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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 Securities Exchange Act of 1934 for the
fiscal year ended December 31, 2001
|           |  |                                                                                                                             
|[  ]       |  | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934                                    
|           |  |                                                                                                                             
|           |  | For the Transition Period: _______________________                                                                          
|           |  |                                                                                                                             
|           |  | Commission File Number: 000-15416                                                                                           

Response Oncology, Inc.

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(Exact name of registrant as specified in its charter)


|                                         |  |                         
|---------------------------------------- |  | ------------------------
|Tennessee                                |  | 62-1212264              
|                                         |  |                         
|(State of incorporation)                 |  | (I.R.S. Employer ID No.)
|                                         |  |                         
|1805 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:

|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each class |  | Name of each exchange
on which registered
|                    |  |                                          
|None                |  | None                                     

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

Common Stock, par value $.01 per share

Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 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 [ ] No X

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

As of May 20, 2002, 12,178,701 shares of Common Stock of Response Oncology,
Inc. were outstanding and the aggregate market value of such Common Stock held
by non-affiliates was $11,488 based on the closing sale price of
$0.001 as reported on the OTC Bulletin Board on that date.

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|                                                |                                                                                               |  |  |  |  |  |  | 
|----------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                         
|                                                | ITEM 1. BUSINESS                                                                             
|                                                | ITEM 2. PROPERTIES                                                                           
|                                                | ITEM 3. LEGAL PROCEEDINGS                                                                    
|                                                | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|PART II                                        
|                                                | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                
|                                                | ITEM 6. SELECTED FINANCIAL DATA                                                              
|                                                | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|                                                | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|                                                | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|PART III                                       
|                                                | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS                                                    
|                                                | ITEM 11. EXECUTIVE COMPENSATION                                                              
|                                                | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|                                                | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|PART IV                                        
|                                                | ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                     
|SIGNATURES                                     
|FIRST AMENDED JOINT PLAN & DISCLOSURE STATEMENT
|TERMINATION OF SERVICE AGREEMENT               
|ASSET PURCHASE/SETTLEMENT AGREEMENT            
|SETTLEMENT AGREEMENT/J. PAONESSA, M.D., P.A.   
|TERMINATION AGREEMENT                          
|SETTLEMENT AGREEMENT                           
|TERMINATION OF SERVICE AGREEMENT               
|STATEMENT / COMPUTATION OF PER SHARE EARNINGS  
|LIST OF SUBSIDIARIES                           
|CONSENT OF INDEPENDENT AUDITORS                



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PART I

Forward-Looking Statements

Management has included in this report certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. When used,
statements which are not historical in nature, including the words
anticipate, estimate, should, expect, believe, intend, and similar
expressions are intended to identify forward-looking statements.
Forward-looking statements are, by their nature, subject to known and unknown
risks and uncertainties. Forward-looking statements include statements about
the Plan (as defined below) and its confirmation, and the timing of completion
of the liquidation of the Company (as defined below). These statements are
based on current expectations and the current status of the Companys financial
condition and filings with the Court (as defined below). They involve a number
of risks and uncertainties that are difficult to predict, including, but not
limited to: the ability of the Company to liquidate its assets under the terms
of the Plan as filed with the Court; and confirmation of the Plan by the Court
and approval by the creditors. Actual results could differ materially from
those expressed or implied in the forward-looking statements. Important
assumptions and other important factors, risks, and uncertainties that could
cause actual results to differ materially from those in the forward-looking
statements are detailed from time to time in other filings by the Company with
the SEC. The Company assumes no obligation to publicly release any revisions
to these forward-looking statements, which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.




ITEM 1. BUSINESS

The Company

Overview

Response Oncology, Inc. and its wholly-owned and majority-owned subsidiaries
(the Company) was, prior to the events described below, a comprehensive
cancer management company. As of May 20, 2002, the Company has liquidated
substantially all of its operating assets and anticipates that the remaining
assets will be liquidated and all wind-down activities completed by the end of
2002. Prior to the sale of its assets, the Company provided: advanced cancer
treatment services through outpatient facilities known as IMPACT® Centers under
the direction of practicing oncologists; owned the assets of and managed the
nonmedical aspects of oncology practices; compounded and dispensed
pharmaceuticals to certain oncologists for a fixed or cost plus fee; and
conducted outcomes research on behalf of pharmaceutical manufacturers.

