================================================================================
                                    FORM 10-Q
                             -----------------------
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                  FOR THE PERIOD ENDED MARCH 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: 0-22162

                                CARECENTRIC, INC.
             (Exact name of registrant as specified in its charter)


DELAWARE                                                 22-3209241
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                          Identification No.)

2625 CUMBERLAND PARKWAY, SUITE 310                      30339
ATLANTA, GEORGIA                                        (zip code)
(Address of principal
executive offices)

(Registrant's telephone number, including area code)    (678) 264-4400


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

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


     Indicate  the  number of  shares  outstanding  of each of the  registrant's
classes of common stock, as of the latest practicable date:

                                        Outstanding at
        Class                           4/30/2002
        -----                           ---------
        COMMON STOCK, $.001 PAR VALUE   4,371,350 SHARES

================================================================================


<PAGE>


                                CARECENTRIC, INC.

                          QUARTERLY REPORT ON FORM 10-Q

                                      INDEX


 PART I.       FINANCIAL INFORMATION

 Item 1.       Consolidated Financial Statements

               Consolidated  Balance  Sheets - March 31,  2002  (unaudited)  and
               December 31, 2001 (audited).

               Consolidated  Statements of Operations - Three Months Ended March
               31, 2002 and 2001 (unaudited).

               Consolidated  Statements of  Shareholders'  Equity - Three Months
               Ended March 31, 2002 (unaudited).

               Consolidated  Statements of Cash Flows - Three Months Ended March
               31, 2002 and 2001 (unaudited).

               Notes to  Consolidated  Financial  Statements  - March  31,  2002
               (unaudited).

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

 Item 3.       Quantitative and Qualitative Disclosures About Market Risk

 PART II.      OTHER INFORMATION

 Item 1.       Legal Proceedings

 Item 2.       Changes in Securities

 Item 3.       Defaults Upon Senior Securities

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

 Item 5.       Other Information

 Item 6.       Exhibits and Reports on Form 8-K



                                       2
<PAGE>


PART I - FINANCIAL INFORMATION


ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

     The  accompanying  unaudited  consolidated  financial  statements have been
prepared by CareCentric,  Inc.  ("CareCentric" or the "Company") pursuant to the
rules and  regulations of the Securities and Exchange  Commission.  Accordingly,
they do not include all of the information  and footnotes  required by generally
accepted accounting principles for complete financial statements. In the opinion
of the Company,  all adjustments  (consisting only of normal recurring  entries)
necessary  for the fair  presentation  of the Company's  results of  operations,
financial position and cash flows for the periods presented have been included.



                                       3
<PAGE>
<TABLE>
<CAPTION>
<S>                                                        <C>            <C>
                                     CARECENTRIC, INC.
                                CONSOLIDATED BALANCE SHEETS

                                                             MARCH 31,       DECEMBER 31,
                                                               2002              2001
                                                            -----------       ---------
                                                            (unaudited)
                                                            -----------       ---------
                                           ASSETS
 Current assets:
     Cash and cash equivalents                               $  457,000     $   201,000

     Accounts receivable, net of allowance for doubtful
      accounts of $1,234,000 and $1,042,000
      respectively                                            5,434,000       4,185,000
     Prepaid expenses and other current assets                  589,000         608,000
     Notes receivable                                           327,000         413,000
                                                            -----------       ---------
      Total current assets                                    6,807,000       5,407,000

Purchased software, furniture and equipment, net              1,410,000       1,533,000
Intangible assets, net                                        5,155,000       5,437,000
Long term notes receivable                                      383,000         431,000
                                                            -----------     -----------
      Total assets                                          $13,755,000     $12,808,000
                                                            ===========     ===========


                            LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Line of credit                                        $  5,967,000     $ 5,572,000
     Accounts payable                                         2,632,000       2,185,000
     Accrued compensation expense                               543,000         593,000
     Accrued liabilities                                      6,548,000       6,574,000
     Customer deposits                                        2,146,000       2,120,000
     Unearned revenues                                        4,107,000       3,981,000
                                                            -----------     -----------
      Total current liabilities                             $21,943,000     $21,025,000
                                                            ===========     ===========

Accrued liabilities, less current portion                       600,000         750,000

Note payable long-term                                        6,343,000       5,343,000

Commitments and contingencies
Shareholders' deficit
     Preferred Stock: 10,000,000 shares authorized
     Series B Preferred, $.001 par value;
      5,600,000  issued and outstanding; liquidation
      value $1.27                                                 6,000           6,000
     Series C Preferred, $.001 par value;
      850,000  issued and outstanding; liquidation
      value $1.23                                                 1,000           1,000
     Series D Preferred, $.001 par value;
      398,000  issued and outstanding; liquidation
      value $2.92                                                     -               -
     Series E Preferred, $.001 par value;
      210,000 issued and outstanding; liquidating
      Value $1.01                                                     -               -
     Common stock, $.001 par value; 20,000,000 shares
      authorized; 4,371,350 shares issued and outstanding
      at March 31, 2002 and December 31, 2001                     4,000           4,000
     Unearned compensation                                     (187,000)       (210,000)
     Additional paid-in capital                              21,280,000      21,280,000
     Stock warrants                                           1,000,000       1,000,000
     Accumulated deficit                                    (37,235,000)    (36,391,000)
                                                            ------------    ------------
      Total shareholders' deficit                           (15,131,000)    (14,310,000)
                                                            ------------    ------------

      Total liabilities and shareholders' deficit          $ 13,755,000      12,808,000
                                                            ============    ============

</TABLE>

                       See notes to consolidated financial statements



                                       4
<PAGE>

<TABLE>
<CAPTION>
<S>                                              <C>                  <C>
                                        CARECENTRIC, INC.
                              CONSOLIDATED STATEMENTS OF OPERATIONS


                                                     THREE MONTHS ENDED MARCH 31,
                                                 --------------------------------------
                                                       2002                 2001
                                                 -----------------    -----------------
                                                   (unaudited)          (unaudited)

Net revenues                                         $  5,253,000         $  5,728,000

Costs and expenses:
    Cost of revenues                                    1,676,000            2,157,000
    Selling, general and administrative                 2,699,000            2,825,000
    Research and development                              947,000            1,767,000
    Amortization and depreciation                         425,000              951,000
                                                 -----------------    -----------------
    Total costs and expenses                            5,747,000            7,700,000
                                                 -----------------    -----------------

Loss from operations                                     (494,000)          (1,972,000)

Other income (expense):
    Interest expense                                     (168,000)            (124,000)
    Interest and other income                              (2,000)              126,000
                                                 -----------------    -----------------
Loss before taxes                                        (664,000)          (1,970,000)
                                                 -----------------    -----------------

    Income tax benefit (expense)                                -                    -
                                                 -----------------    -----------------
Loss from continuing operations                          (664,000)          (1,970,000)
                                                 -----------------    -----------------

Discontinued operation

Loss from operations of
     discontinued segment before taxes                          -            (185,000)

    Applicable tax expense                                      -                   -
                                                 -----------------    -----------------
Net loss from discontinued operations                           -            (185,000)

Net loss                                                 (664,000)         (2,155,000)
                                                 =================    =================

    Cumulative Preferred Dividends                       (180,000)           (176,000)
                                                 -----------------    -----------------
Net loss available to common shareholders             $  (844,000)      $  (2,331,000)
                                                 =================    =================

Net loss per share - basic and diluted
     From continuing operations                      $     (0.15)         $     (0.50)

Net loss per share - basic and diluted
    From discontinued operations                     $         -          $     (0.05)
                                                 -----------------    -----------------
Net loss per share - basic and diluted               $     (0.15)         $     (0.55)
     From operations
                                                 =================    =================

Net loss per share - basic and diluted available     $     (0.19)         $     (0.59)
      to common shareholders
                                                 =================    =================
Weighted average common shares -
      basic and diluted                                 4,371,000            3,922,000
                                                 =================    =================
</TABLE>

                         See notes to consolidated financial statements



                                       5
<PAGE>


<TABLE>
<CAPTION>
<S>                <C>        <C>    <C>           <C>         <C>          <C>           <C>           <C>           <C>

                                                          CARECENTRIC, INC.
                                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT

                                             FOR THE THREE MONTHS ENDED MARCH 31, 2002
                                                             (unaudited)

                                                                              ADDITIONAL                               TOTAL
                          COMMON           PREFERRED              UNEARNED    PAID-IN                     ACCUMULATED  SHAREHOLDERS'
                    SHARES     STOCK   SHARES       STOCK       COMPENSATION  CAPITAL       WARRANTS      DEFICIT      DEFICIT
                    ---------  ------  ---------    -------     ------------  ----------    ---------    ------------  =============

Balance at
 December 31, 2001  4,371,000  $4,000  7,058,000    $ 7,000     $(210,000)    21,280,000    1,000,000    (36,391,000)  $(14,310,000)
                    ---------  ------  ---------    -------     ----------    ----------    ---------    ------------  =============

Amortization
  of unearned
  compensation                                                     23,000                                                     23,000

Net loss                                                                                                   (844,000)       (844,000)
                    ---------  ------  ---------    -------     ----------    ----------    ---------    ------------  =============
Balance at
  March 31, 2001    4,371,000  $4,000  7,058,000     $7,000     $(187,000)   $21,280,000   $1,000,000   $(37,235,000)  $(15,131,000)
                    =========  ======  =========    ========    ==========   ============  ==========  ==============  =============


                                              See notes to Consolidated Financial Statements

</TABLE>




                                       6
<PAGE>



<TABLE>
<CAPTION>
<S>                                                             <C>                   <C>

                                                  CARECENTRIC, INC.
                                        CONSOLIDATED STATEMENTS OF CASH FLOW


                                                                        THREE MONTHS ENDED MARCH 31,
                                                              -------------------------------------------------
                                                                      2002                    2001
                                                              ----------------------  ----------------------
                                                                   (unaudited)              (unaudited)
    CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                     $        (844,000)     $       (2,331,000)

    ADJUSTMENTS TO RECONCILE NET LOSS TO NET
    CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES:
       Provision for doubtful accounts                                     157,000                  43,000
       Amortization and depreciation                                       425,000               1,085,000
       Stock base compensation charge to earnings                           23,000                       -

    CHANGES IN ASSETS AND LIABILITIES, NET OF ACQUISITIONS:
       Accounts receivable                                              (1,406,000)               (920,000)
       Prepaid expenses and other current assets                            19,000                (401,000)
       Notes receivable                                                     37,000                       -
       Accounts payable                                                    447,000               1,223,000
       Accrued compensation                                                (50,000)                397,000
       Accrued liabilities                                                (167,000)               (112,000)
       Customer deposits                                                    26,000                 (96,000)
       Unearned revenues                                                   126,000                (564,000)
                                                              ----------------------  ----------------------
            Net cash used in operating activities                       (1,207,000)             (1,676,000)
                                                              ----------------------  ----------------------

    CASH FLOWS FROM INVESTING ACTIVITIES:

    Purchase of software, furniture and equipment                          (19,000)               (119,000)
                                                              ----------------------  ----------------------
            Net cash used by in investing activities                       (19,000)               (119,000)
                                                              ----------------------  ----------------------

    CASH FLOWS FROM FINANCING ACTIVITIES:

    Proceeds from notes payable                                          1,000,000               1,700,000
    Increase (decrease) in line of credit                                  395,000                       -
    Payments on capital lease obligation                                    (9,000)                (13,000)
    Proceeds from Consulting note receivable                                96,000                       -
                                                              ----------------------  ----------------------
            Net cash provided by  financing activities                   1,482,000               1,687,000
                                                              ----------------------  ----------------------

            Net change in cash and cash equivalents                        256,000                (108,000)

    Cash and cash equivalents, beginning of period                         201,000                 362,000
                                                              ----------------------  ----------------------

    Cash and cash equivalents, end of period                       $       457,000        $        254,000
                                                              ======================  ======================

SUPPLEMENTAL DISCLOSURE:
    Cash paid during period for interest                          $         81,000       $         103,000





                                  See notes to consolidated financial statements

</TABLE>



                                       7
<PAGE>

      CARECENTRIC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

     The consolidated  financial  statements prepared by the Company include the
results of operations of the parent  company and its wholly owned  subsidiaries.
All inter-company balances and transactions have been eliminated.

