<PAGE>   1
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                  FORM 10 - K

(Mark One)


 X   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
---  Act of 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996] For the fiscal
     year ended December 31, 1996

     Transaction Report Pursuant to Section 13 or 15(d) of the Securities
---  Exchange Act of 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
     For the Transaction Period
                                ---------------------
     Commission File Number
                                ---------------------

                           Response Oncology, Inc.
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)


            Tennessee                                 62-1212264
     ------------------------                  ------------------------
     (State of incorporation)                  (I.R.S. Employer ID No.)



     1775 Moriah Woods Blvd., Memphis, TN                 38117
  ----------------------------------------              ---------
  (Address of principal executive offices)              (Zip Code)


     Registrant's telephone number, including area code:  (901) 761-7000

         Securities registered pursuant to Section 12(b) of the Act:

                                                       Name of each exchange
     Title of each class                                on which registered
     -------------------                                -------------------

     Common Stock, par value $.01 per share.............NASDAQ National Market

         Securities registered pursuant to Section 12(g) of the Act:

                                     NONE

Indicate by check mark whether the registrant (1) has filed all reports
required by section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements
for the past 90 days.  Yes X      No
                          ---       ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated in Part III of this Form 10-K or any Amendment to this form 10-K
___

As of March 3, 1997, 11,967,543 shares of Common Stock of Response Oncology,
Inc. were outstanding and the aggregate market value of such Common Stock held
by non affiliates was $21,357,765 based on the closing sale price of $7.50 as
of that date.

Portions of Registrant's Proxy Statement for use in connection with the Annual
Meeting of Shareholders to be held on June 5, 1997 are incorporated by
reference into Part III of this report, to the extent set forth therein, if
such Proxy Statement is filed with the Securities and Exchange Commission on or
before April 30, 1997.  If such Proxy Statement is not filed by such date, the
information required to be presented in Part III will be filed as an amendment
to this report under cover of a Form 8.  The exhibits for this Form 10-K are
listed on Page ____.


<PAGE>   2


PART I


ITEM 1. BUSINESS

THE COMPANY

Response Oncology, Inc. (the "Company")  is a comprehensive cancer management
company. The Company provides advanced cancer treatment services through
outpatient facilities known as IMPACT(R) Centers under the direction of
approximately 350 independent oncologists, manages the practices of oncologists
with whom the Company has affiliated and conducts clinical cancer research on
behalf of pharmaceutical manufacturers.

     IMPACT(R) Services   The Company presently operates 47 IMPACT(R) Centers
in 23 states which provide high-dose chemotherapy with stem cell support to
cancer patients on an outpatient basis.  Through its IMPACT(R) Centers, the
Company has developed extensive medical information systems and databases
containing clinical and patient information, analysis of treatment results and
side effects and clinical care pathways. These systems and databases support
the Company's clinical trials program, which involves carefully planned,
uniform treatment regimens administered to a significant group of patients
together with the monitoring of outcomes and side effects of these treatments.
The clinical trials program allows the Company to develop a rational means of
improving future treatment regimens by predicting which patients are most
likely to benefit from different treatments.

     Each IMPACT(R) Center is staffed by, and makes extensive use of,
experienced oncology nurses, pharmacists, laboratory technologists, and other
support personnel to deliver outpatient services under the direction of
independent medical oncologists.  IMPACT(R) Center services include preparation
and collection of stem cells, administration of high-dose chemotherapy,
reinfusion of stem cells and delivery of broad-based supportive care.
IMPACT(R) Center personnel extend the support mechanism into the patient's
home, further reducing the dependence on hospitalization. The advantages of
this system to the physician and patient include (i) convenience of the local
treatment facility; (ii) specialized on-site laboratory and pharmacy services,
including home pharmacy support; (iii) access to the Company's clinical trials
program to provide ongoing evaluation of current cancer treatment; (iv)
specially trained medical and technical staff; (v) patient education and
support materials through computer, video and staff consultation; and (vi)
reimbursement assistance.

     High-dose chemotherapy is most appropriate for patients with lymphoma,
acute leukemia, multiple myeloma and breast and ovarian cancer. Patients
referred to the Company by the treating oncologist are placed on a treatment
protocol developed from the cumulative analysis of the Company's approximately
3,000 high-dose cases. Protocols conducted at the IMPACT(R) Center begin with a
drug regimen which allows for the collection and cryopreservation of stem cells.
A stem cell is a cell which originates in the bone marrow and is a precursor to
white blood cells. At the appropriate time, stem cells capable of restoring
immune system and bone marrow function are harvested over a two to three day
period. The harvested stem cells are then frozen and stored at the IMPACT(R)
Center, and following confirmation of response to treatment and a satisfactory
stem cell harvest, patients receive high-dose chemotherapy followed by
reinfusion of stem cells. Most patients are then admitted to an affiliated
hospital for 10-14 days. After discharge, the patient is monitored in the
oncologist's office. The Company believes that the proprietary databases and the
information gathering techniques developed from the foregoing programs enable
practicing oncologists to manage cancer cases cost effectively. Clinical
research conducted by the Company focuses on (i) improving cancer survival
rates; (ii) enhancing the cancer patient's quality of life; (iii) reducing the
costs of cancer care; and (iv) developing new approaches to cancer diagnosis,
treatment and post-treatment monitoring.

     Since 1989, the Company has conducted a clinical trials program pursuant
to which carefully planned, uniform treatments administered to a substantial
number of patients have been monitored and studied, with the results being
collected in a database and utilized to predict outcomes and determine
utilization of high-dose



                                     -2-
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chemotherapy as a treatment. In addition, the Company has recorded
outcomes from over 3,000 cases in which high-dose chemotherapy was utilized as a
treatment and has developed and continues to refine treatment pathways, which
forecast the best outcome with the lowest possible cost. Pursuant to agreements
between the Company and the oncologists who supervise their patients' treatment
in IMPACT(R) Centers, such oncologists are obligated to record and monitor
outcomes, collect information and report such information to the Company, for
which the oncologists are paid a fixed fee.

     Oncology Practice Management Services   During 1996 the Company commenced
execution of a diversification strategy into physician practice management,
consummating the acquisitions of 10 medical oncology practices including 38
medical oncologists in Florida and Tennessee.  Through these acquisitions, the
Company has sought to achieve deep geographic penetration in those markets,
believing that significant market share is crucial to achieving efficiencies,
revenue enhancements, and marketing of complete cancer services to diverse
payors including managed care.  Pursuant to management service agreements
("Service Agreements"), the Company provides management services that extend to
all nonmedical aspects of the operations of the affiliated practices.

     Pursuant to the Service Agreements, the Company is the sole and exclusive
manager and administrator of all day-to-day business functions connected
with the medical practice of an affiliated physician group.  The Company is
responsible for providing facilities, equipment, supplies, support personnel,
and management and financial advisory services.  Under the terms of the Service
Agreements in general, the Company (i) prepares annual capital and operating
budgets; (ii) prepares financial statements; (iii) orders and purchases medical
and office inventory and supplies; (iv) bills patients and third party payors;
(v) maintains accounting, billing, medical, and collection records; (vi)
negotiates and administers managed care contracts; (vii) arranges for legal and
accounting services related to practice operations; (viii) recruits, hires and
appoints an executive director to manage and administer all of the day-to-day
business functions of each practice; and (ix) manages all non-physician
professional support and administrative personnel, clerical, secretarial,
bookkeeping and collection personnel. The Company seeks to combine the
purchasing power of numerous physicians to obtain favorable pricing and terms
for equipment, pharmaceuticals and supplies and to obtain favorable contracts
with suppliers.

     In addition, the Company provides its outcomes database, treatment
protocols and pathways to affiliated oncologists, permitting these physicians
to more effectively manage cancer cases. The Company utilizes its management
expertise to conduct utilization review and quality assurance programs and
establish well-defined medical policies for its affiliated physicians.

     In return for its management services and expertise, the Company receives
a service fee based on net revenue or net operating income of the practice.
Pursuant to each Service Agreement, the physicians and the practice agree not
to compete with the Company and the practice. Each Service Agreement has an
initial term of 40 years and, after the initial term, will be automatically
extended for additional five year terms unless either party delivers written
notice to the other party, 180 days prior to the expiration of the preceding
term. The Service Agreement may only be terminated for cause. If the Company
terminates the Service Agreement for cause, the practice is typically obligated
to purchase assets (which typically include intangible assets) and pay
liquidated damages, which are guaranteed by individual physicians for a period
of time. Each Service Agreement provides for the creation of an oversight
committee, a majority of whom are designated by the practice. The oversight
committee is responsible for developing management and administrative policies
for the overall operation of each clinic.

     Cancer Research Services  The Company also utilizes its database to
provide various types of data to pharmaceutical companies regarding the use of
their products. The IMPACT(R) Center network and the Company's medical
information systems make the Company ideally suited to this process. The
Company is currently participating in several projects with leading
pharmaceutical manufacturers to furnish data in connection with FDA
applications and post-FDA approval marketing studies. Revenue from these
contracts helps to underwrite the Company's clinical trials expenses. Such
relationships with pharmaceutical companies allow patients and physicians
earlier access to drugs and therapies and ensure access to clinical trials
under managed care, which guarantee the Company's role as a leader in
oncological developments.


                                     -3-
<PAGE>   4



COMPETITION

     As a result of growing interest among oncologists and the more widely
recognized efficacy of high-dose chemotherapy treatments, the competitive
environment in the field is starting to heighten. Most community hospitals with
a commitment to cancer treatment are evaluating their need to provide high-dose
treatments, and other entities are competing with the Company in providing
high-dose services similar to those offered by the Company.

     Such competition has long been contemplated by the Company, and is
indicative of the evolution of this field.  While the Company believes
that the demand for high-dose chemotherapy services is sufficiently large to
support several significant providers of these services, it is subject to
increasing competitive risks from these entities.

     In addition, the Company is aware of at least two competitors specializing
in the management of oncology practices and two other physician management
companies that manage at least one oncology practice. Several health care
companies with established operating histories and significantly greater
resources than the Company are also providing at least some management services
to oncologists.  There are certain other companies, including hospitals, large
group practices, and outpatient care centers, that are expanding their presence
in the oncology market and may have access to greater resources than the
Company.  Furthermore, organizations specializing in home and ambulatory
infusion care, radiation therapy, and group practice management compete in the
oncology market.

     The Company's revenue depends on the continued success of its affiliated
physician groups.  These physician groups face competition from several
sources, including sole practitioners, single and multi-specialty groups,
hospitals and managed care organizations.

GOVERNMENT REGULATION

     The delivery of healthcare items and services has become one of the most
highly regulated of professional and business endeavors in the United States.
Both the federal government and the individual state governments are
responsible for overseeing the activities of individuals and businesses engaged
in the delivery of healthcare services. Federal law and regulations are based
primarily upon the Medicare program and the Medicaid program, each of which is
financed, at least in part, with federal money. State jurisdiction is based
upon the state's authority to license certain categories of healthcare
professionals and providers, and the state's interest in regulating the quality
of healthcare in the state, regardless of the source of payment.

     The Company believes it is in material compliance with applicable laws.
However, the laws applicable to the Company are subject to evolving
interpretations and therefore, there can be no assurance that a review of the
Company's or the affiliated physicians' practices by a court or law enforcement
or regulatory authority will not result in a determination that could adversely
affect the operations of the Company or the affiliated physicians. Furthermore,
there can be no assurance that the laws applicable to the Company will not be
amended in a manner that could adversely affect the Company.

FEDERAL LAW

     The federal healthcare laws apply in any case in which the Company is
providing an item or service that is reimbursable under Medicare or Medicaid or
is claiming reimbursement from Medicare or Medicaid on behalf of physicians
with whom the Company has a Service Agreement. The principal federal laws
include those that prohibit the filing of false or improper claims with the
Medicare or Medicaid program, those


                                     -4-
<PAGE>   5


that prohibit unlawful inducements for the referral of business
reimbursable under Medicare or Medicaid and those that prohibit the provision of
certain services by a provider to a patient if the patient was referred by a
physician with which the provider has certain types of financial relationships.

     False and Other Improper Claims  The federal government is authorized to
impose criminal, civil and administrative penalties on any healthcare provider
that files a false claim for reimbursement from Medicare or Medicaid. Criminal
penalties are also available in the case of claims filed with private insurers
if the government can show that the claims constitute mail fraud or wire fraud.
While the criminal statutes are generally reserved for instances evidencing an
obviously fraudulent intent, the civil and administrative penalty statutes are
being applied by the government in an increasingly broader range of
circumstances. For example, the government takes the position that a pattern of
claiming reimbursement for unnecessary services violates these statutes if the
claimant should have known that the services were unnecessary. The government
also takes the position that claiming reimbursement for services that are
substandard is a violation of these statutes if the claimant should have known
that the care was substandard.

