liberty Executive Park in Chesapeake, Virginia (incorporated herein by reference to Exhibit 10.27 of the Company’s Current Report on Form 8-K, filed with the Commission on March 30, 2001)

10.19

Deed of Lease between Liberty Property Limited Partnership and Dendrite International, Inc. for Dendrite Building II of the Liberty Executive Park in Chesapeake, Virginia (incorporated herein by reference to Exhibit 10.28 of the Company’s Current Report on Form 8-K, filed with the Commission on March 30, 2001)

10.20

Employment Agreement (including Amendment), dated as of May 16, 2001, between Dendrite International, Inc. and Paul Zaffaroni (incorporated herein by reference to Exhibit 10.29 of the Company’s Current Report on Form 8-K, filed with the Commission on March 19, 2002)^*

10.21

Indemnification Agreement, dated as of October 1, 2001, between Dendrite International, Inc. and Paul Zaffaroni (incorporated herein by reference to Exhibit 10.30 of the Company’s Current Report on Form 8-K, filed with the Commission on March 19, 2002)^*

10.22

Employment Agreement, dated as of June 19, 1997, between Dendrite International, Inc. and Brent Cosgrove (incorporated herein by reference to Exhibit 10.33 of the Company’s Current Report on Form 8-K, filed with the Commission on March 19, 2002)^*

10.23

Amendment to Employment Agreement, dated as of November 8, 2001, between Dendrite International, Inc. and Brent Cosgrove (incorporated herein by reference to Exhibit 10.34 of the Company’s Current Report on Form 8-K, filed with the Commission on March 19, 2002)^*

10.24

Indemnification Agreement, dated as of November 8, 2001, between Dendrite International, Inc. and Brent Cosgrove (incorporated herein by reference to Exhibit 10.35 of the Company’s Current Report on Form 8-K, filed with the Commission on March 19, 2002)^*

10.25

Agreement of Lease, dated as of February 12, 2001, between SCC II, L.L.C. and Dendrite International, Inc. (incorporated herein by reference to Exhibit 10.36 of the Company's Current Report on Form 8-K, filed with the Commission on March 19, 2002)

10.26

First Amendment to Lease, dated as of August 17, 2001, between 1200 Mount Kemble Limited Partnership and Dendrite International, Inc. (incorporated herein by reference to Exhibit 10.37 of the Company’s Current Report on Form 8-K, filed with the Commission on March 19, 2002)

10.27

November 2001 Amendment to Credit Agreement, dated as of November 6, 2001, between Dendrite International, Inc. and The Chase Manhattan Bank, N.A. (incorporated herein by reference to Exhibit 10.38 of the Company's Current Report on Form 8-K, filed with the Commission on March 19, 2002)

10.28

Indemnification Agreement, dated as of October 28, 1998, between Dendrite International, Inc. and John Bailye (incorporated herein by reference to Exhibit 10.39 of the Company’s Current Report on Form 8-K, filed with the Commission on March 19, 2002)^*

10.29

Indemnification Agreement, dated as of October 28, 1998, between Dendrite International, Inc. and George Robson (incorporated herein by reference to Exhibit 10.40 of the Company’s Current Report on Form 8-K, filed with the Commission on March 19, 2002)^*1

10.30

Indemnification Agreement, dated as of January 25, 2001, between Dendrite International, Inc. and Christine Pellizzari (incorporated herein by reference to Exhibit 10.41 of the Company’s Current Report on Form 8-K, filed with the Commission on March 19, 2002)^*

10.31

Indemnification Agreement, dated as of January 25, 2001, between Dendrite International, Inc. and Kathleen Donovan (incorporated herein by reference to Exhibit 10.42 of the Company’s Current Report on Form 8-K, filed with the Commission on March 19, 2000)^*

10.32

1994 Incentive and Non-Qualified Stock Plan of CorNet International, Ltd. (incorporated herein by reference to Exhibit 4.2 of the Company’s Registration Statement on Form S-8, filed with the Commission on June 29, 1999)*

10.33

First Amended SAI Holdings, Inc. Long-Term Incentive Stock Option Plan (incorporated herein by reference to Exhibit 99.1 of the Company's Registration Statement on Form S-8, filed with the Commission on October 25, 2002)*

10.34

Dendrite International, Inc. New Hire Option Grant Authorization (incorporated herein by reference to Exhibit 99.1 of the Company’s Registration Statement on Form S-8, filed with the Commission on November 6, 2002)*

10.35

Indemnification Agreement, dated as of April 6, 2001, between Dendrite International, Inc. and Patrick J. Zenner (incorporated herein by reference to Exhibit 10.37 of the Company’s Current Report on Form 8-K, filed with the Commission on March 26, 2003)*

10.36

Retirement Agreement and General Release, dated as of June 30, 2002, between Dendrite International, Inc. and George Robson (incorporated herein by reference to Exhibit 10.38 of the Company’s Current Report on Form 8-K, filed with the Commission on March 26, 2003)*¹

10.37

November 2002 Amendment to Credit Agreement, dated as of November 6, 2001, between Dendrite International, Inc. and The Chase Manhattan Bank, N.A (incorporated herein by reference to Exhibit 10.39 of the Company’s Current Report on Form 8-K, filed with the Commission on March 26, 2003)

Subsidiaries:

Subsidiaries of the Registrant

Consent of Independent Auditors:

23.1

Consent of Ernst & Young LLP

23.2

Notice regarding Consent of Arthur Andersen LLP

* Management contract or compensatory plan.

¹ Ceased as executive officer.

Dendrite International (DRTE) Inactive 10-K/A2002 FY Annual report (amended)

SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549

Form 10-K/AAMENDMENT NO. 1FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THESECURITIES AND EXCHANGE ACT OF 1934

Commission File Number 0-26138

Dendrite International, Inc.

1200 Mt. Kemble AvenueMorristown, NJ 07960-6797

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Title of Class

Common Stock, no par value

DOCUMENTS INCORPORATED BY REFERENCE

INTRODUCTORY NOTE

CERTIFICATIONS

DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(IN THOUSANDS, EXCEPT SHARE DATA)

DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(IN THOUSANDS, EXCEPT SHARE DATA)

DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(IN THOUSANDS)

DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(IN THOUSANDS)

Customer Acquisition Costs

Capitalized Software Development Costs

Stock Based Compensation

Advertising Costs

Recent Accounting Pronouncements

5. PURCHASE ACCOUNTING RESTRUCTURING ACCRUAL

6. PROPERTY AND EQUIPMENT

9. LONG TERM RECEIVABLE

10. NOTE RECEIVABLE FROM OFFICER OF THE COMPANY

11. REVOLVING CREDIT

12. INCOME TAXES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

Form 10-K/A
AMENDMENT NO. 1

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934

1200 Mt. Kemble Avenue
Morristown, NJ 07960-6797

DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)

DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(IN THOUSANDS)

DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)