     In the opinion of management, the financial statements include all material
adjustments  necessary for the presentation of the Companies financial position,
results  of  operations  and cash  flow.  The  results  of this  period  are not
necessarily indicative of the results for the entire year.

     These financial  statements do not include any adjustments  relating to the
recoverability and classification of recorded asset amounts or classification of
liabilities  that might be necessary should the Company be unable to continue to
operate  in the  normal  course  of  business.  See Note 12 to the  accompanying
Consolidated Financial Statements.

     Certain prior period amounts have been  reclassified to conform to the 2002
financial statement presentation.

DESCRIPTION OF BUSINESS

     The Company is a provider  of  information  technology  systems and related
services and consulting  services  designed to enable home health care providers
to more  effectively  operate their  businesses  and compete in the  prospective
payment system (PPS) and managed care  environments.  The Company's  focus is to
help home health care  providers  streamline  their  operations and better serve
their patients.  CareCentric offers several  comprehensive  software  solutions.
Each of these software solutions is designed to enable customers to generate and
utilize comprehensive financial, operational and clinical information.

MANAGEMENT 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  as well as the  reported  amounts  of  revenues  and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

REVENUE RECOGNITION

     The Company  recognizes  revenue under SOP 97-2 as amended by SOP 98-9. The
Company recognizes software license revenue when the following criteria are met:
(1) a signed and executed contract is obtained;  (2) delivery has occurred;  (3)
the license fee is fixed and determinable;  (4) collection is probable;  and (5)
remaining  obligations under the license  agreement are immaterial.  The Company
sells and invoices  software  licenses and maintenance fees as separate contract
elements,  except with  respect to first year  maintenance  which is sold in the
form of a bundled  turnkey system.  The Company has established  vendor specific
objective  evidence related to the value of maintenance  fees. Where applicable,
the Company uses the residual value method to allocate  software revenue between
licenses and first year maintenance.

     Revenues are derived from the licensing and sub-licensing of software,  the
sale of computer hardware, accessories and supplies, implementation and training
products  and  services,  forms and case plans,  and  software  maintenance  and
support  services.  For the quarter ended March 31, 2002,  the Company  recorded
total  revenues of $5.2 million.  The Company's  core product lines of STAT2 and
MestaMed  accounted  for 34.9% and 54.1%  respectively  of the $5.2  million  in
revenues.

     To the extent that  software and  services  revenues  result from  software
support,  implementation,  training  and  technical  consulting  services,  such
revenues  are  recognized  monthly as the related  services are rendered or, for
software support revenues, over the term of the related agreement. To the extent
that  software and services  revenues  result from software  licenses,  computer
hardware and third-party  software  revenues,  such revenues are recognized when
the related products are delivered and  collectability  of fees is determined to
be probable, provided that no significant obligation remains under the contract.
Limited amounts of revenues derived from the sale of software licenses requiring
significant modification or customization are recorded based upon the percentage

                                       8
<PAGE>
      CARECENTRIC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


of completion method using labor hours or contract milestones.  Software support
or  maintenance  allows  customers  to  receive  unspecified   enhancements  and
regulatory data updates in addition to telephone support.

     Third-party software and computer hardware revenues are recognized when the
related  products are  delivered.  Software  support  agreements  are  generally
renewable  for one-year  periods,  and revenue  derived from such  agreements is
recognized  ratably  over  the  period  of  the  agreements.   The  Company  has
historically  maintained high renewal rates with respect to its software support
agreements. The Company generally charges for software implementation,  training
and technical  consulting services as well as management  consulting services on
an hourly or daily basis. The Company offers "tiered pricing" for implementation
of new systems  whereby  the  customer  pays a fixed fee for a certain  level of
packaged services and daily fees for services beyond the package.

     Revenues for post-contract customer support are recognized ratably over the
term of the support period, which is typically one year.  Post-contract customer
support  fees  typically  cover  incremental  product  enhancements,  regulatory
updates  and  correction  of  software  errors.  Separate  fees are  charged for
significant product  enhancements,  new software modules,  additional users, and
migrations to different operating system platforms.

     Subsequent to delivery, the Company frequently delivers a variety of add-on
software and hardware components.  Revenues from these sales are recognized upon
delivery.

     In addition to software  licenses,  software  maintenance and support,  and
related hardware, the Company also provides computer-based training, CD-ROMs and
a number of ancillary  services  including on site  implementation and training,
classroom training,  consulting and "premium" and after-hours support.  Revenues
from such  products  and services are  recognized  monthly as such  products are
delivered and such services are performed.

PURCHASED SOFTWARE, FURNITURE AND EQUIPMENT

     Purchased   software,   furniture   and  equipment  are  carried  at  cost.
Depreciation and amortization are computed using the  straight-line  method over
the estimated  useful lives of the assets.  When assets are retired or otherwise
disposed of, the cost and related accumulated  depreciation are removed from the
accounts and any resulting gain or loss is reflected in income for the period.

SOFTWARE DEVELOPMENT EXPENSES

     Costs  incurred to  establish  the  technological  feasibility  of computer
software  products  are  expensed  as  incurred.  The  Company's  policy  is  to
capitalize  costs  incurred  between  the  point of  establishing  technological
feasibility  and  general  release  only when such costs are  material.  For the
quarter ended March 31, 2002 and the year ended  December 31, 2001,  the Company
had no capitalized computer software and development costs.

CASH EQUIVALENTS

     All highly liquid investments  purchased with an original maturity of three
months or less are considered to be cash equivalents.

INTANGIBLE ASSETS AND LONG-LIVED ASSETS

     Statement of Financial  Accounting  Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of"  requires  impairment  losses to be  recorded on  long-lived  assets used in
operations when indicators of impairment are present and the  undiscounted  cash
flows  estimated  to be  generated  by those  assets  are less than the  asset's
carrying amount.  The application of SFAS No. 121 resulted in an impairment loss
of $11.8 million  recorded in the fourth  quarter of 2001,  see Note 5. Prior to
the   impairment   adjustment,   the   intangible   assets   arising   from  the
CareCentric/MCS  merger were amortized using the  straight-line  method over the
estimated  useful lives of the related assets as more fully disclosed in Notes 4
and 5. The  measurement of the recorded  impairment was based upon comparing the
projected  undiscounted  future cash flow from the use of the assets against the
unamortized carrying value of the assets in the financial statements.

     Effective  July 1,  2001,  the  Company  adopted  SFAS No.  141,  "Business
Combinations" and SFAS No. 142,  "Goodwill and Intangible Assets" in 2001 became
effective  January 1, 2002 and SFAS No. 144,  "Accounting  for the Impairment or
Disposal of Long-Lived  Assets,"  became  effective  January 1, 2002.  These new
standards  superseded the Company's  previous  accounting for Intangible  Assets
under  SFAS  No.  121 as  discussed  below  in  the  section  Recent  Accounting

                                       9
<PAGE>
      CARECENTRIC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


Pronouncements. In adopting SFAS No. 142, the Company ceased amortizing goodwill
and  reassessed  the life going  forward  for  developed  technologies  from the
remaining 6 years to 4 years.

     Actual  results of operations for the three months ended March 31, 2002 and
the pro forma  results of  operations  for the three months ended March 31, 2001
had we applied the  provisions  of SFAS 142 in that period follow (the impact on
amortization  expense is the result of a cessation of  amortization of goodwill,
the changed forward life of developed  technologies and effect of the impairment
charge recorded in the fourth quarter of the year ended December 31, 2001):

<TABLE>
<CAPTION>
        <S>                                                   <C>                  <C>

                                                                     THREE MONTHS ENDED MARCH 31,
                                                              --------------------------------------
                                                                     2002                  2001
                                                              -------------------  -----------------

         NET LOSS AVAILABLE TO COMMON SHAREHOLDERS                   $ (844,000)      $ (2,331,000)

           Add back: Goodwill amortization                                     -            427,000
           Add back: Technology amortization                             249,000            333,000
                                                              -------------------  -----------------
           Adjusted net income                                       $ (595,000)      $ (1,571,000)
                                                              ===================  =================

         NET LOSS PER SHARE - BASIC AND DILUTED

           Reported net income                                        $   (0.19)       $     (0.59)
           Goodwill amortization                                               -               0.11
           Technology amortization                                          0.06               0.08
                                                              -------------------  -----------------
           Adjusted net income                                        $   (0.14)       $     (0.40)
                                                              ===================  =================

           Weighted average common shares -
                                                              -------------------  -----------------
           basic and diluted                                           4,371,000          3,922,000
                                                              ===================  =================

</TABLE>

     On October 3,  2001,  the FASB  issued  SFAS No.  144  "Accounting  for the
Impairment  or  Disposal  of  Long-Lived  Assets".  SFAS No. 144  addresses  the
accounting and reporting for the  impairments or disposal of long-lived  assets.
It replaces  SFAS No. 121. SFAS No. 144 provides a single  accounting  model for
the disposal of  long-lived  assets.  New  criteria  must be met to classify the
asset as an asset held for sale.  This  statement  also focuses on reporting the
effect of a disposal. This statement became effective for fiscal years beginning
after  December 15,  2001.  The adoption of SFAS No. 144 did not have a material
impact to the Company's financial position or results of operations.

INCOME TAXES

     The Company  accounts  for income  taxes using the  asset/liability  method
which  requires  recognition  of  deferred  tax  liabilities  and assets for the
expected future tax consequences of temporary  differences between the financial
statement carrying amount and the tax bases of assets and liabilities.

NET (LOSS) EARNINGS PER SHARE

     The Company calculates earnings per share under SFAS No. 128, "Earnings Per
Share."  Basic  earnings  per share  exclude  any  dilutive  effects of options,
warrants and convertible securities. Diluted earnings per share for the quarters
ended  March 31,  2002 and March 31,  2001,  exclude  the  effects  of  options,
warrants and conversion rights as they would be anti-dilutive,  and as a result,
basic and diluted earnings are the same for the periods.

STOCK BASED COMPENSATION

     Employee  stock  options  are  accounted  for under  SFAS No.  123 (and its
related  interpretations)  which allows the use of Accounting  Principles  Board
Opinion  No.  25,  "Accounting  for Stock  Issued  to  Employees"  which  allows
providing  disclosure  of  compensation  cost - see  Note 8 to the  Consolidated
Financial Statements.