     Anti-Kickback Law  Federal law commonly known as the "Anti-kickback
Amendments" prohibits the offer, solicitation, payment or receipt of anything
of value (direct or indirect, overt or covert, in cash or in kind) which is
intended to induce the referral of Medicare or Medicaid patients, or the
ordering of items or services reimbursable under those programs. The law also
prohibits remuneration that is intended to induce the recommendation of, or the
arranging for, the provision of items or services reimbursable under Medicare
and Medicaid. The law has been broadly interpreted by a number of courts to
prohibit remuneration which is offered or paid for otherwise legitimate
purposes if the circumstances show that one purpose of the arrangement is to
induce referrals. Even bona fide investment interests in a healthcare provider
may be questioned under the Anti-kickback Amendment if the government concludes
that the opportunity to invest was offered as an inducement for referrals. The
penalties for violations of this law include criminal sanctions and exclusion
from the federal healthcare program.

     In part to address concerns regarding the implementation of the
Anti-kickback Amendments, the federal government in 1991 published regulations
that provide exceptions, or "safe harbors," for certain transactions that will
not be deemed to violate the Anti-kickback Amendments. Among the safe harbors
included in the regulations were provisions relating to the sale of physician
practices, management and personal services agreements and employee
relationships. Subsequently, regulations were published offering safe harbor
protection to additional activities, including referrals within group practices
consisting of active investors. Proposed amendments to the Anti-kickback
Regulations were published in 1994 which, if ultimately adopted, would result
in substantive changes to existing regulations. The failure to qualify under a
safe harbor provision, while potentially subjecting the activity to greater
regulatory scrutiny, does not render the activity illegal per se.

     There are several aspects of the Company's relationships with physicians
to which the Anti-kickback Law may be relevant. In some instances, the
Company itself may become a provider of services for which it will claim
reimbursement from Medicare or Medicaid, and physicians who are investors in the
Company may refer patients to the Company for those services. Furthermore, the
government may construe some of the marketing and managed care contracting
activities of the Company as arranging for the referral of patients to the
physicians with whom the Company has a management contract. Finally, at the
request of a physician or medical practice with which the Company has a
contract, the Company will manage in the physician's office the provision of
ancillary services which the physician desires to make available to his
patients. At the present time, the services provided by the Company in its
IMPACT(R) Centers are generally not reimbursable by Medicare or Medicaid.

     Although neither the investments in the Company by physicians nor the
management contracts between the Company and physicians qualify for protection
under the safe harbor regulations, the Company does not believe that these
activities fall within the type of activities the Anti-kickback Amendments were
intended to prohibit. A determination that the Company had violated the
Anti-kickback Amendments would have a material adverse effect on the Company's
business.

     The Stark Self-Referral Law  The Stark Self-Referral Law ("Stark Law")
prohibits a physician from referring a patient to a healthcare provider for
certain designated health services reimbursable by Medicare or

                                     -5-
<PAGE>   6


Medicaid if the physician has a financial relationship with that
provider, including an investment interest, a loan or debt relationship or a
compensation relationship. The designated services covered by the law include
radiology services, infusion therapy, radiation therapy, outpatient prescription
drugs and hospital services, among others. In addition to the conduct directly
prohibited by the law, the statute also prohibits "circumvention schemes," that
are designed to obtain referrals indirectly that cannot be made directly. The
penalties for violating the law include (i) a refund of any Medicare or Medicaid
payments for services that resulted from an unlawful referral; (ii) civil fines;
and (iii) exclusion from the Medicare and Medicaid programs. The Stark Law
contains a number of exceptions potentially applicable to the Company's
operations. These include exceptions for a physician's ownership of publicly
traded securities in a corporation with stockholders' equity exceeding $75
million as of the end of its most recent fiscal year, for certain in-office
ancillary services and for certain personal services arrangements.

     The Company is not currently a provider of any designated health service
under the Stark Law for which the Company claims reimbursement from Medicare or
Medicaid. The Company intends to assure that any designated health services
provided by physicians with whom the Company has a management contract will
qualify under the applicable exception in the Stark Law for in-office services.
However, because the Company will provide management services related to those
designated health services, there can be no certainty that the Company will not
be considered as the provider for those services. In that event, the referrals
from the physicians will be permissible only if (i) the Company qualifies for
the exception for publicly-traded corporations and (ii) the management contract
meets the exception in the Stark Law for payments by physicians to a health
care entity. To qualify for such exception, such payments must be set at a fair
market value. The Company intends to structure its arrangements so as to
qualify for applicable exceptions under the Stark Law, however, there can be no
assurance that a review by courts or regulatory authorities would not result in
a contrary determination.

STATE LAW

     State Anti-Kickback Laws  Many states have laws that prohibit the payment
of kickbacks in return for the referral of patients. Some of these laws apply
only to services reimbursable under the state Medicaid program. However, a
number of these laws apply to all healthcare services in the state, regardless
of the source of payment for the service. The Company believes, based on the
advice of counsel, that these laws prohibit payments to referral sources only
where a principal purpose for the payment is for the referral. The Company pays
oncologists, who supervise their patients' treatment at the IMPACT(R) Centers,
fees for collecting and monitoring treatment and outcomes data and reporting
such data to the Company. The Company believes such fees reflect the fair
market value of the services rendered by such physicians to the Company.
However, the laws in most states regarding kickbacks have been subjected to
limited judicial and regulatory interpretation and therefore, no assurances can
be given that the Company's activities will be found to be in compliance.
Noncompliance with such laws could have an adverse effect upon the Company and
subject it and such physicians to penalties and sanctions.

     State Self-Referral Laws  A number of states have enacted self-referral
laws that are similar in purpose to the Stark Self-Referral Law. However, each
state law is unique. For example, some states only prohibit referrals where the
physician's financial relationship with a healthcare provider is based upon an
investment interest. Other state laws apply only to a limited number of
designated health services. Finally, some states do not prohibit referrals, but
merely require that a patient be informed of the financial relationship before
the referral is made. The Company believes that it is in compliance with the
self-referral law of any state in which the Company has a financial
relationship with a physician.

     Fee-Splitting Laws  Many states prohibit a physician from splitting with a
referral source the fees generated from physician services. Other states have a
broader prohibition against any splitting of a physician's fees, regardless of
whether the other party is a referral source. In most cases, it is not
considered to be fee-splitting when the payment made by the physician is
reasonable reimbursement for services rendered on the physician's behalf.


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     The Company will be reimbursed by physicians on whose behalf the Company
provides management services. The Company intends to structure the
reimbursement provisions of its management contracts with physicians in order
to comply with applicable state laws relating to fee-splitting. However, there
can be no certainty that, if challenged, the Company and its affiliated
physicians will be found to be in compliance with each state's fee-splitting
laws.

     Corporate Practice of Medicine  Most states prohibit corporations from
engaging in the practice of medicine. Many of these state doctrines prohibit a
business corporation from employing a physician. However, states differ with
respect to the extent to which a licensed physician can affiliate with
corporate entities for the delivery of medical services. Some states interpret
the "practice of medicine" broadly to include decisions that have an  impact on
the practice of medicine, even where the physician is not an employee of the
corporation and the corporation exercises no discretion with respect to the
diagnosis or treatment of a particular patient.

     The Company's standard practice under its management contracts is to avoid
the exercise of any responsibility on behalf of its physicians that could be
construed as affecting the practice of medicine. Accordingly, the Company
believes that it is not in violation of applicable state laws relating to the
corporate practice of medicine. However, because such laws and legal doctrines
have been subjected to only limited judicial and regulatory interpretation,
there can be no assurance that, if challenged, the Company will be adjudicated
to be in compliance with all such laws and doctrines.

     Insurance Laws   Laws in all states regulate the business of insurance and
the operation of HMOs. Many states also regulate the establishment and
operation of networks of health care providers. While these laws do not
generally apply to companies that provide management services to networks of
physicians, there can be no assurance that regulatory authorities of the states
in which the Company operates would not apply these laws to require licensure
of the Company's operations as an insurer, as an HMO or as a provider network.
The Company believes that it is in compliance with these laws in the states in
which it does business, but there can be no assurance that future
interpretations of insurance and health care network laws by regulatory
authorities in these states or in the states into which the Company may expand
will not require licensure or a restructuring of some or all of the Company's
operations.

     State Licensing  The Company's laboratories operated in conjunction with
certain  IMPACT(R) Centers are registered with the U.S. Food & Drug
Administration and are certified pursuant to the Clinical Laboratory
Improvement Amendments of 1988. In addition, the Company maintains pharmacy
licenses for all  IMPACT(R) Centers having self-contained pharmacies, and state
health care facility licenses, where required.

REIMBURSEMENT AND COST CONTAINMENT

     Approximately 50% of the net revenue of the Company's practice management
division and less than five percent of the revenue of the Company's
IMPACT(R) division is derived from payments made by government sponsored health
care programs (principally, Medicare and Medicaid). As a result, any change in
reimbursement regulations, policies, practices, interpretations or statutes
could adversely affect the operations of the Company. In recent years, the
federal government has sought to constrain the growth of spending in the
Medicare and Medicaid programs. Through the Medicare program, the federal
government has implemented a resource-based relative value scale ("RBRVS")
payment methodology for physician services. RBRVS is a fee schedule that, except
for certain geographical and other adjustments, pays similarly situated
physicians the same amount for the same services. The RBRVS is adjusted each
year and is subject to increases or decreases at the discretion of Congress. The
implementation of RBRVS may result in reductions in payment rates for procedures
provided by physicians under current contract with the Company. RBRVS-type
payment systems have also been adopted by certain private third party payors and
may become a predominant payment methodology. A broader implementation of such
programs would reduce payments by private third party payors and could
indirectly reduce the Company's operating margins to the extent that the cost of
providing management services related to such procedures could not be
proportionately reduced. To the extent the Company's costs increase, the Company
may not be able to recover such cost increases from government reimbursement
programs. In addition, because of cost containment measures and market changes
in non-governmental insurance plans, the Company may not be able to shift cost
increases to non-governmental payors. The Company expects a reduction



                                     -7-
<PAGE>   8


from historical levels in per patient Medicare revenue received by
certain of the physician groups with which the Company contracts; however, the
Company does not believe such reductions would, if implemented, result in a
material adverse effect on the Company.

     In addition to current governmental regulation, the Clinton Administration
and several members of Congress have proposed legislation for comprehensive
reforms affecting the payment for and availability of health care services.
Aspects of certain of such health care proposals, such as reductions in
Medicare and Medicaid payments, if adopted, could adversely affect the Company.
Other aspects of such proposals, such as universal health insurance coverage
and coverage of certain previously uncovered services, could have a positive
impact on the Company's business. It is not possible at this time to predict
what, if any, reforms will be adopted by Congress or state legislatures, or
when such reforms would be adopted and implemented. As health care reform
progresses and the regulatory environment accommodates reform, it is likely
that changes in state and federal regulations will necessitate modifications to
the Company's agreements and operations. While the Company believes it will be
able to restructure in accordance with applicable laws and regulations, the
Company cannot assure that such restructuring in all cases will be possible or
profitable.

     Rates paid by private third party payors, including those that provide
Medicare supplemental insurance, are based on established physician, clinic and
hospital charges and are generally higher than Medicare payment rates. Changes
in the mix of the Company's patients among the non-governmental payors and
government sponsored health care programs, and among different types of
non-government payor sources, could have a material adverse effect on the
Company.

EMPLOYEES

     As of March 1, 1997, the Company employed approximately 500 persons,
approximately 400 of whom were full-time employees. Under the terms of the
Service Agreements with the affiliated physician groups, the Company is
responsible for the practice compensation and benefits of the groups'
non-physician medical personnel. No employee of the Company or of any
affiliated physician group is a member of a labor union or subject to a
collective bargaining agreement. The Company believes that its labor relations
are good.

ITEM 2. PROPERTIES

     As of March 1, 1997 the Company leased 36,500 square feet of space at 1775
Moriah Woods Boulevard, in Memphis, Tennessee, where the Company's
headquarters are located.  The lease expires in 2002.  The Company also leases
all facilities housing the Company's operating facilities.  The Company is also
liable under leases for facilities where affiliated practices to which the
Company provides management services are located. Management believes that the
Company's properties are well maintained and suitable for its business
operations.  The Company may lease additional space in connection with the
development of future treatment facilities or practice affiliations.