Filings Under Chapter 11 of the Bankruptcy Code

On March 29, 2001, the Company (excluding entities that are majority-owned by
Response Oncology, Inc.) filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code (the Code) in the United
States Bankruptcy Court for the Western District of Tennessee, Western Division
(the Court). The case is jointly administered under case number
01-24607-DSK. The Company is operating as a debtor-in-possession under the
Code, which protects it from its creditors pending reorganization or
liquidation under the jurisdiction of the Court. As debtor-in-possession, the
Company is authorized to operate its business but may not engage in
transactions outside the ordinary course of business without approval of the
Court. A statutory creditors committee may be appointed in the Chapter 11
case, but at this point such a committee has not been formed. As part of the
Chapter 11 process, the Company has attempted to notify all known or potential
creditors of the Chapter 11 filing for the purpose of identifying all
prepetition claims against the Company.

The Court approved a disclosure statement (the Disclosure Statement) filed in
connection with the First Amended Joint Plan (the Plan) by the Company and
AmSouth Bank, as agent for itself, Bank of America, N.A. and Union Planters
Bank, N.A. (the Lenders) on Friday, May 3, 2002. Under the Plan, originally
filed April 12, 2002, and amended April 19, 2002, the Companys outstanding
common stock, preferred stock, options and warrants will be cancelled and
current shareholders and warrantholders will not receive any consideration.
The Plan is a liquidating plan and does not contemplate the financial
rehabilitation of the Company or the continuation of its business. Most of the
Companys assets have been sold or are in the process of being liquidated, with
such funds being paid to creditors as set forth in the Plan.

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Under the Plan, the Lenders, whose outstanding secured claim was allowed in the
amount of $29,545,087.31 by Court order dated October 26, 2001, will be paid
all proceeds from the liquidation, except for amounts to be paid on account of
allowed administrative and priority claims (estimated to be approximately
$3,500,000), and $250,000, which will be distributed to general unsecured
creditors. The liquidation of the Companys assets will not return to the
Lenders or general unsecured creditors the full amount of their claims.

The Court has set a hearing on the confirmation of the Plan for June 14, 2002,
at 11:00 a.m. CDT. If the Plan is confirmed, upon completion of the liquidation
of all the Companys assets and distribution of those proceeds, the Company
will be dissolved.

Generally, substantially all of the Companys liabilities as of the filing date
(prepetition liabilities) are subject to settlement under a plan of
reorganization. Actions to enforce or otherwise effect repayment of all
prepetition liabilities as well as all pending litigation against the Company
are stayed while the Company continues to operate as debtor-in-possession.
Absent approval from the Court, the Company is prohibited from paying
prepetition obligations. The Court has approved payment of certain prepetition
obligations such as employee wages and benefits. Additionally, the Court has
approved the retention of various legal, financial and other professionals.
Schedules were filed by the Company with the Court setting forth its assets and
liabilities as of the filing date as reflected in the Companys accounting
records. Differences between amounts reflected in such schedules and claims
filed by creditors will be investigated and either amicably resolved or
subsequently adjudicated before the Court. As previously discussed, a Plan has
been filed by the Company and its secured lenders, but has not been confirmed.
There can be no assurance that the Plan will be approved by the Companys
creditors.

Under the Code, the Company may elect to assume or reject real property leases,
employment contracts, personal property leases, service contracts and other
executory prepetition contracts, subject to Bankruptcy Court review. Parties
affected by such rejections may file prepetition claims with the Bankruptcy
Court in accordance with bankruptcy procedures. At this time, because of
material uncertainties, prepetition claims are generally carried at face value
in the accompanying financial statements. The Company cannot presently
determine or reasonably estimate the ultimate liability that may result from
rejecting leases or from filing of claims for any rejected contracts, and no
provisions have been made for the majority of these items. Additionally, the
net expense resulting from the Chapter 11 filing by the Company has been
segregated and reported as reorganization costs in the consolidated statements
of operations for the year ended December 31, 2001.