                                       10
<PAGE>
      CARECENTRIC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


FAIR VALUE OF FINANCIAL INSTRUMENTS

     The  following  methods  and  assumptions  were  used  by  the  Company  in
estimating its fair value disclosures for financial instruments:

     Cash and cash  equivalents:  The carrying  amounts  reported in the balance
sheet for cash and cash equivalents approximate their fair value.

     Notes  receivable and payable:  The carrying amounts of the Company's notes
receivable and payable approximates their fair value.

SEGMENTS

     The Company has one operating  segment in continuing  operations,  which is
the  Software  Systems  segment.  As further  described  in Note 2, the  Company
discontinued the Consulting segment during the year ended December 31, 2001.

NOTE 2 -- DISCONTINUED OPERATIONS

     The discontinued operations reported in the Company's results of operations
for the quarter ending March 31, 2002 relate to the Company's Simione Consulting
segment which was sold on September 28, 2001. The Consulting business,  previous
to its sale, was the Company's  only  separately  reported  segment of business.
Accordingly,  the Company no longer reports segment information.  The Consulting
business  segment  was  discontinued  through a  transaction  pursuant  to which
certain  of  the  assets  of  the  Company's  wholly-owned  subsidiary,  Simione
Consulting, Inc. were sold to Simione Consultants,  L.L.C. ("Simione"), which is
owned and  controlled by William  Simione,  Jr., a director of the Company.  The
total sales price was approximately  $2.0 million plus the assumption of certain
liabilities  by Simione.  The  Company's  net pre-tax  loss on the  disposal was
approximately  $2.6  million and  resulted  from a write-off  of the  intangible
assets  associated with the Consulting  segment as identified at the merger date
of March 7, 2000 with MCS.

                                                           MARCH 31,
                                                  ------------------------------
                                                       2002         2001
                                                  ------------------------------

      Operating Revenue                              $   -        $ 1,164
      Income before Provision for Income Taxes           -          (185)
      Income from Discontinued Operations
           Net of Income Tax                         $   -        $ (185)


NOTE 3 - NOTES RECEIVABLE

     The Company has certain Notes  Receivable of varying  maturities which have
resulted from the sale of the assets of the Consulting segment, and financing to
a customer for purchase of a new software  system.  The Consulting  segment Note
Receivable  is due from Mr.  William  Simione  Jr.,  currently a director of the
Company,  the  President  and Chief  Executive  Officer of the  acquirer  of the
Consulting business,  Simione Consulting,  LLC, and past Chief Executive Officer
of the  Consulting  segment when it was part of the Company.  The Customer  note
occurred in the normal course of business.

     The amounts and term of each note are summarized in the table below:

                                          NOTES RECEIVABLE
                           ---------------------------------------------------
                            CONSULTING     CUSTOMER NOTE         TOTAL
                           ---------------------------------------------------

       Balance 12-31-01         $ 707,000      $   137,000          $ 844,000
                           ===================================================

       Balance 3-31-2002        $ 611,000      $    99,000          $ 710,000
                           ===================================================

       Interest Rate                8.50%            5.65%


                                       11
<PAGE>
      CARECENTRIC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 4 - PURCHASED SOFTWARE, FURNITURE AND EQUIPMENT

     Purchased software, furniture and equipment consisted of the following:

<TABLE>
<CAPTION>
      <S>                                       <C>                <C>                <C>
                                                                                      DEPRECIATION
                                                  MARCH 31,        DECEMBER 31,         ESTIMATED
                                                   2002                2001            USEFUL LIVES
                                            --------------------------------------------------------

      Furniture and Fixtures                      $  1,448,000      $  1,428,000       10 years
      Computer equipment and purchased
        software                                     6,237,000         6,237,000        5 years
                                            -------------------------------------
                                                     7,685,000         7,665,000

      Accumulated depreciation                     (6,275,000)       (6,132,000)
                                            -------------------------------------
                                                  $  1,410,000      $  1,533,000
                                            =====================================
</TABLE>

NOTE 5 - INTANGIBLE ASSETS

     As a  result  of the  merger  with  MCS  on  March  7,  2000,  the  Company
capitalized  $26.5 million of  intangible  assets.  Those assets were  amortized
according to various lives ranging from five to nine years.  In accordance  with
SFAS No. 121,  the Company is required to  periodically  review the value of its
intangible assets. During the fourth quarter of 2001, the Company's analysis and
review,  utilizing the methodology of SFAS No. 121, resulted in an $11.8 million
impairment loss of the intangible  assets of the Company.  The major reasons for
the impairment were new technologies  being integrated in the Company's  current
and future  products  causing its  existing  product  platforms  to have reduced
future  revenue  generation  capability,   and  an  expectation  that  immediate
opportunities  for new software sales are lower than were forecasted at the time
of the merger with MCS.

     The following table  summarizes the Company's  changes in account  balances
for its intangible assets since the MCS merger on March 7, 2000.

<TABLE>
<CAPTION>
<S>                       <C>                <C>              <C>               <C>               <C>                <C>

                                                                                                     3/31/2002
                              ORIGINAL           ASSETS          IMPAIRMENT       ACCUMULATED         NET BOOK       AMORTIZATION
                                COST            DISPOSED        WRITE - DOWN      AMORTIZATION         VALUE            PERIOD
                          ------------------ ---------------- ----------------- ----------------- -----------------  -------------

Developed technology            $10,650,000    $          -      $(4,220,000)      $ (2,690,000)      $  3,740,000      4 years
Customer base                     1,700,000        (510,000)                 -         (275,000)      $    915,000      9 years
Goodwill                         14,151,000      (2,906,000)       (7,580,000)       (3,165,000)      $    500,000
                          ------------------ ---------------- ----------------- ----------------- -----------------
                                $26,501,000    $ (3,416,000)     $(11,800,000)     $ (6,130,000)      $  5,155,000
                          ================== ================ ================= ================= =================
</TABLE>


                                       12
<PAGE>
      CARECENTRIC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


     Included in Note 1 to the Financial Statements is a table presenting actual
results of  operations  for the three  months ended March 31, 2002 and pro forma
results of operations  for the three months ended March 31, 2001.  The pro forma
results   for  March  31,  2002   present   the  effect  on  earnings   had  the
nonamortization  provisions  of SFAS  142 been  applied  and the  effect  of the
write-off of the intangibles recorded in the fourth quarter of 2001.

NOTE 6 - NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Line of Credit:

<TABLE>
<CAPTION>
         <S>                                                 <C>                     <C>    <C>    <C>    <C>    <C>

                                                                     MARCH 31, 2002      DECEMBER 31, 2001
                                                             ----------------------- ----------------------
         SHORT TERM:
         Line of Credit                                             $     5,967,000        $     5,572,000
         Note Payable  - Mestek                                                   -                      -
                                                             ----------------------- ----------------------
                                                                    $     5,967,000        $     5,572,000
                                                             ======================= ======================

         LONG TERM:
         Convertible Note Payable - B.C. O'Donnell                   $      600,000         $      600,000
         Convertible Note Payable - J.E. Reed (1)                         4,500,000              3,500,000
         Note Payable  - Mestek                                           1,019,000              1,019,000
         Note Payable  - Mestek Capitalized Interest                         40,000                 40,000
         Note Payable  - J.E. Reed Capitalized interest                     184,000                184,000
                                                             ----------------------- ----------------------
                                                                    $     6,343,000        $     5,343,000
                                                             ======================= ======================

</TABLE>

     (1) Includes Mestek's participation in the J.E. Reed Facility

     On July 12, 2000, the Company entered into a $6.0 million Loan and Security
Agreement  facility  with  Wainwright  Bank and Trust  Company  (the  Wainwright
Facility),  a commercial  bank, under which the Company granted a first priority
position on substantially all of its assets as security. The Wainwright Facility
was  used to pay off the  line of  credit  with  Silicon  Valley  Bank,  certain
short-term  loans from Mestek,  Inc. (a related  party,  See Note 9), and a loan
from David O. Ellis.  Borrowings under the Wainwright  Facility accrue interest,
at the bank's  prime rate per annum,  require  monthly  payments of interest and
mature on July 12, 2002. The Company's obligations under the Wainwright Facility
are  guaranteed  by Mestek in  consideration  of which the  Company has issued a
warrant to Mestek to purchase  104,712  shares of the Company's  common stock as
more fully explained in Note 8 to these Financial Statements.

Convertible Note Payable - Barrett C. O'Donnell:

     On November 11, 1999,  Simione borrowed  $500,000 from Barrett C. O'Donnell
and  $250,000  from David O. Ellis,  both on an  unsecured  basis,  and executed
promissory  notes in  connection  therewith.  Dr.  Ellis and Mr.  O'Donnell  are
directors of the Company. When the CareCentric/MCS merger was completed on March
7, 2000, the Company succeeded to both of these obligations. The note payable to
Dr. Ellis,  which accrued interest at 9% per annum, was paid in full on July 12,
2000 in  advance  of its  August  15,  2000  maturity.  The note  payable to Mr.
O'Donnell  included interest at 9% per annum, was scheduled to mature on May 11,
2002, and required  quarterly  payments of accrued interest.  On August 8, 2000,
the $500,000 note payable to Mr.  O'Donnell,  together with $100,000 of deferred
salary, was cancelled in exchange for a $600,000 subordinated note,  convertible
into  CareCentric  common  stock at a strike  price of  $2.51  per  share,  with
interest at 9% per annum and a five-year  maturity.  In January 2002,  this loan
was amended to change the interest  rate to prime plus two percent and to change
the terms of  payment  of  interest  for 2002 to require  that  one-half  of the
accrued  interest  be timely  paid each  quarter  and the  balance to be paid on
December 31, 2003 or to be converted into an additional convertible note.

Note Payable - Mestek:

     The Company is obligated under an eighteen month unsecured  promissory note
in the  principal  amount of  $1,019,000  payable  to Mestek  Inc.  which  bears
interest at prime plus one and one half percent  (1.5%),  with interest  payable
semiannually and which matures on June 30, 2003. This note covers funds advanced
by Mestek to  CareCentric  to cover  payroll and  accounts  payable  obligations
incurred by the Company  during the period of its  transition of senior  lenders
from  Silicon  Valley Bank to  Wainwright  Bank and Trust  Company,  accrued and
unpaid interest thereon and the unreimbursed portion of Mr. Bruce Dewey's salary


                                       13
<PAGE>
      CARECENTRIC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


for the  periods  from  November  9, 1999 to October  31, 2001 when he was Chief
Executive Officer of the Company.

J.E. Reed Facility:

     On June 22, 2000, the Company entered into a new financing facility (the J.
E. Reed  Facility)  provided by John E. Reed,  Chairman of  CareCentric  and the
Chairman and Chief  Executive  Officer of Mestek,  Inc. The J. E. Reed  Facility
consists of a $6.0 million subordinated line of credit,  convertible into common
stock of the Company at a strike price of $2.51 per share,  with  interest at 9%
per annum and a five-year maturity. The J. E. Reed Facility can be drawn down by
the Company as needed in $500,000 increments and is secured by a second position
on substantially all of the Company's assets. At March 31, 2002 and December 31,
2001,   borrowings  were  equal  to  $4,500,000  and  $3,500,000   respectively,
$1,000,000 of which was participated to Mestek at March 31, 2002 and at December
31, 2001,  and  $3,500,000  and  $2,500,000 of which remains held by Mr. Reed at
March 31, 2002 and December 31, 2001,  respectively.  On December 31, 2001,  the
facility was amended to change the interest  rate to prime plus two percent,  to
change the payment term for unpaid 2001 interest to require  payment at December
31,  2003,  or  to  convert  the  outstanding   unpaid  interest  to  additional
convertible  notes,  in the amount of $184,438 at the option of Mr. Reed, and in
the  amount of  $40,463  at the  option of  Mestek,  and to change  the terms of
payment  of  interest  for 2002 to require  that  one-half  be timely  paid each
quarter  and the  balance  be paid  on  December  31,  2003 or be  converted  to
additional convertible notes.