ITEM 3. LEGAL PROCEEDINGS

     No material litigation is currently pending against the Company, and the
Company is not aware of any outstanding claims against any affiliated physician
group that would have a material adverse effect on the Company's financial
condition or results of operations. The Company expects its affiliated
physician groups to be involved in legal proceedings incident to their
business, most of which are expected to involve claims related to the alleged
medical malpractice of its affiliated oncologists.

ITEM 4. MATTERS SUBMITTED TO STOCKHOLDERS' VOTE

               Not applicable.


                                     -8-


<PAGE>   9


                                   PART II

ITEM 5. MARKET INFORMATION AND RELATED STOCKHOLDER MATTERS

     The Company's common stock is quoted on The Nasdaq Stock Market's National
Market under the symbol "ROIX".  Prior to October 26, 1995, the common stock
was listed on the American Stock Exchange under the symbol "RTK".  As of March
1, 1997 the Company's common stock was held by approximately 600 shareholders
of record.

     The Company has not paid any cash dividends on the common stock since its
inception.  The Board of Directors does not intend to pay cash dividends on the
common stock in the foreseeable future, but intends to retain all earnings, if
any, for use in the Company's business.

     The following tables set forth, for the periods indicated, the high and
low sale prices for the Company's common stock.  All prices are adjusted to
give effect to a reverse stock split effected by the Company on November 2,
1995.


<TABLE>
<CAPTION>

Year Ended December 31, 1996                  Year Ended December 31, 1995
----------------------------                  ----------------------------
                           High      Low                               High     Low
                           ----      ---                               ----     ---
<S>                        <C>       <C>      <C>                      <C>      <C>
First Quarter              16 1/2    12       First Quarter            12 1/2   8 1/2
Second Quarter             21        12 1/2   Second Quarter           13 3/4   9 1/16
Third Quarter              17        12 1/2   Third Quarter            21 1/4   7 1/2
Fourth Quarter             14 7/8     9 1/4   Fourth Quarter           20       9 1/4

</TABLE>

Recent Sales of Unregistered Securities

Securities Issued in connection with Physician Practice Affiliations:
During the Registrant's 1996 fiscal year, the Registrant issued shares of its
Common Stock, warrants to purchase the Registrant's Common Stock and unsecured,
and subordinated promissory notes ("PIK Notes") payable at the option of
holders in shares of Common Stock (collectively, the "Unregistered Securities")
in ten separate acquisition transactions pursuant to which the Registrant
acquired the operating assets or stock of ten medical oncology practices from
the physician owners ("Physician Owners") thereof or the professional
association owned by such Physician Owners ("PA"). In each case, the
Unregistered Securities were issued in exchange for either 100% of the
outstanding stock owned by the Physician Owners of the practices or, in one
case, certain of the assets of the PA. The Unregistered Securities were offered
and issued to the Physician Owners or, in one instance, the PA, in reliance
upon the exemption from registration under Section 4(2) of the Securities Act
of 1933. Each of the Physician Owners was an accredited investor, as that term
is defined in Rule 501 under Regulation D, and each Physician Owner was
represented by competent transactional counsel. The affiliation transactions
and Unregistered Securities issued in connection with the affiliations are as
follows:

     In January 1996, the Registrant issued to Physician Owners a single 9% PIK
Note in the principal amount of $5,959,972 that matures in 2011, with principal
and interest payable on an amortized basis. Any payment of principal and
interest may be paid, at the option of the holder of the PIK Note, in shares of
Common Stock at a conversion price of $14.00 per share.

     In April 1996, the Registrant issued to Physician Owners 80,000 warrants
to purchase Common Stock at a price of $11.75. In addition, the Registrant
issued a 5% PIK Note to a Physician Owner in the principal amount of $150,000
maturing in 1997, payment of which may be made, at the option of the holder, in
shares of Common Stock at a conversion price of $11.75 per share.

     In June 1996, the Registrant issued to a Physician Owner 196,154 shares of
Common Stock. In addition, the Registrant issued to the Physician Owner a $5.1
million 4% PIK Note maturing in 1998, payment of which may be made, at the
option of the holder, in shares of Common Stock at a conversion price of $15.60
per share.

     In July 1996, the Registrant issued to Physician Owners an aggregate of
117,600 shares of Common Stock.

     In August 1996, the Registrant issued to Physician Owners 5% PIK Notes in
the aggregate of $1,900,000 maturing August 1, 2001, payment of which may be
made, at the option of the holders, in shares of Common Stock at a conversion
price of $13.75.

     In October 1996, the Registrant issued to the P.A. or Physician Owners an
aggregate of 326,170 shares of Common Stock. In addition, the Registrant issued
4% and 5% PIK Notes in the aggregate of $5,636,625 maturing through 2001,
payment of which may be made, at the option of the holders, in shares of Common
Stock at conversion prices ranging from $12.73 to $18.00 (approximately $4
million of which has a conversion price of $12.73).

     In November 1996, the Registrant issued 47,836 shares of Common Stock. In
addition, the Registrant issued to Physician Owners 5.6% PIK Notes in the
aggregate of $772,500, payment of which may be made, at the option of the
holders, in shares of Common Stock at a conversion price of $14.20.


Securities Issued to Controlling Shareholder

     In April 1996, the Registrant issued an unsecured, $10 million convertible
note to Seafield Capital Corporation ("Seafield"), the Registrant's controlling
shareholder, bearing interest at the rate of prime plus 1%, which after August
1, 1996, became convertible at the election of Seafield into shares of the
Company's Common Stock. Proceeds of the loan were used to finance a practice
management affiliation.  The note was exchanged for 909,090 shares of Common
Stock during August 1996.

     In October 1996, the Registrant obtained a $23.5 million credit facility
from Seafield to be used to finance practice affiliations and for working
capital.  The facility was evidenced by a convertible note payable upon the
earlier of the closing of an equity offering or August 1, 1998.  The note
provided for interest at a rate of 8% escalating at certain points during the
term of the note, was unsecured and was convertible at the election of Seafield
Capital Corporation into shares of the Company's common stock at a conversion
price equal to the market price of the common stock at the date of conversion;
provided, however, that after December 31, 1996, the conversion price would be
the lower of market or $11.00 per share.


ITEM 6.  SELECTED FINANCIAL DATA
         (in thousands except per share data)


<TABLE>
<CAPTION>

                                                      Year Ended December 31
                                           ---------------------------------------------
                                             1996     1995      1994     1993     1992
                                           --------  -------  --------  -------  -------
<S>                                        <C>       <C>      <C>       <C>      <C>
Net revenue and other income               $ 67,553  $44,580  $38,471   $37,885  $28,043

Net earnings (loss)                             910    2,314   (2,346)      700      591

Net earning (loss) to common shareholders       907    2,310   (2,349)      697      584

Total assets                                142,950   24,765   21,037    25,877   17,100

Long-term debt and lease obligations         62,230       15       29       185      320

Earnings (loss) per common share (1)       $   0.11  $  0.32  $ (0.34)  $  0.10  $  0.09
</TABLE>

(1)  On November 2, 1995, the Company effected a one-for-five reverse split of
     its common stock.  Earnings (loss) per common share computations have been
     restated to retroactively reflect the reverse split.



                                     -9-
<PAGE>   10


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

OVERVIEW

     The Company is a comprehensive cancer management company.  The Company
provides advanced cancer treatment services through outpatient facilities known
as IMPACT(R) Centers under the direction of practicing oncologists; owns the
assets of and manages the nonmedical aspects of oncology practices; and
conducts clinical cancer research on behalf of pharmaceutical manufacturers.
Approximately 350 medical oncologists are associated with the Company through
these programs.

     In 1990 the Company began development of a network of specialized
IMPACT(R) Centers to provide complex outpatient chemotherapy services under the
direction of practicing oncologists.  The majority of the therapies provided at
the IMPACT(R) Centers entail the administration of high-dose chemotherapy
coupled with peripheral blood stem cell support of the patient's immune system.
At December 31, 1996, the Company's network consisted of 47 IMPACT(R) Centers,
including 24 wholly-owned, 12 managed programs, and 11 owned and operated in
joint venture with a host hospital.  Prior to January 1996, the Company derived
substantially all of its revenues from outpatient cancer treatment services
through reimbursements from third party payors on a fee-for-service or
discounted fee-for-service basis.

     During 1996 the Company commenced execution of a diversification strategy
into practice management.  Such diversification included the affiliation during
1996 with 38 physicians in 10 medical oncology practices in Florida and
Tennessee.  The Company has sought deep geographic penetration in those markets
believing that significant market share is crucial to achieving efficiencies,
revenue enhancements, and marketing of complete cancer services to diverse
payors including managed care.  Pursuant to Service Agreements, the Company
provides management services that extend to all nonmedical aspects of the
operations of the affiliated practices.  The Company is responsible for
providing facilities, equipment, supplies, support personnel, and management
and financial advisory services.

     In its practice management relationships, the Company has predominantly
used two models of Service Agreements:  (i) an "adjusted net revenue"
model; and (ii) a "net operating income" model.  Service Agreements utilizing
the adjusted net revenue concept provide for the payment by the physician group
out of practice net revenue, in the following order of payment (A) physician
retainage (i.e. physician compensation, benefits, and perquisites, including
malpractice insurance) of between 24% and 50% of net revenue ("Physician
Expense"); (B) a clinic expense portion of the management fee (the "Clinic
Expense Portion") equal to the aggregate actual practice operating expenses
exclusive of Physician Expense; and (C) a base service fee portion (the "Base
Fee") of between 8.7% and 29.5% of net revenue.  In the event that net revenue
is insufficient to pay all of the foregoing in full, then the Base Fee is first
reduced, followed by the Clinic Expense Portion of the management fee, and
finally, physician retainage, therefore effectively shifting all operating risk
to the Company.  In each Service Agreement utilizing the adjusted net revenue
model, the Company is entitled to a Performance Fee generally equal to 50% of
Annual Surplus, defined as the excess of practice revenue over the sum of
Physician Retainage, the Clinic Expense Portion, and the Base Fee.

     Service Agreements utilizing the net operating income model provide for a
management fee equal to the sum of a Clinic Expense Portion (see preceding
paragraph) plus a percentage (the "Percentage Portion"), ranging from 20% to
40%, of the net operating income of the practice (defined as net revenue minus
practice operating expenses).  In those practice management relationships
utilizing the net operating income model Service Agreement, the Company and the
physician group share the risk of expense increases and revenue declines, but
likewise share the benefits of expense savings, economies of scale and practice
enhancements.



                                     -10-

<PAGE>   11


     Each Service Agreement contains a liquidated damages provision binding the
physician practice and the principals thereof in the event the Service
Agreement is terminated "for cause" by the Company.  The liquidated damages are
a declining amount, equal in the first year to the purchase price paid by the
Company for practice assets and declining over a period of between 5 and 17.5
years.  Principals are relieved of their individual obligations for liquidated
damages only in the event of death, disability, or retirement at a
predetermined age.

RESULTS OF OPERATIONS

1996 Compared to 1995

     Net revenue increased 52% to $67.4 million compared to $44.3 million for
the year ended December 31, 1995.  Net revenue from patient services decreased
$.4 million from $33.8 million in 1995 to $33.4 million in 1996.  Several
jointly-owned IMPACT(R) Centers became operational during 1996 that minimized
the effect of the closure of three wholly-owned IMPACT(R) Centers.  These sites
were closed due to affiliations by referring physicians with another physician
practice management company prior to the Company establishing its own practice
management alternative for oncologists.  Practice management service fees from
affiliations consummated beginning in January 1996, were $19.3 million or 84% of
the overall increase in net revenue.  Additionally, pharmaceutical sales to
physicians increased $3.7 million from $9.8 million in 1995 to $13.5 million in
1996.  Practice management service fees and pharmaceutical sales to physicians
both carry a lower operating margin than the Company's traditional patient
service revenue.

     EBITDA (earnings before interest, taxes, depreciation and amortization)
increased $3.3 million or 80% to $7.4 million for the year ended
December 31, 1996, in comparison to $4.1 million for the year ended December 31,
1995. EBITDA is not intended to represent net income, cash flow, or any other
measure of performance in accordance with generally accepted accounting
principles, but is included because the Company believes it is useful for
measuring and identifying trends with respect to the Company's operating
performance and creditworthiness.  The increase in EBITDA is primarily due to
the increase in revenues related to Service Agreements with affiliated
physicians.