The Companys consolidated financial statements have been prepared in
accordance with the American Institute of Certified Public Accountants (AICPA)
Statement of Position 90-7 (SOP 90-7), Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code. In addition, the consolidated
financial statements have been prepared using accounting principles applicable
to a going concern, which contemplates the realization of assets and the
payment of liabilities in the ordinary course of business. As a result of the
Chapter 11 filing, such realization of assets and liquidation of liabilities is
subject to uncertainty. Based on the liquidation values of the Companys
assets sold in April and May of 2002, the carrying value of these assets has
been adjusted to their net realizable value as of December 31, 2001. The
financial statements include reclassifications made to reflect the liabilities
that have been deferred under the Chapter 11 proceedings as Liabilities
Subject to Settlement under Reorganization Proceedings. Certain accounting
and business practices have been adopted that are applicable to companies that
are operating under Chapter 11.

IMPACT ServicesGenerally, the Company has exited its IMPACT Services
business that provided high dose chemotherapy with stem cell support to cancer
patients on an outpatient basis. Through its IMPACT Centers, the Company had
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 supported the
Companys clinical trials program, which involved 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 allowed the Company to develop a rational means of
improving future treatment regimens by predicting which patients are most
likely to benefit from different treatments. The Companys
clinical trials
assets and related infrastructure were sold in April 2002.

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Each IMPACT Center was staffed by, and made 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 Center services included preparation and collection of
stem cells, administration of high dose chemotherapy, reinfusion of stem cells
and delivery of broad-based supportive care. IMPACT Center personnel extended
the support mechanism into the patients home, further reducing the dependence
on hospitalization. The advantages of this system to the physician and patient
included: (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 oncologists were placed on a treatment protocol
developed from the cumulative analysis of the Companys approximately 4,000
high dose cases. Cases conducted at the IMPACT Center began with a drug regimen
which allowed 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 functions were harvested over a two to three day period.
The harvested stem cells were then frozen and stored at the IMPACT Center, and
following confirmation of response to treatment and a satisfactory stem cell
harvest, patients received high dose chemotherapy followed by reinfusion of
stem cells. Most patients were then admitted to an affiliated hospital for
approximately 8-12 days. After discharge, the patient was monitored in the
oncologists office. The Company believed that the proprietary databases and
the information gathering techniques developed from the foregoing programs
enabled practicing oncologists to cost effectively manage cancer cases while
ensuring quality. Clinical research conducted by the Company focused 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.

In May of 1999, the results of certain breast cancer studies were released at
the meeting of the American Society of Clinical Oncology (ASCO). These
studies, involving the use of high dose chemotherapy, sparked controversy among
oncologists, and, in the aggregate, caused confusion among patients,
third-party payers, and physicians about the role of high dose chemotherapy in
the treatment of breast cancer. After the release of these data, the Companys
high dose business slowed extensively. The Company closed 16 IMPACT Centers in
2001, 19 IMPACT Centers in 2000, and 12 IMPACT Centers in 1999 due to decreased
patient volumes. All remaining IMPACT Centers are currently being sold or
closed by the Company. The decline in the IMPACT Center business was a
significant factor that led to the Companys bankruptcy filing.

While additional data presented at the 2000 ASCO annual meeting appeared to
clarify somewhat the role of high dose therapies for breast cancer and
indicated favorable preliminary results, the Company did not experience an
increase in referrals for breast cancer patients, nor did the Company expect
this trend to reverse in the foreseeable future. The continuing declines in
high dose therapy volumes and the inability to develop new referral lines or
treatment options for the network related to non-breast cancer volumes
adversely affected the financial results of this line of business. Such
adverse results have required the Company to close or sell the remaining IMPACT
Centers in the network.

During the first quarter of 2000, the Company decided to expand into the
specialty pharmaceutical business and began to put in place certain of the
resources necessary for this expansion. The Company intended to leverage its
expertise and resources in the delivery of complex pharmaceuticals to cancer
patients into the delivery of specialty drugs to patients with a wide range of
chronic, costly and complex diseases. Specifically, this would have included
the distribution of new drugs with special handling requirements, and was
expected to involve the use of the Companys regional network of specialized
pharmaceutical centers. In addition, the Company intended to use its national
network of IMPACT Centers and its highly trained healthcare professionals to
administer the most fragile compounds to the expanded patient population. The
Company had hired an expert consultant to assist in the development of the
business plan. In addition, the Company recruited a chief medical officer and
a vice president of operations in the third quarter of 2000. These individuals
had operating responsibilities over the existing business segments and for the
development of the specialty pharmaceutical business. The Company also engaged
in discussions with potential strategic partners, including certain
pharmaceutical manufacturers, partner hospitals, and affiliated physicians.
Various clinical and marketing materials were

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also developed. These services
were marketed to select physicians and third-party payers in existing locations
within the IMPACT Center network. The Company treated very few patients
utilizing such specialty drugs. Given the Companys intent to liquidate all of
its assets, the Company is no longer pursuing this strategy.