     The  Company  is  obligated  under a number of  capital  lease  obligations
originally  entered into by CareCentric  related to computer  equipment formerly
used in CareCentric's business.

     The fair value of the Company's  long-term  debt is estimated  based on the
current  interest  rates  offered  to the  Company  for debt  offered  under the
liquidity conditions and credit profile of the Company.  Management believes the
carrying value of debt and the contractual values of the outstanding  letters of
credit approximate their fair values as of March 31, 2002.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

     CONTINGENCIES

     The Company is engaged in various legal and regulatory  proceedings arising
in the normal  course of  business  which  management  believes  will not have a
material adverse effect on its financial position or results of operations.

     Simione Central Holding,  Inc., a subsidiary of CareCentric now known as SC
Holding,  Inc.  ("SC  Holding")  was  one  of  several  defendants  named  in  a
"whistleblower"  lawsuit related to alleged Medicare fraud filed under the False
Claims  Act in the  Northern  District  of  Georgia  (U.S.  ex re.  McLendon  v.
Columbia/HCA  Healthcare  Corp., et al., No. 97-VC-0890 (N.D. Ga.)). The lawsuit
involves alleged claims that SC Holding  allegedly  participated in a conspiracy
with Columbia/HCA and other third parties to bill inflated and fraudulent claims
to Medicare.  On July 21, 1999, the Justice Department issued notice that it had
elected  not to join  in the  claims  asserted  against  SC  Holding  by  Donald
McLendon,  who  is a  former  employee  of  an  unrelated  service  provider  to
Columbia/HCA.  Although  the Justice  Department  joined the suit with regard to
other  defendants,  it  specifically  declined  to  intervene  with regard to SC
Holding.  In late 2000,  CareCentric was advised by Mr. McLendon's attorney that
notwithstanding the declination by the Justice Department,  Mr. McLendon intends
to pursue "whistleblower" claims against SC Holding directly.  Through March 22,
2002,  no such  action has been taken and  nothing  further  has been heard from
McLendon's attorney over one year.  Management believes that this claim has been
abandoned. In the event a claim is asserted, however, CareCentric and SC Holding
intend to vigorously defend against it.

     COMMITMENTS

     The  Company  leases its office  facilities  and  certain  equipment  under
various  operating  lease  agreements.  These leases  require the Company to pay
taxes,  insurance,  and maintenance  expenses and provide for renewal options at
the then fair market rental value of the property.

NOTE 8 - SHAREHOLDERS' EQUITY

     The  Company's  shareholders'  equity  (all on a  split-adjusted  basis) is
comprised of the following:

     Common Shares - 20,000,000 shares  authorized,  $.001 par value,  4,371,350
shares  issued and  outstanding  as of March 31,  2002 and  December  31,  2001.
1,489,853  of such  shares were issued on March 7, 2000 to the former MCS common

                                       14
<PAGE>
      CARECENTRIC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


shareholders.  606,904 of such shares were issued on March 7, 2000 to the former
preferred  shareholders  and noteholders of CareCentric  Solutions,  Inc., which
shares were converted from Series A Preferred Stock into  CareCentric  (formerly
known as Simione  Central  Holdings  Inc.) common shares in connection  with the
merger.

     Pursuant  to the  terms of the  July 12,  1999  merger  agreement  by which
Simione  acquired  the stock of  CareCentric  Solutions,  Inc.,  the Company was
required  to issue up to an  additional  606,904  shares of common  stock to the
former preferred  shareholders  and noteholders of CareCentric  Solutions if the
average  closing  price of the  Company's  stock for the period  October 1, 2000
through  December  31,  2000 is not equal to or greater  than  $15.00 per share.
Since the Company's  average  closing stock price for the fourth quarter of 2000
was less than $15.00 per share,  on March 19, 2001,  the Company  issued 593,688
shares of its common stock to the former preferred  shareholders and noteholders
of  CareCentric   Solutions.   As  required  by  generally  accepted  accounting
principles, no value was assigned to these shares as it was deemed not to impact
total consideration paid. The Company asserted that it was not required to issue
13,216 additional shares of its common stock as well as 150,740 shares of common
stock that were being  held by it in escrow  under the terms of the  CareCentric
Solutions  Merger  Agreement  based upon  various  indemnification  and  expense
overages  claims it believes it had  against  the former  CareCentric  Solutions
preferred shareholders and noteholders. On May 16, 2001, the Company finalized a
settlement  of these claims with the  representative  of the former  CareCentric
Solutions  parties pursuant to which 88,586 shares of common stock were released
from  escrow and  distributed  to the  former  CareCentric  Solutions  preferred
shareholders and noteholders, the remaining 62,154 escrow shares were cancelled,
no additional shares of common stock will be issued,  and the parties executed a
comprehensive settlement agreement.

     Pursuant to a comprehensive  settlement agreement on June 28, 2001, between
Sterling  Star,  Inc., Mr. Ted Wade  (President of Sterling Star,  Inc.) and the
Company, certain disputes related to the acquisition of a product named Tropical
Software,  were  settled.  Under the terms of the  settlement,  10,000 shares of
common stock originally issued to Sterling Star were returned to the Company and
were cancelled.

     Preferred Stock-10,000,000 shares authorized

     Series B Preferred  Stock -$.001 par value,  5,600,000  shares issued.  The
shares of Series B Preferred  Stock are held by Mestek,  Inc.  (Mestek) and were
issued in  consideration  of $6,000,000 paid to CareCentric on March 7, 2000, in
the  form of cash and debt  forgiveness.  The  Series  B  Preferred  shares,  as
originally  issued,  carried  2,240,000  common share votes (on a split-adjusted
basis) and were entitled to a 9% annual cumulative dividend, among other rights.
In connection with the Company's  application for listing on the Nasdaq SmallCap
Market,  the Company  reached an agreement  with Mestek on June 12, 2000,  under
which Mestek agreed to allow the aforementioned  number of common share votes to
be reduced to  1,120,000  in  consideration  for the  issuance by the Company to
Mestek of a warrant to acquire up to 490,396 shares of CareCentric common stock,
as more  fully  described  below.  On March 29,  2002,  in  connection  with the
refinancing  commitments  made to the  Company  by  Mestek  and John E. Reed (as
further  described in Note 13), Mestek  transferred the voting rights associated
with the Series B Preferred Stock to Mr. Reed.

     Series C Preferred  Stock - $.001 par value,  850,000  shares  issued.  The
shares  of Series C  Preferred  Stock are held by  Mestek  and  result  from the
conversion at the March 7, 2000 merger of a  pre-existing  $850,000  convertible
note payable to Mestek. The Series C Preferred shares carry 170,000 common share
votes (on a split adjusted  basis) and are entitled to an 11% annual  cumulative
dividend, among other rights.

     Series D Preferred  Stock - $.001 par value,  398,406  shares  issued.  The
shares of Series D  Preferred  Stock are held by John E. Reed and were issued on
June 12, 2000 in  consideration of $1.0 million paid to the Company in cash. The
Series D Preferred shares have a 9% annual cumulative dividend,  are convertible
into common stock at an initial  conversion price of $2.51 per share,  limit the
ability to issue dilutive stock options and have voting rights equal to those of
the common stock, among other rights.

     Series E Preferred  Stock - $.001 par value,  210,000 shares issued under a
restricted  stock award. The shares of Series E Preferred Stock are held by John
R. Festa and the rights to those shares were  granted on November 10, 2001.  The
Series E Preferred shares are entitled to certain voting, dividend,  liquidation
and conversion rights.

     Common  Stock  Warrants - In  connection  with the issuance of the Series B
Preferred  Stock  described  above,  Mestek  received a warrant to acquire up to
400,000 shares of the Company's common stock at a per share exercise price equal
to $10.875.  In  connection  with the waiver by Mestek of certain  voting rights
previously  granted to it, Mestek received on June 12, 2000 a warrant to acquire
up to 490,396  shares of the  Company's  common stock for a term of 3 years at a
per share exercise price equal to $3.21. In connection  with Mestek's  guarantee
of the Company's  obligations  under the line of credit from Wainwright Bank and
Trust Company, as more fully explained in Note 6 to these Financial  Statements,
Mestek  received on July 12,  2000 a warrant to acquire up to 104,712  shares of
the Company's  common stock for a term of 3 years at a per share  exercise price


                                       15
<PAGE>
      CARECENTRIC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


equal to $2.51. The aforementioned number of shares and per share prices are all
on  a  split-adjusted  basis.  Other  warrants  existing  prior  to  the  merger
transaction to acquire up to 25,000 shares of common stock remain outstanding.

     Stock Options - Options  totaling 1,000 shares were  outstanding and vested
under the now discontinued 1997 SCHI NQ (Directors) Plan at an exercise price of
$60.00.   Non-plan  options  totaling  107,453  shares,   of  which  90,787  are
exercisable,  were  outstanding at exercise prices ranging from $2.51 to $45.00.
The Simione Central Holding Inc. 1997 Omnibus  Equity-Based Plan (the "Plan") is
the only  continuing  stock  option  plan of the  Company.  The Plan offers both
incentive  stock  options  and  non-qualified  stock  options.  The  Company  is
authorized  to grant options of up to 900,000  shares of common  stock.  Options
totaling  465,206  shares  were   outstanding,   of  which  267,332  shares  are
exercisable, at exercise prices ranging from $2.51 to $73.55.

     In  connection  with the  Simione/MCS  merger on March 7, 2000,  Mestek was
granted a series of options to purchase a total of approximately  378,295 shares
of the Company's  common stock (on a  split-adjusted  basis).  These options are
exercisable only to the extent that outstanding CareCentric options, warrants or
other  conversion  rights are exercised.  These options were designed to prevent
dilution of Mestek's  ownership  interest  in the Company  after the merger.  As
options,  warrants and other common rights are forfeited or cancelled,  Mestek's
option rights are correspondingly reduced. Due to the contingent nature of these
options,  they have been  excluded  from the above  tables.  At March 31,  2002,
159,573  shares of such  options  were  available  under the  original  terms of
issuance.

STOCK PURCHASE WARRANTS

     At March 31, 2002, the Company had outstanding  warrants to purchase shares
of the Company's common stock as follows:

                   EXERCISE
COMMON SHARES        PRICE         EXPIRATION DATE
---------------  --------------   -------------------

        25,000         $  5.00    February 24, 2005
       104,712         $  2.51    July 12, 2003
       490,396         $  3.21    June 30, 2003
       400,000         $ 10.88    March 7, 2003
---------------
     1,020,108
===============

NOTE 9 - RELATED PARTY TRANSACTIONS

     The Company has subleased  certain space to  Healthfield,  Inc.  which is a
Mestamed  customer and has a significant  shareholder who was a former member of
the board of directors of the Company.  The original lease and related  sublease
expire on December 31, 2002 and required annual  sublease  payments equal to the
original lease payments of approximately $730,000.