     Operating expenses increased $18.9 million, or 57%, from $32.9 million in
1995 to $51.8 million in 1996. Operating expenses consist primarily of payroll
costs, pharmaceutical and laboratory expenses, medical director fees, rent
expense, and other operational costs.  Operating expenses as a percentage of
net revenue were 77% and 74% for the years ended 1996 and 1995, respectively.
The increase is primarily due to clinic expenses incurred at the affiliated
physician practices under the Service Agreements.  The increase as a percentage
of net revenue is due to the lower margins realized on increased practice
management service fees and pharmaceutical sales to physicians.

     Lab and pharmacy expense, which represents the largest component of
operating expenses, increased $11.6 million, or 62%, from 1995 to 1996.
Payroll costs increased $2.8 million, or 42%, from 1995 to 1996.  The increases
are primarily related to lab and pharmacy expenses and payroll costs at the
affiliated physician practices that were not included in the Company's
operating results in 1995.

     General and administrative costs increased $.7 million, or 12%, from $5.5
million in 1995 to $6.2 million in 1996.  Salaries and benefits, which
represent the largest component of general and administrative expenses, were
$4.2 million in 1996 and $3.3 million in 1995.  The increase is primarily due
to the addition of operational management personnel for the practice management
division and general increases in salaries and benefits.  General and
administrative costs as a percentage of net revenue were 9% and 12% in 1996 and
1995, respectively.  The decrease as a percentage of net revenue is due to the
significant increase in the revenue base from practice management service fees
without a significant increase in general and administrative costs.



                                     -11-
<PAGE>   12



     Depreciation and amortization increased $1.8 million from $1.7 million in
1995 to $3.5 million in 1996.  The increase is primarily attributable to the
amortization of the Service Agreements purchased in practice management
affiliations consummated during 1996.

     Interest expense was $2.6 million in 1996 related to borrowings under the
Company's Credit Facility and debt assumed and/or issued in connection with
practice management affiliations.

     The provision for doubtful accounts decreased $.5 million from $2.1
million in 1995 to $1.6 million in 1996.  The provision as a percentage of net
revenue from patient services was 5% and 6% for 1996 and 1995, respectively.
The decrease is attributable to a higher proportion of contracted patient
accounts.  The Company's collection experience in 1996 and 1995 may not be
indicative of future periods.

     Other costs of $.6 million were primarily non-recurring costs associated
with the Company's financing efforts in 1996.

     Tax net operating loss carryforwards were utilized to reduce income tax
expense to zero.  As of December 31, 1996, the Company had available net
operating loss carryforwards totaling approximately $4.5 million, all of which
is subject to certain annual limitations due to a change in ownership for tax
purposes in 1990. The use of net operating loss carryforwards is also dependent
upon future taxable income.  See Note G to the consolidated financial
statements.

1995 Compared to 1994

     The Company recorded net earnings of $2.3 million compared to a loss of
$2.3 million for the year ended December 31, 1994.  The significant improvement
in operations in 1995 compared to 1994 is attributable to increased revenues
from the increased referrals of high-dose chemotherapy patients, including the
establishment of additional IMPACT(R) Centers, principally in joint venture
with hospitals, and the further development of physician investigator studies
for the pharmaceutical industry.

     Net revenue increased $6.0 million, or 16%, from 1994 to 1995.  In
addition to an approximate $2.1 million increase in net revenues from services
to patients to $33.8 million in 1995, sales of pharmaceuticals to physicians
increased by $3.3 million to $9.8 million and revenues from physician
investigator studies in 1995, the first year of significant revenues generated
from this source, amounted to $.7 million.

     Operating expenses increased $1.1 million, or 4%, from 1994 to 1995.
Operating expenses consist primarily of payroll costs, pharmaceutical and
laboratory expenses, medical director fees, rent expense and other operational
costs.  These expenses are expected to display a high degree of variability in
proportion to Center revenues.  Operating expenses as a percentage of net
revenue were 74% and 83% for the years ended 1995 and 1994, respectively.  This
decrease is primarily attributable to operating efficiencies at higher levels
of Center activity and certain fixed operating expenses being spread over a
larger revenue base.

     Lab and pharmacy expense, which represents the largest component of
operating expenses, increased $1.7 million, or 10%, from 1994 to 1995.  The
increase is primarily due to an increase in patient referrals and
pharmaceutical supply expense related to sales to physicians.  A reduction in
medical director fees and other operating expenses of $.5 million was realized
during 1995.

     General and administrative costs increased $1.2 million, or 29%, from 1994
to 1995.  Salaries and benefits, which represent the largest component of
general and administrative expenses, were $3.3 million in 1995 and $2.2 million
in 1994.  The increase is primarily due to management incentive compensation
relative to



                                     -12-
<PAGE>   13


significant improvement in operations and general increases in salaries
and benefits.  General and administrative costs as a percentage of net revenue
were 12% and 11% in 1995 and 1994, respectively.

     Depreciation expense decreased $.1 million from 1994 to 1995.  The
decrease is primarily attributable to many prior capital expenditures becoming
fully depreciated.  Amortization expense decreased $.2 million from 1994 to
1995 due to the startup costs of many Centers being fully amortized after a
two-year operational period.

     The provision for doubtful accounts decreased $.4 million from 1994 to
1995.  The provision as a percentage of net revenue was 5% and 7% for 1995 and
1994, respectively.  The decrease is attributable to a higher proportion of
contracted patient accounts, improved collections performance and an increase
in revenues from physician sales, hospital management fees, and contract
research for which collection is more certain.  The Company's collection
experience in 1995 and 1994 may not be indicative of future periods.

     Tax net operating loss carryforwards were utilized to fully offset 1995
taxable income.

LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 1996, the Company's working capital was $14.6 million with
current assets of $31.7 million and current liabilities of $17.1 million. Cash,
cash equivalents, and short-term investments represented $.4 million of the
Company's current assets.  The increases in other current assets are related to
receivables acquired through practice management affiliations and amounts due
from affiliated physicians for practice management service fees.  Current
liabilities increased for amounts payable for operating expenses of practices
under management and liabilities assumed as consideration in the practice
management affiliations.

     Cash used by operating activities was $3.7 million in 1996 as compared to
cash provided by operating activities of $2.1 million in 1995.  The decrease in
operating cash flow is primarily due to   advances made to fund operations of
recent practice management affiliations and increased general and
administrative expenses in 1996 related to  the Company's diversification into
physician practice management.

     Cash used by investing activities was $53.3 million and $1.6 million in
1996 and 1995, respectively.  The increase primarily represents  funds used to
acquire the nonmedical assets of the  physician practices.  Cash provided by
financing activities was $53.3 million in 1996 and $.8 million in 1995.  The
increase in 1996 primarily represents proceeds from borrowings under the
Company's Acquisition Facility and from Seafield Capital Corporation
("Seafield") to finance practice management affiliations.

     In April 1996, the Company obtained an unsecured $10.0 million loan (the
"Seafield Note") from Seafield bearing interest at the rate of prime
plus 1%, which after August 1, 1996, became convertible at the election of
Seafield into shares of the Company's common stock.  Proceeds of the loan were
used to finance a practice management affiliation.  The loan was exchanged for
909,090 shares of common stock during August, 1996.

     In May 1996, the Company entered into a $27.5 million Credit Facility with
NationsBank and Union Planters to fund the Company's acquisition and working
capital needs and to repay its existing facility with Union Planters.  The
Credit Facility, comprised of a $22.0 million Acquisition Facility and a $5.5
million Working Capital Facility, is collateralized by the common stock of the
Company's subsidiaries.  The Acquisition Facility matures May 31, 1998, and
bears interest at a variable rate equal to LIBOR plus a spread between 1.5% and
2.625%, depending upon borrowing levels.  The Working Capital Facility matures
May 30, 1997, subject to a one-year extension, and bears interest at a variable
rate equal to LIBOR plus a spread between 1.875% and 2.375%.  At December 31,
1996, $20.9 million aggregate principal was outstanding under the Credit
Facility with a current interest rate of approximately 7.7%.  The Company's
available credit under the

                                     -13-

<PAGE>   14



Credit Facility at December 31, 1996 was $.2 million.   The Credit
Facility contains affirmative and negative covenants which, among other things,
require the Company to maintain certain financial ratios, including minimum
fixed charges coverage, funded debt to EBITDA, net worth and current ratio.  As
of December 31, 1996, the Company was in compliance with the covenants included
in the Credit Facility.

     The Company has received a commitment to increase the Credit Facility to
$45 million.  The Company anticipates that working capital generated from
operations and anticipated availability under the Credit Facility will be
adequate to expand the IMPACT(R) Center network, manage the practices with
which the Company has affiliated, and to make certain strategic acquisitions
for the next 12 months.  The Company's acquisition strategy is dependent upon
capital resources in excess of working capital generated from operations and
currently available credit facilities.

     Additionally, long-term unsecured, amortizing, promissory notes bearing
interest at rates from 4% to 9% were issued as partial consideration for the
practice management affiliations.  Principal and interest under the long-term
notes may, at the election of the holders, be paid in shares of common stock of
the Company based upon conversion rates ranging from $11.75 to $18.00.  The
unpaid principal amount of the long-term notes was $26.5 million at December
31, 1996.

     In October 1996, the Company procured a $23.5 million credit facility from
Seafield (the "Seafield Facility") to finance acquisitions and for
working capital.  At December 31, 1996, $22.5 million was outstanding under the
Seafield Facility at an interest rate of 8%.   On February 26, 1997, the $23.5
million loan and accrued interest of $.7 million was exchanged for 3,020,536
shares of the Company's common stock at a rate of $8 per share (which exchange
rate was above the quoted market price of the common stock at the date of
conversion).  Simultaneous with the conversion, Seafield announced its intention
to consider a distribution to its shareholders in 1997 of Seafield's shares of
the Company's common stock.

     On July 17, 1996, the Company filed a registration statement with the
Securities and Exchange Commission with respect to the public offering of 5.3
million shares of its common stock, $.01 par value per share.  Because of
market conditions subsequent to filing, the Company chose not to pursue the
public offering and sought acquisition financing from the aforementioned
sources.  The registration statement has not been withdrawn and could be
utilized in connection with any distribution by Seafield, if made.

     Capital expenditures of $1.0 million for the year ended December 31, 1996,
were primarily associated with the expansion of the Company's network of
IMPACT(R) Centers.  No material commitments for capital expenditures currently
exist.

     The Company is committed to future minimum lease payments under operating
leases of $18.7 million for administrative and operational facilities.

NEW ACCOUNTING STANDARDS

     The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128 (SFAS 128), Earnings per Share, and Statement of
Financial Accounting Standards No. 129 (SFAS 129), Disclosure of Information
about Capital Structure.  SFAS 128 establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock.  SFAS 129 establishes standards for disclosing  information about an
entity's capital structure and applies to all entities.  Management believes
that the Company's adoption of these standards, when effective, will not have a
significant impact on the Company's financial statements.



                                     -14-
<PAGE>   15


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

This item is submitted in a separate section of this report (see pages ___
through ___).


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

                                   PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

     The information required by this item with respect to the executive
officers and directors of the Company is incorporated herein by reference to
the sections entitled "Executive Officers" and "Nominees for Election as
Directors" in the Company's definitive proxy statement for its Annual Meeting
of Shareholders to be held June 5, 1997.

ITEM 11. EXECUTIVE COMPENSATION

     The information required by this item with respect to executive
compensation is incorporated herein by reference to the section entitled
"Executive Compensation" in the Company's definitive proxy statement for its
Annual Meeting of Shareholders to be held June 5, 1997.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT

     The information required by this item with respect to executive
compensation is incorporated herein by reference to the section entitled
"Security Ownership of Certain Beneficial Owners, Directors and Management" in
the Company's definitive proxy statement for its Annual Meeting of Shareholders
to be held June 5, 1997.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this item is incorporated herein by reference
to the section entitled "Certain Transactions" in the Company's definitive
proxy statement for its Annual Meeting of Shareholders to be held June 5, 1997.