Pharmaceutical Sales to PhysiciansThe Company provided pharmacy management
services to certain medical oncology practices through its IMPACT Center
pharmacies. These services included compounding and dispensing pharmaceuticals
for a fixed or cost plus fee. The Company has sold or is in the process of
selling all of its pharmacy management assets.

Oncology Practice Management ServicesDuring 1996, the Company adopted a
strategy of diversification into physician practice management and ultimately
consummated affiliations with 12 medical oncology practices, including 43
medical oncologists in Florida and Tennessee. Pursuant to management service
agreements (Service Agreements), the Company provided management services
that extended to all nonmedical aspects of the operations of the affiliated
practices. As described below, the Company recognized deterioration in the
value of its Service Agreements through financial charges and termination and
modification negotiations. As of May 10, 2002, the Company had terminated all
of its Service Agreements and sold all of its assets related to oncology
practice management services.

The Service Agreements named the Company as 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 was responsible for
providing facilities, equipment, supplies, support personnel, and management
and financial advisory services. Under the terms of the Service Agreements,
the Company (among other things): (i) prepared annual capital and operating
budgets; (ii) prepared financial statements; (iii) ordered and purchased
medical and office inventory and supplies; (iv) billed patients and third party
payers as agent for the affiliated practices; (v) maintained accounting,
billing, medical, and collection records; (vi) negotiated and administered
managed care contracts as agent for affiliated physicians; (vii) arranged for
legal and accounting services related to practice operations; (viii) recruited,
hired and appointed an executive director to manage and administer all of the
day-to-day business functions of each practice; and (ix) managed all
non-physician professional support, administrative, clerical, secretarial,
bookkeeping and billing personnel. The Company sought to combine the purchasing
power of numerous physicians to obtain favorable pricing and terms for
equipment, pharmaceuticals and supplies.

In return for its management services, the Company received a service fee,
depending on Service Agreement form, based on net revenue or net operating
income of the practice. Pursuant to each Service Agreement, the physicians and
the practice agreed not to compete with the Company and the practice. Each
Service Agreement had an initial term of 40 years and, after the initial term,
would have been automatically extended for additional five year terms unless
either party delivered written notice to the other party 180 days prior to the
expiration of the preceding term. The Service Agreement only provided for
termination for cause. If the Company terminated the Service Agreement for
cause, the practice was typically obligated to purchase assets (which typically
include intangible assets) and pay liquidated damages, which obligations were
wholly or partially guaranteed by individual physician owners of the practice
for a period of time. Each Service Agreement provided for the creation of an
oversight committee, a majority of the members of which are designated by the
practice. The oversight committee was responsible for developing management
and administrative policies for the overall operation of each practice.

In February 1999 and March 1999, respectively, the Company announced that it
had terminated its Service Agreements with Knoxville Hematology Oncology
Associates, PLLC, and Southeast Florida Hematology Oncology Group, P.A., two of
the Companys three underperforming net revenue model relationships. Since
these were not for cause terminations initiated by the Company, the
affiliated practices were not responsible for liquidated damages. In its
consolidated financial statements for the year ended December 31, 1998, the
Company recorded an impairment charge related to these three Service Agreements
in accordance with Financial Accounting Standards Board Statement No. 121
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
To Be Disposed Of (SFAS No. 121). The structure of these contracts failed
over time to align the physician and Company incentives, producing
deteriorating returns and/or negative cash flows to the Company. The Company
terminated the Service Agreement with the third physician group effective
December 31, 2001.

In the fourth quarter of 1999, the Company terminated its Service Agreement
with one single-physician practice in Florida. This termination was initiated
on a for cause basis and the Company sought recovery of liquidated damages

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and other amounts owed. This dispute was settled pending execution of
definitive documents in May 2002 for $275,000. No recovery has been recorded
in the consolidated financial statements as of and for the year ended December
31, 2001. During the same period, the Company began negotiations to terminate
another Service Agreement with a single-physician
practice. Since this was not a for cause termination initiated by the
Company, the affiliated practice was not responsible for liquidated damages.
The Company experienced deteriorating returns on this particular Service
Agreement and concluded that continuing the relationship was not economically
feasible. At December 31, 1999, the Company recorded an impairment charge
related to both Service Agreements and associated assets. The Company
terminated the second Service Agreement in April 2000.