     R.  Bruce  Dewey  is  Vice-Chairman  of the  Board  of  Directors,  and the
President and Chief  Operating  Officer of Mestek and Winston R. Hindle,  Jr., a
director of the Company, is a director of Mestek. Mestek has certain investments
in the Company in the form of notes,  convertible notes, warrants, stock options
and  preferred  stock  as  described  in Note 6 and  Note 8 to  these  Financial
Statements.

     The Company has a note receivable from Simione Consultants, LLC of $611,000
at March  31,  2002.  On  September  28,  2001,  the  Company  discontinued  its
Consulting  business segment by closing the sale of certain of the assets of its
wholly-owned  subsidiary,  Simione  Consulting,  Inc.  ("Consulting") to Simione
Consultants,  LLC, which is owned and  controlled by William J. Simione,  Jr., a
director  and  former  officer  of  CareCentric.   The  total  sales  price  was
approximately $2.0 million plus the assumption of certain liabilities.  The sale
was made  pursuant to an asset  purchase  agreement.  William  Simione,  Jr. has
resigned as an officer of, but remains a director  of,  CareCentric.  The assets
sold under the agreement included the Consulting accounts  receivable,  computer
equipment, and miscellaneous prepaid expenses.  Consideration received consisted
of approximately $1.0 million in cash and $1.0 million in notes, $770,000 with a
36-month term and $230,000  with a 5-month term.  The cash proceeds were used to
pay down CareCentric's line of credit.

     As of March 31, 2002,  the Company had a  promissory  note  outstanding  to
Barrett C. O'Donnell, a director of the Company, as described in Note 6 to these
Financial Statements.



                                       16
<PAGE>
      CARECENTRIC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


     John  E.  Reed  is a  director  and a  significant,  but  not  controlling,
shareholder  of the  Wainwright  Bank and Trust  Company  which has provided the
Company with a $6.0 million line of credit, as more fully explained in Note 6 to
the Financial Statements.

     John E. Reed,  Chairman  of the Company and  Chairman  and Chief  Executive
Officer of Mestek,  has  provided the Company with a $6.0 million line of credit
(unrelated  to the  Wainwright  Bank  and  Trust  $6.0  million  line of  credit
described  above) as more fully described in Note 6 to the Financial  Statements
and has also purchased $1.0 million of the Company's Series D Preferred Stock on
June 12, 2000, as more fully described in Note 8 to these Financial  Statements.
An  independent  committee of the Company's  Board of  Directors,  consisting of
Barrett C. O'Donnell and David O. Ellis, negotiated the terms of Mr. Reed's debt
and equity investments in the Company.  The issuance of 398,406 shares of Series
D Preferred  Stock to Mr. Reed for his $1.0 million equity  investment was based
on a per share  price of $2.51,  which was the 5-day  average  closing  price of
CareCentric common stock as of the date of the final negotiation of the terms of
Mr.  Reed's  purchase.  The  conversion  price for Mr. Reed's $6.0 million loan,
which converts into CareCentric common stock as described in more detail in Note
6 to these  Financial  Statements,  is also $2.51 per share.  On March 31, 2002,
$4.5 million was outstanding under this credit facility, $3.5 million payable to
Mr.  Reed,  and $1.0  million  payable  to Mestek  pursuant  to a  participation
agreement.

     Warrants  were  granted in June 2000 and July 2000 by the Company to Mestek
in connection with its waiver of certain voting rights previously  granted to it
and in connection  with its guarantee of the loan from Wainwright Bank and Trust
Company to the Company.  The terms of the warrants (as  described in more detail
in  Note  8 to  these  Financial  Statements)  were  based  on  negotiations  by
independent committees of the Boards of Directors of the Company and Mestek.

NOTE 10 -  LICENSE AGREEMENTS

     The Company  licenses  certain  software  products  from third  parties for
incorporation  in, or other use  with,  its  products  and is  obligated  to pay
license fees in connection  with such  products.  The Company  sublicenses  such
products  to  its  customers   and  collects   fees  in  connection   with  such
sublicensees.

NOTE 11 -  EXECUTIVE COMPENSATION

     The Company has entered into an employment agreement with its President and
Chief Executive  Officer,  Mr. John Festa.  Among other specific  contents,  Mr.
Festa (i) has been granted 210,000 shares of Series E preferred  stock, one half
of which vest evenly over the course of three years from his hire date dependent
upon his  continued  employment  as President  and CEO and one half of which are
forfeitable  pro rata over a three year period if certain  financial  milestones
are not met,  (ii) payment of an annual bonus of up to 50% of his annual  salary
based on completion of annual performance  objectives,  (iii) the possibility of
receiving a special  bonus which varies in dollar amount in the event there is a
sale of the Company  while Mr.  Festa is  President  and CEO and for nine months
thereafter.  The Series E preferred stock was valued at  approximately  $210,000
and will be charged to  earnings  as earned.  The amount  representing  unearned
compensation is recorded as an increase in the stockholders deficit account. For
the three  months ended March 31,  2002,  approximately  $23,000 was recorded as
current expense associated with earnings under this grant.

NOTE 12 - LIQUIDITY

     As disclosed in the financial  statements,  the Company's  operations  used
significant  amounts of cash in 2001. The Company has a working  capital deficit
of $15.1  million  at March 31,  2002.  During the first  quarter  of 2002,  the
Company  continued  to use its  Wainwright  Bank Credit Line and the Reed Credit
Line in order to meet its working capital needs.

     The merger with  Simione  added  additional  products  and  resources  and,
importantly,  added to the Company's  critical  mass of installed  sites but the
Company's  longer term success will depend upon increased  sales of new software
systems and successful  installation  performance.  Additionally,  the Company's
continuing  efforts to  develop  new  products  using the  latest  software  and
hardware platforms will be most important to its long-term success.

     As  of  May  9,  2002,  the  Company  had  untapped   credit   capacity  of
approximately  $0.7  million  from  combined  Wainwright  Bank and  Reed  credit
facilities.  As discussed in Note 13 below,  and pending  shareholder  approval,
which is expected  to be  obtained,  certain  terms of the  Wainwright  and Reed
credit  facilities  will be changed.  The  Company  believes  that a  successful
completion and closing of the refinancing and  recapitalization  plan (described
in more detail in Note 13), in combination with the funds available from cash to
be generated  from future  operations,  will be sufficient to meet the Company's
operating  requirements  through at least June 30,  2003,  assuming  no material
adverse change in the operation of the Company's  business.  Notwithstanding the
financial  conditions  prevailing  in the home health  marketplace,  the Company


                                       17
<PAGE>
      CARECENTRIC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


continued to fund significant  product  development  initiatives during 2001 and
intends  to do so  throughout  2002  by  reinvesting  the  moneys  saved  in its
re-engineering which was undertaken beginning on February 5, 2002. Nevertheless,
until revenues increase  sufficiently to cover  fluctuations in  forward-looking
costs and  operating  expenses,  the Company  remains  dependent on its majority
shareholder  for  its  working  capital   financing.   The  Company's   majority
shareholder  has stated his intention and ability to continue to advance cash to
the Company in accordance with the terms of his credit facility.

NOTE 13 - SUBSEQUENT EVENTS

     On April 8, 2002,  the  Company  secured  two  commitments  for  additional
financing,  both from  existing  shareholders.  John E. Reed,  a director of the
Company,  agreed to provide $871,117 in short-term funds, to be refinanced along
with other debt of the Company due Mr. Reed upon the  obtaining  of  shareholder
approval in June,  2002.  The  refinancing  would be  evidenced  by a $3,555,555
subordinated,  secured convertible term note, with principal payable in a single
balloon payment in 60 months and with interest at a fixed rate of 6.25% deferred
and capitalized  for 24 months.  Interest would then be payable  quarterly.  The
note would be  convertible  at any time for common stock at a price of $1.00 per
share. The conversion  rights of Mr. Reed's 398,406 shares of Series D Preferred
Stock would also be amended to increase the  conversion  exchange  rate from one
share of common  stock for one share of  Series D  Preferred  to 2.51  shares of
common stock for one share of Series D Preferred Stock.

     Mestek,  Inc., a preferred  shareholder  of the Company,  agreed to provide
$1,092,000 in short-term  funds,  to be refinanced  along with other debt of the
Company due Mestek upon the obtaining of shareholder approval in June, 2002. The
refinancing would be evidenced by a $4,000,000 subordinated, secured convertible
term note,  with principal  payable in a single balloon payment in 60 months and
with interest at a fixed rate of 6.25% deferred and  capitalized  for 24 months.
Interest would then be payable  quarterly.  The note would be convertible at any
time for common  stock of the Company at a price of $1.00 per share.  The rights
of Mestek's  5,600,000  shares of Series B Preferred Stock would also be amended
to provide for a conversion  exchange  rate of 1.0714 shares of common stock for
one  share of  Series B  Preferred  Stock.  Mestek  will  also give up its stock
options  and a warrant it holds for the  purchase  of  104,712  shares of common
stock and will exchange a warrant it holds for 400,000 shares of common stock at
$10.875 per share,  expiring  March 7, 2003, for a Warrant for 400,000 shares of
common stock at $1.00 per share, expiring June 15, 2004. It will also exchange a
warrant it holds for 490,396 shares of common stock at $3.21 per share, expiring
March 7, 2003,  for a Warrant  for 490,396  shares of common  stock at $1.00 per
share, expiring June 15, 2004.

     A condition to the refinancing of the Company's debt to Mestek and Mr. Reed
is that the present $6.0 million Wainwright Bank line of credit facility be paid
down by the  Company  to $5.9  million  or less on or before  July 31,  2002 and
continue to be reduced by no less than $100,000 each month  thereafter until all
amounts  have been  repaid  to  Wainwright  or the  Wainwright  Facility  or any
replacement thereof is obtained by CareCentric without a guarantee of Mestek.

     The refinancing and  recapitalization  transactions between the Company and
each of Mestek and Reed are subject to the  satisfaction of various  conditions,
including approval by the Company's  shareholders at its annual meeting expected
to be held in June 2002 and  approvals by Mestek's  board of  directors  and the
Company's  senior  lender.  The  transactions  contemplated  by  the  commitment
letters,  if approved,  would (i) reduce the total  financing  facilities of the
Company by approximately $0.3 million, (ii) extend the guaranty by Mestek of the
Company's  senior line of credit with  Wainwright  Bank  through the end of June
2003,  (iii)  refinance  existing debt owed by the Company to Mestek and Reed to
provide a deferral of both  interest and principal for a period of two (2) years
following  the  date  that  the  commitment  letters  are  approved,   and  (iv)
restructure  certain of the Company's  existing  voting  securities and warrants
held by Mestek and Reed.

     Management believes the required shareholder approvals will be obtained.