                                   PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A)(1) and (2) -- The response to this portion of Item 14 is submitted as a
separate section of this report

(A)(3)      LISTING OF EXHIBITS




                                     -15-
<PAGE>   16
3(a)      Charter(1)
3(b)      Bylaws(1)
4         Trust Indenture, Deed of Trust and Security Agreement dated April 3,
          1990(2)
10(a)     Securities Purchase Agreement dated September 26, 1990 between the
          Registrant and Investor(3)
10(b)     Amendment to Securities Purchase Agreement dated July 25, 1991
          (reference 10(a) above)(3)
10(c)*    Registrant's 1990 Non-Qualified Stock Option Plan, as amended**(4)(6)
10(d)     Employment agreement between the Registrant and William H. West,
          M.D. dated July 1, 1995*
10(e)     Employment agreement between the Registrant and Joseph T. Clark dated
          July 1, 1995**(5)
10(f)     Stock Purchase Agreement between the Registrant and stockholders of
          Oncology Hematology Group of South Florida (incorporated herein by
          reference)(8)
10(g)     Service Agreement between the Registrant and stockholders of Oncology
          Hematology Group of South Florida (incorporated herein by
          reference)(8)
10(h)**   Amendment to 1990 Registrant's Non-Qualified Stock Option Plan
          adopted April 20, 1995(5)
10(i)     Employment agreement between the Registrant and Charles H. Weaver,
          M.D. dated July 1, 1995**(5)
10(j)     Purchase and Sale Agreement by and among Response Oncology, Inc.,
          Knoxville Hematology Oncology Associates and Partners of Knoxville
          Hematology Oncology Associates dated April 12, 1996 (incorporated
          herein by reference)(9)
10(k)     Service Agreement between Response Oncology, Inc., Knoxville
          Hematology Oncology Associates, P.L.L.C. and Members of Knoxville
          Hematology Oncology Associates, P.L.L.C. dated April 12, 1996
          (incorporated herein by reference)(9)
10(l)     Stock Purchase Agreement among Registrant, Jeffrey L. Paonessa, M.D.
          and J. Paonessa, M.D., P.A. (incorporated herein by reference)(10)
10(m)     Service Agreement between the Registrant and stockholders of Jeffrey
          L. Paonessa, M.D., P.A. (incorporated herein by reference)(10)
10(n)     Service Agreement between the Registrant and stockholders of
          Southeast Florida Hematology Oncology Group, P.A. (incorporated
          herein by reference)(11)
10(o)     Stock Purchase Agreement between the Registrant and stockholders of
          Southeast Florida Hematology Oncology Group, P.A. (incorporated
          herein by reference)(7)
10(p)     Stock Purchase Agreement by and among the Registrant and Stockholders
          of Rosenberg and Kalman, M.D., P.A. (incorporated herein by
          reference)(11)
10(q)**   Amendment No. 3 to 1990 Registrant's Non-Qualified Stock Option Plan
          adopted December 16, 1995(6)
10(r)     Service Agreement between the Registrant, Rosenberg & Kalman, M.D.,
          P.A., and Stockholders of R&K, M.D., P.A. (incorporated herein by
          reference)(11)



                                      16
<PAGE>   17
10(s)   Asset Purchase Agreement by and among the Registrant, Stockholders of
        The Center for Hematology-Oncology, P.A. and The Center for
        Hematology-Oncology, P.A. (incorporated herein by reference)(12)
10(t)   Stock Purchase Agreement by and among the Registrant, Stockholders of
        Hematology Oncology Associates of the Treasure Coast, P.A. and
        Hematology Oncology Associates of the Treasure Coast, P.A.
        (incorporated herein by reference)(13)
10(u)   Loan Agreement dated May 31, 1996 between Registrant, NationsBank of
        Tennessee, N.A. and Union Planters National Bank
10(v)   Agreement of Payment and Satisfaction dated as of February 26, 1997,
        between the Registrant and Seafield Capital Corporation(14)
10(w)   Registrant's 1985 Stock Option Plan, as amended(15)
11      Statement re Computation of Per Share Earnings.
13      Annual Report to Stockholders for the year ended December 31, 1996 - to
        be filed
21      List of Subsidiaries
23      Consent of Independent Auditors
27      Financial Data Schedule (for SEC use only)
-----------
  *   These documents may be obtained by stockholders of Registrant upon
      written request to: Response Oncology, Inc., 1775 Moriah Woods Blvd.,
      Memphis, Tennessee 38117
 **   Management Compensatory Plan
  +   Response Tech Healthcare Corporation, formerly a wholly-owned subsidiary
      of the Registrant, was merged into the Registrant effective on February
      25, 1997

 (1)  Incorporated by reference to the Registrant's 1989 10-K, dated July 31,
      1989
 (2)  Incorporated by reference in the initial filing of the Registrant's 1990
      10-K, dated July 18, 1990, filed July 20, 1990 and amended on September
      19, 1990
 (3)  Incorporated by reference to the Registrant's 1991 10-K, dated July 26,
      1991
 (4)  Incorporated by reference to the Registrant's Registration Statement on
      Form S-8 under the Securities Act of 1933 (File No. 33-45616) effective
      February 11, 1992
 (5)  Incorporated by reference to the Registrant's 1995 10-K, dated March 29,
      1996
 (6)  Incorporated by reference to the Registrant's Registration Statement on
      Form S-8 under the Securities Act of 1933 (File No. 333-14371) effective
      October 11, 1996
 (7)  Form 8-K filed July 15, 1996 (File No. 0-15416)
 (8)  Form 8-K filed January 17, 1996 (File No. 0-15416)
 (9)  Form 8-K filed April 30, 1996 (File No. 0-15416)
(10)  Form 8-K filed July 5, 1996 (File No. 0-15416)
(11)  Form 8-K filed September 18, 1996 (File No. 1-09922)
(12)  Form 8-K filed October 21, 1996 (File No. 1-09922)
(13)  Form 8-K filed November 5, 1996 (File No. 1-09922)
(14)  Form 13D/A filed March 10, 1997 (File No. 005-37885)
(15)  Incorporated by reference to the Registrant's Registration Statement on
      Form S-8 under the Securities Act of 1933 (File No. 33-21333) effective
      April 26, 1988



                                    - 17 -

<PAGE>   18


                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Response Oncology, Inc. has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                            RESPONSE ONCOLOGY, INC.


                                            By:/s/Joseph T. Clark
                                               --------------------------
                                               Joseph T. Clark
                                               President, Chief Executive
                                               Officer, and  Director

                                               Date: March --, 1997


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.


           By:  /s/Frank M. Bumstead        By:  /s/P. Anthony Jacobs
                --------------------------       --------------------
                Frank M. Bumstead                P. Anthony Jacobs
                Vice-Chairman of the Board       Director

                Date: March --, 1997             Date: March --, 1997

           By:  /s/Joseph T. Clark          By:   /s/Dena L. Mullen
                --------------------------        ------------------------
                Joseph T. Clark                   Dena L. Mullen
                President, Chief Executive        Controller and Principal
                Officer, and Director             Accounting Officer

                                                  Date: March --, 1997
                Date: March --, 1997

           By:  /s/Mary E. Clements         By:  /s/James R. Seward
                --------------------             ------------------------
                Mary E. Clements                 James R. Seward
                Executive Vice                   Director
                President of Finance
                and Principal Financial
                Officer
                                                 Date: March --, 1997
                Date: March --, 1997
                                            By:  /s/William H. West, M.D.
                                                 ------------------------
                                                 William H. West, M.D.
                                                 Chairman of the Board

                                                 Date: March --, 1997





                                     -18-









<PAGE>   19


Independent Auditors' Report
The Board of Directors
Response Oncology, Inc.

     We have audited the consolidated balance sheets of Response
Oncology, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1996.
Our audits also included the financial statement schedule listed in the Index
at Item 14(a).  These financial statements and financial statement schedule are
the responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Response
Oncology, Inc. and subsidiaries as of December 31, 1996 and 1995,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles.  Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.




                                              KPMG PEAT MARWICK LLP
Memphis, Tennessee
February 12, 1997



                                     -19-
<PAGE>   20


PART I - FINANCIAL INFORMATION


<TABLE>
<CAPTION>
ITEM 1: FINANCIAL STATEMENTS
        RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
        CONSOLIDATED BALANCE SHEETS
        (Dollar amounts in thousands)                                             December 31
                                                                             --------------------
ASSETS                                                                          1996        1995
                                                                             ----------  --------
<S>                                                                          <C>         <C>

CURRENT ASSETS
Cash and cash equivalents                                                    $    415  $    4,205
Short-term investments                                                              -         362
Accounts receivable, less allowance for doubtful accounts
  of $1,774 and $2,080                                                         14,297      13,935
Supplies                                                                        2,415       1,119
Prepaid expenses and other current assets                                       2,168       1,016
Due from affiliated physicians                                                 12,423           -
                                                                             --------    --------
TOTAL CURRENT  ASSETS                                                          31,718      20,637

Property and equipment - at cost, less accumulated
  depreciation and amortization of $8,160 and $6,236                            5,406       3,822
Deferred charges, less accumulated amortization of $232 and $66                   490         187
Management service agreements, less accumulated amortization of $1,345        101,963           -
Deferred tax asset                                                              3,267           -
Other assets                                                                      106         119
                                                                             --------    --------
TOTAL ASSETS                                                                 $142,950    $ 24,765
                                                                             ========    ========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable                                                             $  4,863    $  3,691
Accrued expenses and other liabilities                                          4,268       1,135
Notes payable                                                                   7,847           -
Capital lease obligations                                                          74          58
                                                                             --------    --------
TOTAL CURRENT LIABILITIES                                                      17,052       4,884


Capital lease obligations, less current portion                                   124          15
Notes payable, less current portion (including $22,494 due to Parent)          62,106           -
Deferred tax liability                                                         25,127           -
Minority interest                                                                 374          23


STOCKHOLDERS' EQUITY
Series A convertible preferred stock, $1.00 par value, authorized 3,000,000
  shares; issued and outstanding 27,233 and 27,833 shares, respectively,
  liquidating preference $11.00 per share                                          27          28
Common Stock, $.01 par value, authorized 30,000,000 shares; issued and
  outstanding  8,947,018 and 7,371,589 shares, respectively                        89          74
Paid-in capital                                                                77,454      60,054
Accumulated deficit                                                           (39,403)    (40,313)
                                                                             --------    --------
                                                                               38,167      19,843
                                                                             --------    --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                   $142,950    $ 24,765
                                                                             ========    ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                     -20-

<PAGE>   21


RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands except for share data)

<TABLE>
<CAPTION>
                                                       Years Ended December 31
                                                 ----------------------------------
                                                    1996        1995         1994
                                                 ---------   ---------    ---------
<S>                                             <C>         <C>          <C>
NET REVENUE                                     $   67,353  $   44,298   $   38,251
Other income                                           200         282          220
                                                ----------  ----------   ----------
                                                    67,553      44,580       38,471

COSTS AND EXPENSES
  Operating                                         51,842      32,893       31,758
  General and administrative                         6,152       5,512        4,286
  Depreciation and amortization                      3,485       1,736        2,125
  Interest                                           2,589          17          120
  Provision for doubtful accounts                    1,594       2,106        2,528
  Other                                                608           -            -
                                                ----------  ----------   ----------
                                                    66,270      42,264       40,817
                                                ----------  ----------   ----------
EARNINGS (LOSS) BEFORE MINORITY INTEREST             1,283       2,316       (2,346)
  Minority owners' share of net earnings              (373)         (2)           -
                                                ----------  ----------   ----------
NET EARNINGS (LOSS)                                    910       2,314       (2,346)
  Common Stock Dividend to Preferred Stockholders       (3)         (4)          (3)
                                                ----------  ----------   ----------
NET EARNINGS (LOSS) TO COMMON STOCKHOLDERS      $      907  $    2,310   $   (2,349)
                                                ==========  ==========   ==========
EARNINGS (LOSS) PER COMMON SHARE                $     0.11  $     0.32   $    (0.34)
                                                ==========  ==========   ==========
  Weighted average number of shares              8,245,782   7,171,274    6,953,157
                                                ==========  ==========   ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                     -21-
<PAGE>   22


RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollar amounts in thousands)




<TABLE>
<CAPTION>
                                       Series A Convertible
                                          Preferred Stock                 Common Stock
                                   ------------------------       ----------------------------
                                                   Par Value                       Par Value     Paid-In
                                     Shares       ($1.00 Per         Shares     ($.01 Per Share)  Capital
                                   ----------       Share)        ------------   ------------------------
                                                  ----------

<S>                                   <C>            <C>          <C>                     <C>    <C>
Balances at December 31, 1993         29,568         $29           34,664,982             $69    $58,962
  Net loss
  Exercise of common stock
   warrants and options                                               154,500               -         74
  Conversion of preferred stock       (1,235)         (1)               1,130               -          1
  Dividend on preferred stock                                           1,545               -          -
                                     -------         ---          -----------             ---    -------
Balances at December 31, 1994         28,333          28           34,822,157              69     59,037
  Net earnings
  Exercise of common stock
   warrants and options                                               497,000               5      1,017
  Conversion of preferred stock         (500)          -                  458               -          -
  One-for-five reverse split                                      (27,948,332)              -          -
  Dividend on preferred stock                                             306               -          -
                                     -------         ---          -----------             ---    -------
Balances at December 31, 1995         27,833          28            7,371,589              74     60,054
  Net earnings
  Exercise of common stock options                                     26,000               -        275
  Conversion of preferred stock         (600)         (1)                 109               -          1
  Common stock issued in connection
    with practice affiliations                                        639,924               6      6,583
  Conversion of Seafield Note                                         909,090               9      9,991
  Dividend on preferred stock                                             306               -          -
  Warrants issued in connection
    with practice affiliations                                                                       550
                                     -------         ---          -----------             ---    -------
Balances at December 31, 1996         27,233         $27            8,947,018             $89    $77,454
                                     =======         ===          ===========             ===    =======
</TABLE>