In the fourth quarter of 2000, the Company began negotiating, in response to
certain contract disputes, to sell the assets of Oncology/Hematology Group of
South Florida, P.A. (OHGSF) to the existing physician group. Concurrent with
the sale of the assets, the Service Agreement was terminated, and the parties
signed a pharmacy management agreement for the Company to provide turnkey
pharmacy management services to the practice. The sale and pharmacy management
agreement were completed and effective February 1, 2001. At December 31, 2000,
the Company adjusted the Service Agreement and associated assets to their net
realizable value as measured by the termination and sale agreement. The
pharmacy management agreement with OHGSF expired on February 1, 2002.

During the first and second quarters of 2002, the Company terminated all of the
remaining Service Agreements and sold the associated assets to the physician
groups that were parties to the agreements. At December 31, 2001, the Company
adjusted the Service Agreements and associated assets to their net realizable
values as measured by the termination and sale agreements. This resulted in an
impairment charge of $42.1 million related to the Service Agreements and $5.0
million related to adjustments to associated assets. The aggregate proceeds
generated from the termination of the remaining six Service Agreements as sale
of related assets were approximately $11.3 million.

The filings of the voluntary bankruptcy petitions by the Company were technical
defaults under the terms of the Service Agreements. However, such provisions
are not enforceable under the Bankruptcy Code and the affiliated practices were
stayed from terminating their agreements for cause because of the bankruptcy
filings. As discussed above, all of the remaining Service Agreements and
associated assets were terminated and sold back to the affiliated physicians in
the first and second quarters of 2002.

During the second quarter of 2000, the Centers for Medicare and Medicaid
Services (CMS  fka the Health Care Financing Administration), which
oversees the Medicare program, announced its intent to adjust certain
pharmaceutical reimbursement mechanisms. CMS targeted dozens of drugs,
principally those used for the treatment of cancer and AIDS. More
specifically, Medicare utilizes the average wholesale price (AWP) of
pharmaceuticals as the benchmark for reimbursement. It is CMSs stated
position that some drug companies are reporting artificially inflated AWPs to
industry guides that are used for government-reimbursement purposes, resulting
in overpayments by Medicare and excess profits for physicians and other
providers. CMSs investigation into inflated AWPs is ongoing. If the Service
Agreements had not been terminated, the management fees earned by the Company
pursuant to the Service Agreements would have been exposed to reduction
resulting from decreases in reimbursement rates.

On December 1, 2000, the Company received a delisting notification from the
Nasdaq Stock Market for failure to maintain a minimum bid price of $1.00 over
30 consecutive trading days as required under the maintenance standards of the
Nasdaq National Market. The Company had 90 calendar days, or until January 30,
2001, to regain compliance with this rule by obtaining a bid price on its
common stock of at least $1.00 for a minimum of 10 consecutive trading days.
On March 15, 2001, the Companys common stock was delisted from the Nasdaq
Stock Market. The decision was issued following a written appeal and hearing
before the Nasdaq Listing Qualifications Panel. The Companys common stock is
currently traded on the OTC Bulletin Board.

On July 31, 2001 (and subsequently amended on or about January 25, 2002), the
Court approved the establishment of an Employee Retention Plan (ERP) by the
Company in order to provide monetary incentives for certain employees to remain
with the Company during its restructuring and liquidation efforts. The ERP
also provides severance benefits for certain employees in the event of a
without cause termination. In addition, amendments to certain employment
agreements of officers of the Company were approved. Pursuant to Court orders,
approximately $1.3 million was placed in escrow for the benefit of various
employees and officers related to the stay bonus components of the ERP and
employment contracts. At December 31, 2001, approximately $957,000 in ERP
funds is reflected in cash and cash

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equivalents. The aggregate contingent
liability of the ERP, including certain employment agreements, is approximately
$1.9 million as of December 31, 2001. Approximately $1.1 million was paid out
to certain employees and officers from January 1, 2002 through May 20,
2002, and such amounts were not accrued in the consolidated financial
statements as of and for the year ended December 31, 2001 because the
conditions for payment of such obligations were met in 2002.