     On April 19,  2002,  the Company  received a letter from Nasdaq  indicating
that certain financial indicators as reported in the Company's December 31, 2001
financial statements were below applicable minimum requirements issued by Nasdaq
to maintain listing on the Nasdaq SmallCap Market. The Company's current trading
price  and  its  write-off  of  certain  non-cash,  impaired  intangible  assets
contributed to the Nasdaq letter.  On May 10, 2002, the Company submitted a plan
to Nasdaq  that  might  allow  the  Company  to work  towards  meeting  Nasdaq's
requirements for continued  listing on the Nasdaq SmallCap Market.  In the event
the Company's  plan does not receive  acceptance,  the  Company's  stock will be
de-listed  from Nasdaq.  Nevertheless,  the Company is  considering  the actions
necessary to achieve continued trading on the OTC Bulletin Board.

     On April 22, 2002, the Company  employed  George M. Hare as its Senior Vice
President and Chief Financial Officer.  Mr. Hare has over twenty years of varied
experience  in both  financial and  operating  management  positions and holds a
certified public accountant certificate from the state of Pennsylvania.


                                       18
<PAGE>


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

     Certain  statements  set forth in  Management's  Discussion and Analysis of
Financial  Condition  and  Results  of  Operations  constitute  "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and
the Private  Securities  Litigation  Reform Act of 1995,  and are subject to the
safe  harbor  created  by such  sections.  When used in this  report,  the words
"believe",  "anticipate",  "estimate",  "expect",  "plans", "intend",  "likely",
"will"  and  similar  expressions  are  intended  to  identify   forward-looking
statements. All statements,  other than statements of historical facts, included
or incorporated by reference in this Form 10-K which address activities, events,
or developments  which the Company  expects or anticipates  will or may occur in
the future,  including statements regarding the Company's  competitive position,
the successful  development of its software products,  the impact on the Company
of actual or proposed regulatory changes, the Company's  expectations  regarding
the  adequacy  of  current  financing  arrangements,  product  demand and market
growth, and other statements regarding future plans and strategies,  anticipated
events  or  trends  and  similar  expressions  concerning  matters  that are not
historical facts are forward-looking  statements.  These statements are based on
certain  assumptions and analyses made by the Company in light of its experience
and its perception of historical trends, current conditions, and expected future
developments  as well as  other  factors  it  believes  are  appropriate  in the
circumstances.   The  Company's  future  financial   performance   could  differ
significantly  from  that  set  forth  herein,  and  from  the  expectations  of
management.   Important  factors  that  could  cause  the  Company's   financial
performance to differ  materially  from past results and from those expressed in
any forward looking statements  include,  without  limitation,  the inability to
obtain additional capital resources, variability in quarterly operating results,
customer concentration,  product acceptance, long sales cycles, long and varying
delivery  cycles,  the  Company's  dependence  on  business  partners,  emerging
technological standards,  changing regulatory standards,  inability to retain or
hire   experienced   and   knowledgeable   employees,   risks   associated  with
acquisitions,   increased  regulation  of  the  health  care  industry,   future
consolidation  of the health care  industry,  potential  liability in connection
with a Department of Labor  investigation  or IRS audit, the need to develop new
and  enhanced  products,  product  delays and  errors,  competition,  difficulty
protecting  intellectual  property rights,  and the risk factors detailed in the
Company's  Registration  Statement on Form S-4 (File No.  333-96529)  and in the
Company's  periodic  reports filed with the Securities and Exchange  Commission.
Readers  are  cautioned  not to place undue  reliance  on these  forward-looking
statements, which speak only as of their dates. This Management's Discussion and
Analysis of  Financial  Condition  and Results of  Operations  should be read in
conjunction with the Company's  consolidated  financial statements and the notes
thereto.  The  Company  assumes  no  obligation  to  update  publicly  any  such
forward-looking  statements,  whether  as a result  of new  information,  future
events, or otherwise.

CRITICAL ACCOUNTING POLICIES

     Financial  Reporting  Release No. 60,  which was  recently  released by the
Securities  and  Exchange  Commission,  requires  all  companies  to  include  a
discussion of critical accounting policies or methods used in the preparation of
financial  statements.  Note  1 of  the  Notes  to  the  Consolidated  Financial
Statements includes a summary of the significant accounting policies and methods
used in the preparation of our Consolidated Financial Statements.  The following
is a brief  discussion of the more significant  accounting  policies and methods
that we follow.

General

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the reported  amounts of assets and liabilities and the
disclosure of contingent  assets and  liabilities  at the dates of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting periods. The most significant  estimates and assumptions relate to the
intangible  assets,  realization  of deferred  income  taxes and the adequacy of
allowances  for returns and  doubtful  accounts.  Actual  amounts  could  differ
significantly from these estimates.

Our critical accounting policies are as follows:

     o     revenue recognition;
     o     estimate of allowance for uncollectible accounts; and
     o     valuation of long-lived and intangible assets and goodwill.



                                       19
<PAGE>

REVENUE RECOGNITION

     The Company sells its software pursuant to non-exclusive license agreements
which provide for the payment of a one-time  license fee. In accordance with the
American Institute of Certified Public  Accountants  Statement of Position 97-2,
"Revenue Recognition", these revenues are recognized when products are delivered
and the  collectability  of  fees  is  probable,  provided  that no  significant
obligations  remain  under  the  contract.  Revenues  derived  from  the sale of
software  products not requiring  significant  modification or customization are
recognized when products are delivered and  collectability  of fees is probable,
provided that no significant obligations remain under the contract. The price of
the  Company's  software  varies  depending  on the number of  software  modules
licensed and the number of users  accessing  the system and can range from under
ten thousand dollars to a few million dollars.  The Company  generally  requires
payment of a deposit  upon the  signing  of a customer  order as well as certain
additional payments prior to delivery.  As a result, the Company's balance sheet
reflects significant customer deposits.

     Third-party software and computer hardware revenues are recognized when the
related  products are  delivered.  Software  support  agreements  are  generally
renewable  for one-year  periods,  and revenue  derived from such  agreements is
recognized  ratably  over  the  period  of  the  agreements.   The  Company  has
historically  maintained high renewal rates with respect to its software support
agreements. The Company generally charges for software implementation,  training
and technical  consulting services as well as management  consulting services on
an hourly or daily basis. The Company offers "tiered pricing" for implementation
of new systems  whereby  the  customer  pays a fixed fee for a certain  level of
packaged services and daily fees for services beyond the package.

     Revenues for post-contract customer support are recognized ratably over the
term of the support period,  which is typically one year. Post contract customer
support  fees  typically  cover  incremental  product  enhancements,  regulatory
updates  and  correction  of  software  errors.  Separate  fees are  charged for
significant product  enhancements,  new software modules,  additional users, and
migrations to different operating system platforms.

ESTIMATE OF ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS

     The Company  continuously reviews the status of all its accounts receivable
with its customers for current collectability. The Company recognizes that there
are  circumstances  under which  customers  will delay payment  beyond the terms
offered  by the  Company  either  because  of their  own  payment  practices  or
temporary situations which need to be resolved before the customer will continue
payment.  Reserves  for  uncollectability  are  based on  various  ages of those
accounts  receivable  past their original due date for  collection.  The Company
does not write the account off  against  the reserve for  uncollectible  account
until all efforts to collect the accounts receivable have been exhausted.

VALUATION OF LONG-LIVED AND INTANGIBLE ASSETS AND GOODWILL

     The Company assesses the impairment of identifiable intangibles, long-lived
assets and related goodwill and enterprise  level goodwill  annually or whenever
events or changes in  circumstances  indicate that the carrying value may not be
recoverable.  Factors the Company  considers  important  which could  trigger an
impairment review include the following:

     o    significant   underperformance  relative  to  expected  historical  or
          projected future operating results;

     o    significant changes in the manner of the Company's use of the acquired
          assets or the strategy for its overall business; and

     o    significant negative industry or economic trends.

     When the  Company  determines  that  the  carrying  value  of  intangibles,
long-lived  assets and related goodwill and enterprise level goodwill may not be
recoverable  based upon the existence of one or more of the above  indicators of
impairment,  the Company measures any impairment based on a projected discounted
cash flow  method  using a discount  rate  determined  by our  management  to be
commensurate  with  the risk  inherent  in our  current  business  model.  After
recording a $11.8 million impairment adjustment,  net intangible assets amounted
to $5.4  million  as of  December  31,  2001.  See  Note 5 of the  Notes  to the
Consolidated Financial Statements.

RESULTS OF OPERATIONS

EFFECT OF DISCONTINUED  OPERATIONS AND SFAS NO. 142 ON MANAGEMENT DISCUSSION AND
ANALYSIS

     To  present  a more  meaningful  analysis  of  operating  performance,  the
comparison  of the three months ended March 31, 2002 and March 31, 2001 compares
the 2002 reported Financial Statements in the accompanying  Financial Statements


                                       20
<PAGE>

to a pro forma 2001 statement of operating  results.  The pro forma  adjustments
for  the  2001  financial   statements  were  to  exclude  the  results  of  the
discontinued  operations  of the  Consulting  segment of  CareCentric,  Inc.  in
September of 2001 (see Note 2 to the accompanying  Financial  Statements) and to
reduce amortization  expense for the effect of adopting SFAS No. 142 (see Note 1
to the accompanying Financial Statements).

RESULTS OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 2002

     Net  Revenues.  Revenues  (exclusive  of the  Consulting  segment which was
discontinued  in  September  2001) were $5.3  million for the three months ended
March 31, 2002 and $5.7 million for the three  months ended March 31, 2001.  The
$0.4 million decrease was mainly attributable to a reduction in software systems
of $0.5 million to $1.6  million in 2002 from $2.1 million in 2001.  Maintenance
revenues were unchanged at $2.8 million in both 2002 and 2001.

     The Company  believes that the economic  conditions for the home healthcare
marketplace,  more fully discussed in the overview  section of the Form 10-K for
the period ended  December 31, 2001,  have now  stabilized,  and are expected to
improve in the years  ahead.  The Company  also  recognizes  the  importance  of
successfully  introducing new products using more current technologies,  and the
Company  intends to continue  to develop and invest in new  products in 2002 and
beyond.

     Cost of Revenues.  Cost of revenues  decreased $0.5 million,  or 22.3%,  to
$1.7  million in 2002 from $2.2 million in 2001.  As a  percentage  of total net
revenues,  cost of revenues  decreased to 31.9% in 2002 from 37.7% in 2001.  The
$0.5 million decrease resulted  primarily from cost cutting,  changes in product
mix and the  decrease in  revenues  from  software  systems.  The  decrease as a
percentage  of total net revenues is due to the combined  impact of many factors
including  efficiencies in installation and support costs resulting from reduced
sales discounts and changes in product mix.

     Selling,  General and Administrative.  Selling,  general and administrative
expenses decreased $126,000,  or 4.5%, to $2.7 million in 2002 from $2.8 million
in  2001.  As  a  percentage  of  total  net  revenues,   selling,  general  and
administrative  expenses  were  51.4% in 2002 and  49.3%  in 2001.  This  dollar
decrease was  attributable  to synergies  derived from cost savings  initiatives
implemented in 2001 and 2002. Cost savings were primarily  realized  through the
centralization  of  administrative  functions and  elimination of  non-essential
facilities and excess capacity.