<TABLE>
<CAPTION>

                                                                   Total
                                     Accummulated              Stockholders'
                                        Deficit                   Equity
                                   ---------------              -----------
<S>                                       <C>                    <C>
Balances at December 31, 1993             $(40,281)             $ 18,779
  Net loss                                  (2,346)               (2,346)
  Exercise of common stock
   warrants and options                          -                    74
  Conversion of preferred stock                  -                     -
  Dividend on preferred stock                    -                     -
                                          --------              --------
Balances at December 31, 1994              (42,627)               16,507
  Net earnings                               2,314                 2,314
  Exercise of common stock
   warrants and options                          -                 1,022
  Conversion of preferred stock                  -                     -
  One-for-five reverse split                     -                     -
  Dividend on preferred stock                    -                     -
                                          --------              --------
Balances at December 31, 1995              (40,313)               19,843
  Net earnings                                 910                   910
  Exercise of common stock options               -                   275
  Conversion of preferred stock                  -                     -
  Common stock issued in connection
   with practice affiliations                    -                 6,589
  Conversion of Seafield Note                    -                10,000
  Dividend on preferred stock                    -                     -
  Warrants issued in connection
   with practice affiliations                    -                   550
                                          --------              --------
  Balances at December 31, 1996           $(39,403)             $ 38,167
                                          ========              ========
</TABLE>



See accompanying notes to consolidated financial statements

                                    - 22 -

<PAGE>   23


RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                                                     Years Ended December 31,
                                                                   ----------------------------
                                                                    1996       1995       1994
                                                                   --------  ---------  -------
<S>                                                                 <C>      <C>         <C>
OPERATING ACTIVITIES
  Net earnings (loss)                                               $ 910    $ 2,314   $ (2,346)
  Adjustments to reconcile net earnings (loss) from operations:
    Depreciation and amortization                                   3,485      1,736      2,125
    Loss on disposal of equipment                                       -          -         51
    Provisions for losses on accounts receivable                    1,594      2,106      2,528
    Minority owners' share of net income                              373          2          -
    Changes in assets and liabilities, net of effect of
      acquisitions:
      Accounts receivable                                          (1,956)    (3,641)       161
      Supplies, prepaid expenses, and other current assets         (1,332)      (772)       623
      Deferred charges and other assets                              (176)      (207)       (79)
      Net advances to affiliated physician groups                  (6,846)         -          -
      Accounts payable and accrued expenses                           225        553         21
                                                                  -------     ------      -----
NET CASH PROVIDED BY (USED IN) OPERATING
 ACTIVITIES                                                        (3,723)     2,091      3,084

INVESTING ACTIVITIES
  Purchase of equipment                                            (1,034)    (1,330)      (586)
  Proceeds from sale of equipment                                       -          -         24
  Hollywood Center net assets assumed in excess of
   investment basis                                                     -          -        (53)
  Sale (purchase) of short-term investments                           362       (262)         -
  Acquisition of nonmedical assets of affiliated
     physician practices                                          (53,683)         -          -
                                                                  -------     ------      -----
NET CASH USED IN INVESTING ACTIVITIES                             (53,355)    (1,592)      (615)

 FINANCING ACTIVITIES
  Bank overdraft                                                      491          -          -
  Financing costs incurred                                           (324)         -          -
  Proceeds from exercise of stock options and warrants                275      1,022         74
  Proceeds from notes payable                                      26,631          -         59
  Principal payments on notes payable                              (6,895)       (71)         -
  Net proceeds (payments) on line of credit                           681          -     (2,420)
  Proceeds from note payable to parent                             32,494          -          -
  Principal payments on capital lease obligations                     (65)      (168)      (360)
                                                                  -------     ------     ------
NET CASH PROVIDED BY (USED IN) FINANCING
 ACTIVITIES                                                        53,288        783     (2,647)

INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS                                                       (3,790)     1,282       (178)

  Cash and cash equivalents at beginning of period                  4,205      2,923      3,101
                                                                  -------    -------    -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                        $   415    $ 4,205    $ 2,923
                                                                  =======    =======    =======
</TABLE>

                                                                       Continued

                                    - 23 -

<PAGE>   24
RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)


<TABLE>
<CAPTION>
                                                            1996     1995  1994
                                                          ---------  ----  ----
<S>                                                       <C>        <C>   <C>
Supplemental schedule of noncash investing and financing
activities:
  Effect of practice acquisitions (Note C):
    Intangible assets                                     $103,308
    Property and equipment, net                              2,474
    Acquired accounts receivable, net                        6,430
    Other assets                                             4,643
                                                          --------
    Total assets acquired, net of cash                     116,855
    Liabilities assumed                                    (29,926)
    Issuance of notes payable                              (27,107)
    Issuance of common stock                                (7,139)
                                                          --------
      Payments for clinic operating assets                $ 52,683
                                                          ========
    Cash paid for-
    Interest                                              $  1,642    $17  $130
                                                          ========   ====  ====
</TABLE>

See accompanying notes to consolidated financial statements.



                                    - 24 -
<PAGE>   25


RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996

NOTE A -- ORGANIZATION AND DESCRIPTION OF BUSINESS

Response Oncology is a comprehensive cancer management company which owns
and/or operates a network of outpatient treatment centers or IMPACT Centers,
which provide stem cell supported high-dose chemotherapy and other advanced
cancer treatment services under the direction of practicing oncologists, owns
the assets of and manages oncology practices, and conducts clinical cancer
research on behalf of pharmaceutical manufacturers.

The Company, formerly known as Response Technologies, Inc., changed its name to
Response Oncology, Inc. effective November 2, 1995.

The Company is a subsidiary of Seafield Capital Corporation ("Seafield").  On
February 10, 1995, Seafield announced its retention of a financial advisor to
evaluate and recommend steps to enhance the value of Seafield to its
shareholders.  Any transaction pursued by Seafield will be likely to result in
a significant change in the Company's ownership.


NOTE B -- SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation:  The consolidated
financial statements include the accounts of the Company and its wholly-owned
subsidiaries and majority-owned or controlled joint ventures.  All significant
intercompany accounts and transactions have been eliminated in consolidation.

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

Short-Term Investments:  Short-term investments consist of certificates of
deposit maturing in less than one year.  These investments are carried at cost
which approximates market.

Accounts Receivable:  Accounts receivable represents amounts due from patients
for medical services provided.  Such amounts are recorded net of uncollectible
amounts.

Due From Affiliated Physicians:  Due from affiliated physicians consists of
management fees earned pursuant to the management service agreements ("Service
Agreements") during the year ended December 31, 1996.  In addition, the Company
may also fund certain working capital needs of the affiliated physicians from
time to time.

Due to the demographics of oncology patients, a significant portion of the
affiliated physicians' medical service revenues are related to third-party
reimbursement agreements, primarily Medicare and other governmental programs.
Medicare and other governmental programs reimburse physicians based on fee
schedules which are determined by the related governmental agency.  In the
ordinary course of business, affiliated physicians receiving reimbursement from
Medicare and other governmental programs are potentially subject to a review by
regulatory agencies concerning the accuracy of billings and sufficiency of
supporting documentation of procedures performed.  Provisions for estimated
third-party payor settlements and adjustments are estimated in the period the
related services are rendered and adjusted in future periods as final
settlements are determined.

Supplies:  Supplies are recorded at lower of cost (first-in, first-out) or
market.


                                     -25-
<PAGE>   26


Property and Equipment:  Property and equipment are stated at cost.
Depreciation and amortization are provided by the straight-line method over the
estimated useful lives which range from three to ten years.

Management Service Agreements:  Costs of obtaining Service Agreements arose
from the acquisitions described in Note C and were created by the excess of the
purchase price over the fair value of net assets of the acquired practices.
The Service Agreements are noncancelable except for performance defaults, as
defined.  In the event a practice breaches the agreement, or if the Company
terminates with cause, the practice is required to purchase all tangible assets
at fair market value and pay substantial liquidating damages.  Cost of
obtaining Service Agreements are amortized using the straight-line method over
the 40-year terms of the agreements.

At each reporting period, the Company reviews the carrying value of Service
Agreements on a practice by practice basis to determine if facts and
circumstances exist which would suggest that the value of the Service
Agreements may be impaired or that the amortization period needs to be
modified.  Among the factors considered by the Company in making the evaluation
are changes in the practices' market position, reputation, profitability and
geographical penetration.  Using these factors, if circumstances are present
which may indicate impairment is probable, the Company will prepare a
projection of the undiscounted cash flows before interest charges of the
specific practice and determine if the Service Agreements are recoverable based
on these undiscounted cash flows.  If impairment is indicated, then an
adjustment will be made to reduce the carrying value of intangible assets to
fair value.  Based on the factors considered above, the Company does not
believe that there are any current factors indicating any impairment of Service
Agreements as of December 31, 1996.

Deferred Charges:  Deferred charges consist primarily of startup costs
representing direct and incremental expenses incurred prior to the operational
date of a new IMPACT Center which are capitalized and amortized from the
operational date over a period of two years.

Deferred charges also include costs capitalized in connection with obtaining
long-term financing and are being amortized using the interest method over the
terms of the related debt.

Net Revenue:  The following table is a summary of net revenue by source for the
respective periods ended December 31.  Patient services revenue is recorded net
of contractual allowances and discounts of $4,898,000, $4,224,000, and
$3,894,000 for the years ended December 31, 1996, 1995, and 1994, respectively.
The Company's revenue from practice management affiliations includes practice
operating expenses (other than amounts retained by physicians) and a management
fee either fixed in amount or equal to a percentage of each affiliated oncology
group's adjusted net revenue or net operating income.  In certain affiliations,
the Company may also be entitled to a performance fee if certain financial
criteria are satisfied.


<TABLE>
<CAPTION>

(In thousands)                               December 31
                                      1996     1995        1994
                                    --------  -------    -------
<S>                                 <C>       <C>        <C>
Net patient services revenue         $33,423  $33,827    $31,772
Practice management service fees      19,292        -          -
Pharmaceutical sales to physicians    13,531    9,806      6,479
Physician investigator studies         1,107      665          -
                                    --------  -------    -------
                                     $67,353  $44,298    $38,251
                                    ========  =======    =======
</TABLE>

Income Taxes:  The Company follows the liability method of accounting for income
taxes, whereby deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.

Net Earnings (Loss) Per Common Share:  Net earnings (loss) per common share has
been computed based upon the weighted average number of shares of common stock
outstanding during the period, plus (in periods in which they have a dilutive
effect) common stock equivalents, primarily stock options and warrants.  Fully
diluted earnings per share are not disclosed as the effect of assuming the
conversion of the preferred stock is clearly immaterial.  All share and per
share amounts have been restated to reflect a one-for-five reverse split
effected November 2, 1995.

Fair Value of Financial Instruments:  The carrying amounts of all asset and
liability financial instruments approximate their estimated fair values at
December 31, 1996.  Fair value of a financial instrument is defined as the
amount at which the instrument could be exchanged in a current transaction
between willing parties.



                                     -26-
<PAGE>   27


Use of Estimates:  The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period.  Actual results could differ from those estimates.

New Accounting Standards: The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), Earnings Per
Share, and Statement of Financial Accounting Standards No. 129 (SFAS 129),
Disclosure of Information about Capital Structure.  SFAS 128 establishes
standards for computing and presenting earnings per share and applies to
entities with publicly held common stock.  SFAS 129 establishes standards for
disclosing information about an entity's capital structure and applies to all
entities.  Management believes that the Company's adoption of these standards,
when effective, will not have a significant impact on the Company's financial
statements.

NOTE C -- ACQUISITIONS

During 1996, the Company acquired stock in or certain operating assets and
assumed certain liabilities of ten oncology practices in Tennessee and Florida.
The Company's consideration in exchange for the practice affiliations
consisted of $53 million in cash,  $27 million in notes payable, and 640,000
shares of its common stock.  The practice affiliations have been accounted for
as purchases and the accompanying financial statements include the results of
their operations from their respective dates of acquisition.