Cancer Research ServicesThe clinical research services assets and related
infrastructure were sold in April 2002. Since 1989, the Company had conducted
a clinical trials program pursuant to which carefully planned, uniform
treatments administered to a substantial number of IMPACT Center 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
chemotherapy as a treatment. In addition, the Company had recorded outcomes
from over 4,000 cases in which high dose chemotherapy was utilized as a
treatment and had developed treatment pathways, which forecast the best outcome
with the lowest possible cost. Pursuant to agreements between the Company and
the oncologists who supervised their patients treatment in IMPACT Centers,
such oncologists were obligated to record and monitor outcomes, collect
information and report such information to the Company.

The Company also utilized its outcomes database to provide various types of
data to pharmaceutical companies regarding the use of their products. The
IMPACT Center network and the Companys medical information systems made the
Company favorably suited to this process. The Company had participated 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 helped to underwrite the Companys clinical trials
expenses. Such relationships with pharmaceutical companies allowed patients and
physicians earlier access to drugs and therapies which enhanced the Companys
role as a participant in oncological developments.

Certain financial information relating to each of the Companys reportable
segments is included in Note L of the Companys consolidated financial
statements.

Competition

While the Company was operational, most community hospitals with a commitment
to cancer treatment had evaluated their need to provide high dose treatments,
and other entities were competing with the Company in providing high dose
services similar to those formerly offered by the Company.
Although several physician practice management companies have liquidated or
ceased operations, 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 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.

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 individual state governments are responsible for
overseeing the activities of individuals and businesses engaged in the delivery
of healthcare services. Federal regulation of the healthcare industry is based
primarily upon the Medicare and Medicaid programs, each of which is financed,
at least in part, with federal funds. 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 and the states level of
participation in and funding of its Medicaid program.

The Company believes it is in material compliance with applicable healthcare
laws. During 1999, the Company adopted a formal compliance program and, as
part of such program, continues to monitor ongoing developments in healthcare
laws and regulations. However, the laws and regulations applicable to the
Company are subject to significant change and evolving interpretations and,
therefore, there can be no assurance that a review of the Companys practices
by a court or law enforcement or regulatory authority will not result in a
determination that could materially adversely affect the operations of the
Company or the affiliated physicians. Furthermore, there can be no assurance
that the laws applicable to

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the Company will not be amended in a manner that could adversely affect the
Company, its permissible activities, the relative costs associated with doing
business, and the amount of reimbursement by government and other third-party
payers.

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, Medicaid or other
federally-funded programs (Federal Reimbursement Programs) or is claiming
reimbursement from Federal Reimbursement Programs 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 Federal
Reimbursement Programs, those that prohibit unlawful inducements for the
referral of business reimbursable under Federal Reimbursement Programs and
those that prohibit the provision of certain services by a provider to a
patient if the patient was referred by a physician with whom the provider has
certain types of financial relationships.

False and Other Improper ClaimsThe federal government is authorized to impose
criminal, civil and administrative penalties on any person or entity that files
a false claim for reimbursement from any of the Federal Reimbursement Programs.
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 or violate state false claims prohibitions. While the criminal
statutes are generally reserved for instances involving fraudulent intent, the
civil and administrative penalty statutes are being applied by the government
in an increasingly broader range of circumstances. By way of example, the
federal government has brought suits which maintain that a pattern of claiming
reimbursement for unnecessary services where the claimant should have known
that the services were unnecessary, and that claiming reimbursement for
substandard services where the claimant knows the care was substandard, are
actionable claims. In addition, at least one federal appellate court has
affirmed a finding of liability under the false claims statutes based upon
reckless disregard of the factual basis of claims submitted, falling short of
actual knowledge. Severe sanctions under these statutes, including exclusion
from Federal Reimbursement Programs, have been levied even in situations not
resulting in criminal convictions. The Company believes that its billing
activities on behalf of affiliated practices through Service Agreements are in
material compliance with such laws, but there can be no assurance that the
Companys activities will not be challenged or scrutinized by governmental
authorities. A determination that the Company or any affiliated practice has
violated such laws could have a material adverse effect on the Company.