     Research and  Development.  Research  and  development  expenses  decreased
approximately $0.8 million,  or 46.4%, to $0.9 million in 2002 from $1.7 million
in 2001.  As a  percentage  of total  net  revenues,  research  and  development
expenses decreased to 18.0% in 2002 from 30.9% in 2001. The decrease in research
and development  expenditures was primarily due to the Company's  realignment of
research  efforts between  existing and future platform  products.  Although the
comparative  value of research and expenditure  expenses has fallen in the first
quarter of 2002,  the Company  believes the 18% of revenue level  experienced in
the first  quarter of 2002 is the proper  amount to both  enhance  and  maintain
existing  products.   As  the  Company  develops  its  next  generation  product
platforms,  research and development  expenditures are expected to increase to a
higher level than experienced in the first quarter of 2002.

     Amortization and Depreciation.  Amortization and depreciation  decreased by
approximately  $0.5  million to $0.4  million in 2002 from $1.0 million in 2001.
This decrease is  attributable to the net effect of the adoption of SFAS No. 142
and the reduction in  amortization  from the write off of the intangibles in the
fourth quarter of 2001.

     Operating Loss. The Company's loss from continuing  operations,  reflecting
the same assumptions as above for purposes of comparability, decreased from $2.0
million for the three  months  ended  March 31,  2001 to $644,000  for the three
months ended March 31, 2002. This decrease in loss from continuing operations is
due to the combined effect of reductions in selling, general and administrative,
research and development  and  amortization  expenses.  Continued high levels of
research  and  development  expenditures  over the last two years are a material
cause of the recurring loss from continuing  operations,  although the reduction
in research  and  development  expenses in the first  quarter of 2002 versus the
first  quarter of 2001  positively  contributed  to the  reduction  in the first
quarter operating loss reported for 2002 compared to 2001.

     Other Income  (Expense).  Interest  expense related to borrowings under the
Company's line of credit agreements and capital lease  obligations  increased by
approximately $44,000 to $168,000 for the three months ended March 31, 2002 from
$124,000 for the three  months  ended March 31, 2001.  Interest and other income
consist  principally of interest income related to customer  finance charges and
the Company's short term cash  investments  and have decreased by  approximately
$128,000.  The Company expects further increases in interest expense in 2002 due
to increased borrowing.

     Income Taxes.  The Company has not incurred or paid any substantial  income
taxes since March 2000. At December 31, 2001, CareCentric had net operating loss
("NOL")  carryforwards  for  federal  and state  income  tax  purposes  of $36.7
million.  Such losses expire beginning in 2010, if not utilized.  The Tax Reform
Act of 1986, as amended,  contains  provisions that limit the NOL and tax credit
carryforwards  available to be used in any given year when certain events occur,


                                       21
<PAGE>

including  additional sales of equity securities and other changes in ownership.
As a  result,  certain  of the NOL  carryforwards  may be  limited  as to  their
utilization  in any year.  The Company has concluded that it is more likely than
not that these NOL  carryforwards  will not be  realized  based on a weighing of
available  evidence at March 31,  2002,  and  accordingly,  a 100%  deferred tax
valuation allowance has been recorded against these assets.

     Loss from  Operations of Discontinued  Segment.  The loss of ($185,000) for
the three  months  ended  March 31,  2001 is  attributable  to the  discontinued
operations of the Consulting segment.

BACKLOG

     The Company's  backlog  associated  with its software  operations  remained
unchanged at approximately $3.2 million on March 31, 2002 and December 31, 2001,
respectively.  Backlog  consists of the  unrecognized  portion of  contractually
committed  software  license fees,  hardware,  estimated  installation  fees and
professional services. The length of time required to complete an implementation
depends on many factors outside the control of the Company,  including the state
of the customer's  existing  information  systems and the customer's  ability to
commit  the   personnel   and  other   resources   necessary   to  complete  the
implementation  process.  As a result,  the  Company  may be  unable to  predict
accurately  the amount of revenue it will  recognize in any period and therefore
can make no  assurances  that the amounts in backlog will be  recognized  in the
next three months.

LIQUIDITY AND CAPITAL RESOURCES

     In November  1999,  CareCentric,  prior to the merger with MCS and when its
pre-merger  name was Simione  Central  Holdings,  Inc.  (Simione)  received $1.6
million  of  loans  from  Mestek  ($850,000)  and two  stockholders  of  Simione
($750,000),  Barrett C. O'Donnell and David Ellis,  to fund operating  needs and
continue the execution of product  strategies in the fourth quarter of 1999. The
$850,000  loan from Mestek was  converted  into  850,000  shares of newly issued
Series C  Preferred  stock of  Simione at the  closing of the MCS merger  having
170,000 common shares votes and which are entitled to an 11.0% annual cumulative
dividend.  The loan from Mr.  O'Donnell  along with $100,000 in deferred  salary
were exchanged for a $600,000  subordinated note,  convertible into common stock
at $2.51 per share,  with interest at 9% per annum and a maturity date of August
8, 2005. In January  2002,  this loan was amended to change the interest rate to
prime plus two percent  and to change the terms of payment of interest  for 2002
to require that one-half of the accrued interest be timely paid each quarter and
the  balance  to be  paid  on  December  31,  2003  or to be  converted  into an
additional  convertible  note.  The loan from Dr. Ellis was paid in full on July
12, 2000 from the credit facility provided by Wainwright Bank and Trust Company.
See Note 6 to the accompanying Consolidated Financial Statements.

     In February  2000,  Simione  received an  additional  $1.0  million of loan
proceeds from Mestek.  The loan proceeds were used to fund  Simione's  operating
needs until  completion  of the merger with MCS,  and carried the same terms and
security as the $3.0 million loan  received  from Mestek in September  1999.  On
March 7, 2000, the merger with MCS was completed and Mestek's  notes  evidencing
the $1.0  million and $3.0  million  loans,  together  with an  additional  $2.0
million in cash from Mestek,  were converted into Series B Preferred Stock and a
warrant to purchase  CareCentric common stock. The consolidation of the accounts
receivable  of MCS into the  then  outstanding  balance  of  Simione's  accounts
receivable provided an additional $1.5 million of borrowing capacity on the $5.0
million bank line of credit established by Simione in September 1999.

     Immediately after the Simione/MCS  merger on March 7, 2000, the Company had
cash and cash  equivalents of $3.5 million and short and long term debt from all
sources  of  $2.5  million,   for  a  positive  net   cash/(debt)   position  of
approximately $1.0 million.  In order to supplement its capital  resources,  the
Company,  subsequent to the merger,  undertook a search for  additional  capital
resources  which  resulted  in the  creation  of the  following  credit and debt
facilities and preferred equity securities:

<TABLE>
<CAPTION>
<S>                                        <C>                <C>                        <C>

                 SOURCE                        FUNDING                  FORM               DATE CLOSED
-----------------------------------------  -----------------  -------------------------  ----------------

John E. Reed                                   $ 1,000,000    Series D Preferred Stock    June 22, 2000

John E. Reed                                     6,000,000    Line of Credit              June 22, 2000

Wainwright Bank and Trust Company                6,000,000    Line of Credit              July 12, 2000
                                           -----------------
                                               $13,000,000
                                           =================
</TABLE>

                                       22
<PAGE>

     These three  transactions  are described in greater detail in Note 6 to the
accompanying  Consolidated  Financial Statements.  The Wainwright Bank and Trust
Company  line  of  credit  was  used to pay off the  Silicon  Valley  Bank  (the
Company's commercial bank prior to the merger with MCS) line of credit,  certain
short-term  loans  from  Mestek,  and the note  payable to David O.  Ellis.  The
Wainwright Line of Credit expired July 11, 2001 and was renewed through July 11,
2002.  Payment of the Wainwright  Line of Credit is guaranteed by Mestek.  Based
upon representations received from Wainwright Bank, the Company expects the Line
of Credit to be renewed  through July 11, 2003. As of April 8, 2002, the Company
owes Wainwright approximately $5,967,000 under the Line of Credit.

     The Company is obligated under an 18 month unsecured promissory note in the
principal  amount of $1,018,000  payable to Mestek which bears interest at prime
plus one and one half percent (1.5%),  with interest  payable  semiannually  and
which  matures on June 30, 2003.  This note covers  funds  advanced by Mestek to
CareCentric to cover payroll and accounts  payable  obligations  incurred by the
Company  during the period of its  transition  of senior  lenders  from  Silicon
Valley Bank to Wainwright  Bank and Trust Company,  accrued and unpaid  interest
thereon  and the  unreimbursed  portion of Mr. R. Bruce  Dewey's  salary for the
periods from November 9, 1999 to October 31, 2001.

     On June 22,  2000,  the  Company  closed a financing  with John E. Reed,  a
CareCentric  director  and the chief  executive  officer of Mestek,  of up to $7
million.  The  financing  consisted  of $1 million  in equity,  and a $6 million
subordinated revolving line of credit facility, convertible into common stock of
CareCentric,  with a 9% interest  rate and five-year  maturity.  On December 31,
2001, the outstanding  amount under the Credit  Facility was $3.5 million,  $1.0
million  of which was  participated  to  Mestek,  and the  balance  of which was
retained by Mr. Reed.  On December 31, 2001,  the facility was amended to change
the  interest  rate to prime plus two percent,  to change the payment  terms for
unpaid 2001  interest to require  payment at December 31, 2003 or to convert the
outstanding  unpaid  interest to additional  convertible  notes in the amount of
$184,438 at the option of Mr.  Reed,  and in the amount of $40,463 at the option
of Mestek,  and to change the terms of payment of  interest  for 2002 to require
that one-half be timely paid each quarter and the balance to be paid on December
31, 2003 or to be converted to additional convertible notes.

     During  2000,  2001 and the first  quarter of 2002,  the  Company  incurred
operating losses and experienced  significant  problems  collecting its accounts
receivable because of the uncertain  operating condition of its customers due to
the  negative  effects of the current  government  limits over home medical cost
reimbursement  and the costs to date of developing,  implementing and supporting
The Smart Clipboard(R) product, which have been much higher than anticipated. In
addition,  sales revenue in 2000 was lower than planned in the core MestaMed(R),
DME VI and STAT2 products while new sales of The Smart Clipboard(R) and Tropical
products (now discontinued) did not develop as quickly as projected.  The merger
with Simione added additional products and resources and, importantly,  added to
the  Company's  critical mass of installed  sites but the Company's  longer term
success will depend upon increased sales of new software  systems and successful
installation  performance,  including its point-of-care and MestaMed(R) systems.
In this connection,  the Company recorded a significant  increase in bookings of
new systems in several of its major product  lines through March 2002.  Bookings
have  increased  steadily  through  the  first  quarter  of  2002  and  prospect
opportunities have been clearly identified.  The existing pipeline, if realized,
will  exceed  the  Company's   2002   bookings   budget  and  cash  flow  needs.
Notwithstanding  the  financial   conditions   prevailing  in  the  home  health
marketplace,  the Company  continued  to fund  significant  product  development
initiatives during 2001.  Accordingly,  until revenues increase  sufficiently to
cover these  forward-looking  costs and operating expenses,  the Company remains
dependent  on  outside  funding  sources,  including  John E.  Reed,  Mestek and
Wainwright Bank and Trust Company, for its working capital financing.

     On April 8, 2002,  the  Company  secured  two  commitments  for  additional
financing,  from existing shareholders John Reed and Mestek. See Notes 12 and 13
to the Financial Statements. Mr. Reed and Mestek have agreed to provide $871,117
and  $1,092,000 in short-term  debt  financing,  respectively,  to be refinanced
along with other debt of the Company due such parties upon obtaining shareholder
approval in June 2002.