The following unaudited pro forma information for the years ended December 31,
1996 and 1995 is presented as if the acquisitions described above had occurred
at the beginning of 1995 after giving effect to certain adjustments including
additional depreciation and amortization and increased expense on debt related
to the acquisitions.  The following information is not necessarily indicative
of what actual results of operations would have been had such acquisitions been
completed on January 1, 1995, nor does it purport to represent the results of
operations for future periods.  In management's opinion, all adjustments
necessary to reflect the acquisitions have been made. Summarized pro forma
information is as follows:

Statement of Operations
(Unaudited, dollar amounts in thousands except for share data)


<TABLE>
<CAPTION>
                                                          1996         1995
                                                      -----------  ------------
<S>                                                   <C>          <C>
 Revenues                                             $    87,687   $    77,866
 Net income                                           $     4,357   $     1,737
                                                      ===========   ===========
 Net income per common share                          $      0.35   $      0.15
                                                      ============  ===========
 Weighted average number of common shares outstanding  12,277,869    11,735,721
                                                      ============  ===========
</TABLE>



                                     -27-
<PAGE>   28


NOTE D -- PROPERTY AND EQUIPMENT

Balances of major classes of property and equipment are as follows:
(In thousands)

<TABLE>
<CAPTION>
                                                      December 31,
                                                   -----------------
                                                      1996      1995
                                                   -------   -------
<S>                                                <C>       <C>
Lab and pharmacy equipment                         $ 4,730   $ 4,213
Furniture and office equipment                       3,803     2,904
Equipment under capital leases                       1,515     1,558
Leasehold improvements                               3,518     1,383
                                                   -------   -------
                                                    13,566    10,058
Less accumulated depreciation and amortization      (8,160)   (6,236)
                                                   -------   -------
                                                   $ 5,406   $ 3,822
                                                   =======   =======
</TABLE>

Purchases of equipment reflected in the "Consolidated Statements of Cash Flows"
of $1,330,000 for the year ended December 31, 1995, does not include purchases
included in accounts payable of $24,000 or property acquired under capital
lease transactions of $55,000.

NOTE E -- NOTES PAYABLE

Notes payable at December 31, 1996, consists of the following:
(In thousands)


<TABLE>
<S>                                                                     <C>
Subordinated line of credit with Seafield                               $22,494
Bank credit facility                                                     20,861
Various subordinated notes payable to affiliated
  physicians and physician practices, bearing interest
  ranging from 4% to 9% per annum, with maturities through 2011          26,467
Other notes payable collateralized by furniture and
  equipment with interest rates between 8% and 10% per annum
  and payable in monthly installments of principal and
  interest through 2001                                                     131
                                                                        -------
Total notes payable                                                      69,953
Less current installments                                                (7,847)
                                                                        -------
                                                                        $62,106
                                                                        =======
</TABLE>

In April 1996, the Company obtained an unsecured $10 million loan (the "Seafield
Note") from Seafield bearing interest at an annual rate of prime plus 1%, which
after August 1, 1996, became convertible at the election of Seafield into
shares of the Company's common stock.  Proceeds of the loan were used to
finance a practice acquisition.  The Seafield Note was exchanged for shares of
the Company's common stock in August 1996 (See Note H).



                                     -28-
<PAGE>   29


In October 1996, the Company procured a $23.5 million subordinated line of
credit from Seafield (the "Seafield Facility"), to be used to finance
acquisitions and working capital.  The loan is payable upon the earlier of the
closing of an equity offering by the Company or August 1998.  The Seafield
Facility bears interest at a rate of 8% per annum escalating at certain points
during the term of the loan, is uncollateralized, and is convertible at the
election of Seafield into shares of the Company's common stock at a conversion
price equal to the market price of the common stock at the date of conversion
provided, however, that after December 31, 1996, the conversion price will be
the lower of market or $11.00 per share.  The Seafield Facility was exchanged
for shares of the Company's common stock in February 1997 (See Note L).

In  May 1996, the Company entered into a $27.5 million Credit Facility with
NationsBank and Union Planters to fund the Company's acquisitions and working
capital needs and to repay its existing facility with Union Planters.  The
Credit Facility, comprised of a $22 million Acquisition Facility and a $5.5
million Working Capital Facility, is collateralized by the common stock of the
Company's subsidiaries.  The Acquisition Facility matures May 31, 1998 and
bears interest at a variable rate equal to LIBOR plus a spread between 1.5% and
2.625%, depending upon borrowing levels.  The Working Capital Facility matures
May 30, 1997, subject to a one year extension, and bears interest at a variable
rate equal to LIBOR plus a spread between 1.875% and 2.375%.  At December 31,
1996, $20.9 million aggregate principal was outstanding under the Credit
Facility with a current interest rate of approximately 7.7%.  The Company's
available credit under the Credit Facility at December 31, 1996 was $.2
million.   The Credit Facility contains affirmative and negative covenants
which, among other things, require the Company to maintain certain financial
ratios, including minimum fixed charges coverage, funded debt to EBITDA, net
worth and current ratio.  As of December 31, 1996, the Company was in
compliance with the covenants included in the Credit Facility.

The installment notes payable to affiliated physicians and physician practices
were issued as partial consideration for the practice management affiliations
described in Note C. Principal and interest under the long-term notes may, at
the election of the holders, be paid in shares of common stock of the Company
based on conversion prices ranging from $11.75 to $18.00.

The aggregate maturities of notes payable at December 31, 1996 are as follows:
(In thousands)


<TABLE>
                          <S>         <C>
                          1997        $ 7,847
                          1998         53,762
                          1999          1,296
                          2000            762
                          2001          1,453
                          Thereafter    4,833
                                      -------
                                      $69,953
                                      =======
</TABLE>


NOTE F -- LEASES

The Company leases certain office facilities and equipment under lease
agreements with original terms ranging from one to forty years that generally
provide for one or more renewal options.

Interest has been imputed on capital leases at rates of 6% to 12%. Accumulated
amortization of assets recorded under capital leases totaled $1,308,000,
$1,001,000, and $742,000 at December 31, 1996, 1995, and 1994, respectively.
Amortization of leased assets is included in depreciation and amortization
expense.



                                     -29-
<PAGE>   30



Total rent expense under operating leases amounted to $2,361,000, $1,800,000,
and $1,791,000 for the years ended December 31, 1996, 1995, and 1994,
respectively.  The Company is generally obligated to the lessors for its
proportionate share of operating expenses of the leased premises.  At December
31, 1996, future minimum lease payments under capital and operating leases with
initial terms of one year or more are as follows (in thousands):


<TABLE>
<CAPTION>

                                                     Capital     Operating
                                                     Leases       Leases
                                                     -------    ----------

       Fiscal year ended December 31:
     <S>       <C>                                   <C>          <C>
               1997                                  $ 88         $ 2,143
               1998                                    67           1,677
               1999                                    44           1,380
               2000                                    12           1,196
               2001                                     -           1,113
               Thereafter                               -          11,214
                                                     ----         -------
       Total minimum payments                         211         $18,723
                                                                  =======
             Less imputed interest                     13
                                                     ----
       Present value of minimum rental payments       198
       Less current installments                       74
                                                     ----
       Obligations under capital leases
         excluding current installments              $124
                                                     ====
</TABLE>



NOTE G -- INCOME TAXES

The actual tax expense for the years ended December 31, 1996, 1995, and 1994,
respectively, differs from the expected tax expense for those years (computed
by applying the federal corporate tax rate of 34% to net earnings before
minority interest) as follows (in thousands):


<TABLE>
<CAPTION>
                                                 1996     1995     1994
                                                 ----     ----     ----
<S>                                              <C>      <C>      <C>
Computed expected tax expense  (benefit)         $ 436    $ 787    $(798)

Non-deductible expenses                             14       13       10

Utilization of net operating loss carryforwards   (450)    (800)       -

Loss for which no benefit was provided               -        -    $ 788
                                                 -----    -----    -----
Actual income tax expense                        $   0    $   0    $   0
                                                 =====    =====    =====

</TABLE>



                                     -30-
<PAGE>   31


The approximate tax effects of each type of temporary difference and
carryforward that gives rise to a significant portion of deferred tax assets
and deferred tax liabilities are as follows (in thousands):



<TABLE>
<CAPTION>
                                           December 31,
                                       ------------------
                                          1996       1995
                                       -------    -------
<S>                                    <C>        <C>
Deferred tax assets:
Net operating loss carryforwards       $ 1,678    $ 2,366
Reserve for bad debts                      674        409
Excess book depreciation/amortization      665        547
Partnership basis differences              204          -
Excess book expense accruals                46        152
Other                                        -         41
                                       -------    -------
Total deferred assets                    3,267      3,515
Valuation allowance                                (3,515)
                                       -------    -------
Net deferred tax assets                  3,267          0
                                       -------    -------
Deferred tax liability -
Management service agreements           25,127          0
                                       -------    -------
Net deferred tax liability             $21,860    $     0
                                       =======    =======
</TABLE>

The deferred tax liability of $25,127,000 is calculated by applying the
applicable expected tax rate of 38 percent to the future taxable amounts
resulting from the taxable temporary differences between the assigned value of
identifiable net assets (Service Agreements) and their tax basis.

The valuation allowance for deferred tax assets as of January 1, 1995 was
$4,191,000.  The net change in the total valuation allowance for the years
ended December 31, 1996 and 1995, was a decrease of $3,515,000 and $676,000,
respectively.  The 1996 decrease was reflected in the accounting for the
purchase of management services agreements whose book basis exceeded their tax
basis.

The amount of income that the Company may offset in future years by the net
operating loss carryforwards incurred prior to an ownership change in 1990 will
be limited, by the application of the Internal Revenue Code Section 382, to
$475,000 annually through the year 2005.  The unused portion of the net
operating losses may be carried forward and realized in future years subject to
this limitation.  The net operating loss carryforwards incurred subsequent to
the October 31, 1990, ownership change are available to fully offset future
earnings of the Company and expire in the years 2005 through 2009.

As of December 31, 1996, the Company had available tax net operating loss
carryforwards totaling $4,500,000, all of which is subject to certain annual
limitations due to a change in ownership for tax purposes in 1990.  The use of
net operating loss carryforwards, for income tax purposes, is also dependent
upon future taxable income.  A benefit for the net operating loss carryforwards
has been provided for the reversal of taxable temporary differences during the
carryforward period.

NOTE H -- COMMON STOCK, CONVERTIBLE PREFERRED STOCK, WARRANTS, AND OPTIONS

Common Stock:  On November 1, 1995, an amendment to the Company's charter was
approved at a special meeting of the stockholders decreasing the number of
authorized shares from 60,000,000 shares, $.002 par value, to 30,000,000 shares,
$.01 par value, with a corresponding reclassification to which each issued and
outstanding


                                     -31-
<PAGE>   32


share was reclassified, converted, and changed into one-fifth (1/5) of
an issued and outstanding share.  The amendment became effective November 2,
1995.  The one-for-five reverse split resulted in the reduction of 27,948,332
outstanding shares of common stock.  Accordingly, all references in the
financial statements to weighted average shares outstanding, per share amounts
and stock option plan data have been restated to reflect the reverse split.

The $10 million Seafield Note was exchanged for 909,090 shares of common
stock during August 1996.  At December 31, 1996, Seafield's ownership interest
in the Company was approximately 56%.  Subsequent to December 31, 1996, the
$23.5 million Seafield Facility and accrued interest thereon was converted into
3,020,536 shares of the Company's common stock at a rate of $8 per share.  The
conversion increased Seafield's ownership as of February 26, 1997 to 67%.
Simultaneous with the conversion, Seafield announced its intention to consider
a distribution to its shareholders in 1997 of Seafield's shares of the
Company's common stock.

During 1996, 639,924 shares of common stock were issued as consideration in the
acquisition of certain oncology practices.  Additionally, 26,000, 497,000, and
154,500 shares of common stock were issued pursuant to the exercise of warrants
and employee stock options during the years ended December 31, 1996, 1995, and
1994, respectively.  Proceeds to the Company amounted to $275,000, $1,022,000,
and $74,000, for the respective periods.

The Company also has reserved 3,111,000 shares of its common stock for issuance
upon the exercise of options (1,783,000 shares), the conversion of Convertible
Preferred Stock (5,000 shares), and the exercise of warrants or conversion of
debt issued in the practice affiliations consummated during 1996 (1,323,000
shares).