     As  of  May  9,  2002,  the  Company  had  untapped   credit   capacity  of
approximately  $0.7 million from the  aforementioned  Reed and  Wainwright  Bank
facilities. The Company believes that a successful completion of its refinancing
commitments  from John Reed and Mestek,  in combination with the funds available
from its cash, cash equivalents and cash to be generated from future operations,
will be  sufficient to meet the Company's  operating  requirements,  assuming no
material  adverse  change in the operation of the Company's  business,  until at
least December 31, 2002. See also Note 12 to Financial Statements.



                                       23
<PAGE>

     The  table  below  summarizes  the  Company's  debt and  other  contractual
obligations:
<TABLE>
<CAPTION>
<S>                                        <C>           <C>        <C>          <C>

                                                      PAYMENTS DUE BY PERIOD
                                                      ----------------------
                                                        LESS THAN
         CONTRACTUAL OBLIGATIONS             TOTAL       1 YEAR      1-3 YEARS   4-5 YEARS
         -----------------------             -----       ------      ---------   ---------

Long-Term Debt                             $ 6,343,000    $ --        $1,243,000  $5,100,000
Capital Lease Obligations                       27,000       27,000           --          --
Operating Leases                             5,145,000    2,359,000    2,114,000     672,000
Line of Credit                               5,967,000    5,967,000           --          --
Other Long-Term Obligations                  1,302,000      702,000      600,000          --
                                           -----------   ----------   ----------  ----------
Total Contractual Cash Obligations         $18,038,000   $8,669,000   $4,107,000  $5,262,000
                                           ===========   ==========   ==========  ==========
</TABLE>

     As of March 31,  2002,  the Company had negative  working  capital of $15.3
million and cash equivalents of $0.5 million.  The Company's current liabilities
as of March 31, 2002  include  customer  deposits of $2.1  million and  unearned
revenues of $4.1 million.

     Net cash used in  operating  activities  for the years ended March 31, 2002
and March 31, 2001 was $1.1 million, and $1.7 million, respectively.

     Cash flows from financing  activities include the Wainwright and Reed lines
of credit borrowings during 2002.

     Inflation  has not had, and is not  expected to have, a material  impact on
the Company's  operations.  If inflation increases,  the Company will attempt to
increase its prices to offset  increased  expenses.  No assurance  can be given,
however,  that the Company  will be able to  adequately  increase  its prices in
response to inflation.

IMPACT OF NEW ACCOUNTING STANDARDS

     In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets"
SFAS No. 141  addresses  financial  accounting  and  reporting  for all business
combinations and requires that all business combinations entered into subsequent
to June  2001 be  recorded  under  the  purchase  method.  This  statement  also
addresses  financial  accounting and reporting for goodwill and other intangible
assets acquired in a business combination at acquisition. SFAS No. 142 addresses
financial  accounting and reporting for intangible assets acquired  individually
or with a group of other assets at  acquisition.  This  statement also addresses
financial  accounting  and  reporting for goodwill and other  intangible  assets
subsequent to their acquisition. These statements were adopted by the Company on
January 1, 2002.  Under SFAS No. 142,  goodwill is no longer  amortized.  In the
place of  amortization,  the  Company is  required  to  periodically  review the
valuation  of the  Company's  intangible  assets  using a  discounted  cash flow
estimation   approach.   Following  the  accounting  for  impairment   discussed
immediately  below,  which has been made  under the rules of SFAS No.  121,  the
effect of adopting  SFAS No. 141 and 142 was limited to changes in  amortization
expense for the periods  after  December 31, 2001.  Additionally,  the assembled
workforce intangible asset has been  recharacterized as goodwill,  which will no
longer be amortized under the rules of SFAS No. 142.

     Accounting for impairment.  For the years ended December 31, 2001, 2000 and
1999, the Company  reported its accounting for intangible  assets under SFAS No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to Be Disposed Of", and the  accounting  and reporting  provisions of APB
Opinion No. 30. Under the rules of SFAS No. 121, the Company  performs  periodic
analysis to  determine if the  Company's  intangible  assets have been  impaired
using  a  combination  of  discounted  and  undiscounted   estimated  cash  flow
estimations.  In the fourth  quarter of 2001,  the Company  determined  that the
combination of new technologies  being  integrated in the Company's  current and
future products would result in its existing  product  platforms  having smaller
future revenue generation capability.  Additionally, the Company determined that
the continued  support of existing  products  while  migrating to new technology
platforms  would  result  in a lower  estimated  cash  value to the  Company  of
existing  products.  The resulting  impairment to the  intangible  assets of the
Company  was $11.8  million.  As  further  detailed  in Note 5 of the  Financial
Statements,  the intangible assets of the Company,  after the impairment charge,
will be Developed Technologies, Customer Base and Assembled Workforce.

     On  October  3,  2001,  FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment  or Disposal  of  Long-Lived  Assets,"  that  replaced  SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To
Be Disposed  Of." The primary  objectives  of this  project  were to develop one
accounting  model  based  on the  framework  established  in  SFAS  No.  121 for
long-lived  assets  to be  disposed  of by  sales  and  to  address  significant
implementation issues. The accounting model for long-lived assets to be disposed
of by sale applies to all long-lived assets,  including discontinued operations,


                                       24
<PAGE>

and replaces the provisions of the Accounting  Principles Board (APB Opinion No.
30,  Reporting  Results of  Operations-Reporting  the  Effects of  Disposal of a
Segment of a Business), for the disposal of segments of a business. SFAS No. 144
requires  that those  long-lived  assets be  measured  at the lower of  carrying
amount or fair value less cost to see whether reported in continuing  operations
or in discontinued operations. Therefore, discontinued operations will no longer
be measured at net realizable value or include amounts for operating losses that
have not yet  occurred.  The  provisions  of SFAS No.  144 were  adopted  by the
Company  effective  January 1, 2002.  The  impact of those  provisions  were not
material  to the  Company's  statement  of  financial  condition  and results of
operations.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

     As of March 31, 2002, the Company's obligations include variable rate notes
payable  and a line of credit  bank note with  aggregate  principal  balances of
approximately  $12.3  million,  which mature at various dates through 2005.  The
Company  is  exposed  to the  market  risk of  significant  increases  in future
interest rates.  Each incremental  point change in the prime interest rate would
correspondingly   increase  or  decrease  the  Company's   interest  expense  by
approximately $107,000 per year.

     At March 31, 2002,  the Company had accounts  receivable  of  approximately
$5.4 million net of an  allowance  for doubtful  accounts of $1.2  million.  The
Company  is  subject  to a  concentration  of credit  risk  because  most of the
accounts receivable are due from companies in the home health industry.


PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

     Neither CareCentric nor any of its subsidiaries is currently a party to any
legal proceedings which would be material to the business or financial condition
of the Company on a consolidated basis.

     Simione Central Holding,  Inc., a subsidiary of CareCentric now known as SC
Holding,  Inc.  ("SC  Holding")  was  one  of  several  defendants  named  in  a
"whistleblower"  lawsuit related to alleged Medicare fraud filed under the False
Claims  Act in the  Northern  District  of  Georgia  (U.S.  ex re.  McLendon  v.
Columbia/HCA  Healthcare  Corp., et al., No. 97-VC-0890 (N.D. Ga.)). The lawsuit
involves alleged claims that SC Holding  allegedly  participated in a conspiracy
with Columbia/HCA and other third parties to bill inflated and fraudulent claims
to Medicare.  On July 21, 1999, the Justice Department issued notice that it had
elected  not to join  in the  claims  asserted  against  SC  Holding  by  Donald
McLendon,  who  is a  former  employee  of  an  unrelated  service  provider  to
Columbia/HCA.  Although  the Justice  Department  joined the suit with regard to
other  defendants,  it  specifically  declined  to  intervene  with regard to SC
Holding.  In late 2000,  CareCentric was advised by Mr. McLendon's attorney that
notwithstanding the declination by the Justice Department,  Mr. McLendon intends
to pursue "whistleblower" claims against SC Holding directly.  Through March 22,
2002,  no such  action has been taken and  nothing  further  has been heard from
McLendon's  attorney for over one year.  Management believes that this claim has
been abandoned.  In the event a claim is asserted,  however,  CareCentric and SC
Holding intend to vigorously defend against it.

Item 2.  Change in Securities.

     On April 19,  2002,  the Company  received a letter from Nasdaq  indicating
that certain financial indicators as reported in the Company's December 31, 2001
financial statements were below applicable minimum requirements issued by Nasdaq
to maintain listing on the Nasdaq SmallCap Market. The Company's current trading
price  and  its  write-off  of  certain  non-cash,  impaired  intangible  assets
contributed to the Nasdaq letter.  On May 10, 2002, the Company submitted a plan
to Nasdaq  that  might  allow  the  Company  to work  towards  meeting  Nasdaq's
requirements for continued  listing on the Nasdaq SmallCap Market.  In the event
the Company's  plan does not receive  acceptance,  the  Company's  stock will be
de-listed  from Nasdaq.  Nevertheless,  the Company is  considering  the actions
necessary to achieve continued trading on the OTC Bulletin Board.

Item 3.  Defaults Upon Senior Securities.

None.



                                       25
<PAGE>

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

None.

Item 5.  Other Information.

None.

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

          (a)       Exhibits:

          3.1       Amended and Restated  Certificate  of  Incorporation  of the
                    Company.

          3.2       Certificate  of  Ownership  and  Merger of  Simione  Central
                    Holdings,  Inc. with and into CareCentric Inc. (Incorporated
                    by reference to Exhibit 3.2 of the Company's  Current Report
                    on  Form  8-K  dated  as  of  January  31,  2001  (file  No.
                    000-22162)).

          3.3       Amended and Restated Bylaws of the Company  (Incorporated by
                    reference  to  Exhibit  3.3  of the  Company's  Registration
                    Statement on Form S-1  (Registration  Number  333-25551)  as
                    filed with the Securities and Exchange Commission).

          3.4       Certificate  of  Designations,  Preferences  and  Rights  of
                    Series E  Preferred  Stock of the Company  (Incorporated  by
                    reference to Exhibit 3.4 of the  Company's  Annual Report on
                    Form 10-K for the year  ended  December  31,  2001 (File No.
                    000-22162)).

          10.46     Convertible Note Agreement dated as of August 8, 2000 by and
                    between the Company and Barrett C. O'Donnell.

          10.46.1   Convertible  Promissory  Note dated  August 8, 2000 from the
                    Company in favor of Barrett C. O'Donnell.

          10.46.2   First   Amendment  to   Convertible   Note   Agreement   and
                    Convertible  Promissory Note dated as of January 21, 2002 by
                    and between the Company and Barrett C. O'Donnell.

          (b)       Reports on Form 8-K:

                    On February 8, 2002,  the Company filed a Form 8-K regarding
                    its plan to realign its business.

                    On March 29, 2002,  the Company filed a Form 8-K regarding a
                    change to its 2001 earnings for an impairment  write-down of
                    goodwill and other intangible assets.




SIGNATURES

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


                                            CARECENTRIC, INC.


Dated:  May 15, 2002                        By:/s/ George M. Hare
                                               --------------------------------
                                            GEORGE M. HARE
                                            Sr. Vice President and
                                            Chief Financial Officer
                                            (Principal Financial Officer)


                                       26




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