Convertible Preferred Stock:  The shares of Series A Convertible
Preferred Stock have the following rights and restrictions:  (a) a preference in
the event of liquidation equal to $11.00 per share; (b) the right to convert
into the number of shares of common stock equal to the stated value of shares
surrendered ($11.00) divided by the conversion price of $60.00 -- subject to
certain adjustments; (c) the right to receive dividends in the form of common
stock at the rate of .011 share of common stock per annum per share payable
annually each year commencing January 15, 1988; (d) the shares are redeemable at
the Company's option at $11.00 per share; and (e) holders of the preferred stock
will not be entitled to vote.

In December 1996, 1995,  and September 1994, the Board of Directors approved a
common stock dividend of 306, 306, and 1,545 shares to the holders of the Series
A Convertible Preferred Stock of record as of December 15, 1996, 1995, and 1994
that was paid in January 1997, 1996, and 1995, respectively.  The market value
of the common stock distributed was $3,000, $4,000 and $3,000 in the years 1996,
1995, and 1994, respectively.  The dividends have been reflected in the
"Consolidated Statements of Operations" and the weighted average number of
common shares in the determination of net earnings (loss) to common stockholders
and the earnings (loss) per common share calculations.  The par value of the
common stock distributed was charged to paid-in capital.

Options:  The 1985 Stock Option Plan (the "1985 Plan"), as amended in fiscal
year 1988, allows for granting of incentive stock options, non-qualified stock
options, and stock appreciation rights of up to 122,000 shares of common stock
to eligible officers and key employees of the Company at an exercise price of
not less than the fair market value of the common stock on the date of grant
for an incentive stock option and not less than 85% of the fair market value of
the common stock on the date of grant for a non-qualified stock option.  The
1985 Plan expired in 1995; no additional shares are available for grant.




                                     -32-
<PAGE>   33



The 1990 Non-Qualified Stock Option Plan (the "1990 Plan"), as amended in 1995,
allows for the granting of non-qualified stock options, up to 1,125,000 options
to eligible officers, directors, key employees, and consultants of the Company
at an exercise price of not less than the market price of the common stock on
the date of grant with an option period up to 10 years.

During the year, the 1996 Incentive and Non-Qualified Stock Option Plan (the
"1996 Plan"), was adopted and allows for the granting of up to 630,000 options
to eligible officers, directors, advisors, medical directors, consultants, and
key employees of the Company at an exercise price of not less that the market
price of the common stock on the date of grant with an option period up to 10
years.

A summary status of the 1985 Plan as of December 31, 1996, 1995, and 1994, and
changes during the years then ended is presented below:




<TABLE>
<CAPTION>
                                                   1996                                    1995
                                  --------------------------------------  --------------------------------------
                                                         Weighted                                Weighted
                                                         Average                                 Average
                                         Number of       exercise            Number              exercise
         Fixed Options                   shares            price             of shares             price
         -------------            ----------------  --------------------  ----------------  -------------------
<S>                                     <C>              <C>                   <C>                 <C>
Outstanding at beginning of year           74,200        $ 5.79                75,360              $ 5.86
Granted
Exercised                                  (2,700)         5.76                  (560)               9.02
Forfeited                                    (400)        11.88                  (600)              11.88
                                        ---------                              ------
Outstanding at end of year                 71,100          5.76                74,200                5.79
                                        =========                              ======
Options exercisable at year-end            66,060                              65,820
                                        =========                              ======
</TABLE>


<TABLE>

<CAPTION>
                                                       1994
                                            ---------------------------
                                                               Weighted
                                                               Average
                                            Number             exercise
         Fixed Options                      of shares            price
--------------------------------            ---------          --------
<S>                                         <C>                <C>
Outstanding at beginning of year            65,160             $ 4.34
Granted                                     14,600              11.88
Exercised                                   (3,900)              2.13
Forfeited                                     (500)             11.88
                                            ------
Outstanding at end of year                  75,360               5.86
                                            ======
Options exercisable at year-end             63,040
                                            ======
</TABLE>



A summary status of the 1990 Plan as of December 31, 1996, 1995, and 1994 and
changes during the years then ended is presented below:


<TABLE>
<CAPTION>                                      1996                             1995                         1994
                                  -------------------------------  ---------------------------  --------------------------------
                                                                                                                   Weighted
                                             Weighted Average                 Weighted Average                     Average
                                  Number        exercise           Number       exercise          Number           exercise
         Fixed Options            of shares      price             of shares      price           of shares          price
--------------------------------  ---------  --------------------  ---------  ----------------  ----------------  --------------
<S>                               <C>           <C>                <C>           <C>                <C>           <C>
Outstanding at beginning of year    933,440     $11.02              559,550      $10.21             431,550          $10.10
Granted                             172,000      12.50              400,900       11.91             132,500           10.48
Exercised                           (22,300)     11.09              (12,800)       2.82              (4,000)           2.50
Forfeited                           (29,990)     11.69              (14,210)      11.88                (500)          23.75
                                  ---------                         -------                          ------
Outstanding at end of year        1,053,150      11.24              933,440       11.02             559,550           10.21
                                  =========                         =======                         =======
Options exercisable at year-end     694,020                         396,210                         317,320
                                  =========                         =======                         =======
</TABLE>



                                     -33-
<PAGE>   34


A summary status of the 1996 Plan for the year ended December 31, 1996 is
presented below:


<TABLE>
<CAPTION>
                                             1996
                                  ---------------------------
                                                     Weighted
                                                      Average
                                   Number            exercise
         Fixed Options            of shares             price
--------------------------------  ---------  ----------------
<S>                               <C>                  <C>
Outstanding at beginning of year        -                   -
Granted                           621,400              $11.87
Exercised                          (1,000)              12.50
Forfeited                         (50,000)              12.50
                                  -------
Outstanding at end of year        570,400               11.81
                                  =======
Options exercisable at year-end   130,080
                                  =======
</TABLE>

The following table summarizes information about fixed stock options
outstanding at December 31, 1996:


<TABLE>
<CAPTION>
                                           Options Outstanding                                  Options Exercisable
                      --------------------------------------------------------------  ----------------------------------------
                                                 Weighted
                                                  average              Weighted
                                                 remaining              average                                 Weighted
Range of                      Number        contractual life           exercise            Number          average exercise
exercise prices             outstanding           (years)                price           exercisable             price
--------------------        -----------    ------------------  --------------------  ------------------  --------------------
   <S>                       <C>                  <C>                  <C>                <C>                    <C>
   $1.56 - $9.75             329,700               7.50                $ 7.20             177,700                $ 5.07
   10.00 - 10.63             247,700               7.20                 10.23             176,120                 10.23
   11.50 - 12.25             232,700               8.70                 11.61              98,100                 11.60
   12.50 - 12.50             702,250              10.90                 12.50             306,180                 12.50
   13.13 - 16.50             178,700               7.20                 14.10             128,460                 13.92
   16.88 - 16.88               1,000               8.80                 16.88               1,000                 16.88
   23.75 - 23.75               2,600               5.30                 23.75               2,600                 23.75
</TABLE>

The Company accounts for stock options in accordance with the provisions
of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations (APB 25).  As such, compensation expense
is recorded on the date of grant only if the current market price of the
underlying stock exceeds the exercise price.  During 1996, the Company adopted
Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" (FAS 123), which permits entities to recognize as expense over the
vesting period the fair value of all stock-based awards on the date of grant.
Alternately, FAS 123 allows entities to continue to apply the provisions of APB
25 and provide pro forma net earnings and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years as if
the fair-value-based method defined in FAS 123 had been applied. The Company has
elected to continue to apply the provisions of APB 25 and provide the pro forma
disclosure provisions of FAS 123.

The per share weighted average fair value of stock options granted during 1996
and 1995 was $12.00 and $11.91 on the date of grant using the "Black Scholes"
option-pricing model with the following average assumptions:  1996 - expected
dividend yield of 0%, risk-free interest rate of 6%, expected volatility factor
of 77% and an expected life of five years; 1995 - expected dividend yield of
0%, risk-free interest rate of 6.3%, expected volatility factor of 77% and an
expected life of five years.




                                     -34-
<PAGE>   35


Since the Company applies APB 25 in accounting for its plans, no compensation
cost has been recognized for its stock options in the financial statements.
Had the Company recorded compensation cost based on the fair value at the grant
date for its stock options under FAS 123, the Company's net earnings and
earnings per share would have been reduced by approximately $2,366,000 or $.16
per share in 1996 and approximately $1,319,000 or $.33 per share in 1995.

Pro forma net earnings reflect only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock options
under FAS 123 is not reflected in the pro forma net earnings amounts presented
above because compensation costs are reflected over the option's vesting period
of five years for the 1996 and 1995 options.  Compensation cost for options
granted prior to January 1, 1995, is not considered material.

NOTE I -- BENEFIT PLAN

The Company established a 401(k) Profit Sharing Plan (the "Plan") which allows
qualifying employees electing membership to defer a portion of their income on
a pretax basis through contributions to the Plan.  For each dollar of employee
contributions, the Company makes a discretionary percentage matching
contribution to the Plan.  In addition, eligible employees share in any
additional discretionary contributions which are based upon the profitability
of the Company.  All contributions made by the Company are determined by the
Company's Board of Directors.  For the Plan year ended December 31, 1996, the
approved matching percentage is twenty-five percent (25%) up to a maximum of
$1,250 per employee. The expense recognized for the years ended December 31,
1996, 1995, and 1994 for Company contributions to the Plan totaled $113,000,
$99,000, and $76,000 respectively.

NOTE J -- RELATED PARTY TRANSACTIONS

The West Clinic:  The Company's IMPACT Center in Memphis, Tennessee is located
adjacent to The West Clinic, P.C., a private practicing oncology group, of
which the Company's Chairman is a shareholder.  Arrangements exist between the
Company and the West Clinic for providing space and other support services to
the Company.  During the years ended December 31, 1996, 1995, and 1994, the
Company expensed $74,000, $59,000 and $108,000, respectively, relating to these
arrangements.  In addition, during the years ended December 31, 1996, 1995, and
1994, the Company recognized net revenue of $4,653,000, $3,032,000, and
$2,026,000, respectively, for sales of pharmaceuticals to The West Clinic and,
at December 31, 1996, 1995 and 1994, had a related accounts receivable balance
of $829,000, $636,000, and $281,000.  The pricing policy with respect to sales
of pharmaceuticals to the West Clinic is consistent with sales to physicians at
other Centers.

NOTE K -- COMMITMENTS AND CONTINGENCIES

With respect to professional and general liability risks, the Company currently
maintains an insurance policy that provides coverage during the policy period
ending August 1, 1997, on a claims-made basis, for $1,000,000 per claim in
excess of the Company retaining $25,000 per claim, and $3,000,000 in the
aggregate.  Costs of defending claims are in addition to the limit of
liability.  In addition, the Company maintains a $10,000,000 umbrella policy
with respect to potential general liability claims.  Since inception, the
Company has incurred no professional or general liability losses and as of
December 31, 1996, the Company was not aware of any pending professional or
general liability claims.


                                     -35-
<PAGE>   36


NOTE L -- SUBSEQUENT EVENTS

In February 1997, the $23.5 million Seafield Facility and accrued interest of
$.7 million was exchanged for 3,020,536 shares of the Company's common stock at
a rate of $8 per share.

In March 1997, the Company received a commitment to increase its bank credit
facility from $27.5 million to $45.0 million and to extend the expiration date
from May 1997 to May 1998.



                                     -36-
<PAGE>   37


SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
(Amounts in thousands)




<TABLE>
<CAPTION>
            Col A                      Col B                    Col C -  Additions
------------------------------      -------------        --------------------------------
                                                                             Charged to
                                     Balance at          Charged to            Other
        Classification              Beginning of         Costs and            Accounts -
                                      Period             Expenses             Describe
------------------------------      -------------        -----------        -------------
<S>                                        <C>                <C>
Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful
accounts - accounts receivable             $2,080             $1,594
                                    =============        ===========
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful
accounts - accounts receivable             $3,935             $2,106
                                    =============        ===========
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for doubtful
accounts - accounts receivable             $3,800             $2,528
                                    =============        ===========


<CAPTION>
            Col A                        Col D                Col E
------------------------------      -------------        -----------
                                       Deductions         Balance at
        Classification                 - Describe           End of
                                           (1)              Period
------------------------------      -------------        -----------
<S>                                        <C>                <C>
Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful
accounts - accounts receivable             $1,900             $1,774
                                    =============        ===========
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful
accounts - accounts receivable             $3,961             $2,080
                                    =============        ===========
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for doubtful
accounts - accounts receivable             $2,393             $3,935
                                    =============        ===========
</TABLE>


(1)  Accounts written off, net of recoveries.