Anti-Kickback LawFederal law commonly known as the Anti-kickback Statute
prohibits the knowing or willful 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 patients covered by Federal
Reimbursement Programs, 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 furnishing, or the arranging for, the provision of
items or services reimbursable under Federal Reimbursement Programs. 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 Statute 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
Statute, the federal government has promulgated regulations that provide
exceptions, or safe harbors, for certain transactions that will not be deemed
to violate the Anti-kickback Statute. 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. Further regulatory safe harbors relating to the
Anti-kickback Statute are under consideration which, if ultimately adopted, may
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 Statute may be relevant. In some instances, the Company
itself may have become a provider of services for which it claimed
reimbursement from Federal Reimbursement Programs, and physicians who were
investors in the Company may have referred patients to the Company for those
services. Furthermore, the government may construe some of the marketing

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and
managed care contracting activities that the Company historically performed as
arranging for the referral of patients to the physicians with
whom the Company had a Service Agreement. Finally, at the request of a
physician or medical practice with which the Company had a Service Agreement,
the Company had managed the provision of ancillary services which the physician
desired to make available to his patients in the physicians office. The
services that were provided by the Company in its IMPACT Centers were
generally not reimbursable by Federal Reimbursement Programs.

Although neither the investments in the Company by physicians nor the Service
Agreements between the Company and physicians qualify for protection under the
safe harbor regulations, the Company does not believe that these activities
fall within the types of activities the Anti-kickback Statute was intended to
prohibit. A determination that the Company had violated or is violating the
Anti-kickback Statute would have a material adverse effect on the Companys
business.

The Stark Self-Referral LawThe Stark Self-Referral Law (Stark Law)
prohibits a physician from referring a patient to a healthcare provider for
certain designated health services reimbursable by the Medicare or Medicaid
programs 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
certain publicly traded securities, certain in-office ancillary services,
certain employment relationships, and certain personal services arrangements.

On January 4, 2001, the Health Care Financing Administration (HCFA) issued a
partial final rule (the Phase I Final Regulations) regarding certain
provisions of the Stark Law with an effective date for the relevant portions of
January 4, 2002. A second rulemaking, Phase II of the Stark Law regulations,
that would address the remaining sections of the Stark Law is pending. It is
not known when these additional final regulations will be promulgated. The
Phase I Final Regulations expand upon the statutory exceptions and contemplate
that designated health services may be provided by a physician practice or by
another corporation if the relevant exceptions delineated in the regulations
apply. In any event, the federal regulatory authorities have indicated through
various charges that recently have been brought against providers that they
consider the Stark Law to be sufficiently self-implementing that charges may be
brought when violations of unambiguous elements of the Stark Law are found.

The Company believes that in the vast majority of situations it would not be
construed as a provider of any designated health service under the Stark Law
for which the Company claims reimbursement from Medicare or Medicaid. However,
there can be no certainty that the Company will not be deemed to have been a
provider of designated health services in at least some circumstances. In that
event, referrals from the physicians for designated health services would have
been permissible only if the relevant contractual relationship(s) met an
exception to the Stark Law prohibitions. To qualify for such exception, the
payments made under the relevant contract must be set at fair market value as
well as meeting other requirements of the relevant Stark Law exception. The
Company intended 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. A finding of noncompliance with the Stark Law could have a
material adverse effect upon the Company and subject it and the Companys
affiliated physicians to penalties and sanctions.

State Law

State Anti-Kickback LawsMany 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 paid oncologists who supervised
their patients treatment at the IMPACT Centers certain professional 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 a material adverse effect upon the Company and subject it and
such physicians to penalties and sanctions.

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State Self-Referral LawsA number of states have enacted self-referral laws
that are similar in purpose to the Stark 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 was in compliance with the self-referral law
of any state in which the Company had a financial relationship with a
physician.

Fee-Splitting LawsMany 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.

The Company has been reimbursed by physicians on whose behalf the Company
provides management services. The Company intended 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. Noncompliance would have an adverse impact upon such physician and thus
upon the Company.

The Florida Board of Medicine ruled in a declaratory statement that payments of
30% of a physician groups net income to a practice management company in
return for a number of services, including expansion of the practice by
increasing patient referrals through the creation of provider networks,
affiliation with other networks, and the negotiation of managed care contracts,
constituted fee-splitting arrangements in violation of the Florida law
prohibiting fee-splitting and could subject the physicians engaged in such
arrangements to disciplinary action. This order has been affirmed by a Florida
appellate court, though the order itself only applies to the physician practice
management company and the individual physicians whose fact situation was
presented to the Florida Board of Medicine for a declaratory statement. While
the Company believes that its Service Agreements were substantially different
from the management services agreement that the Florida Board of Medicine ruled
on, there is a risk that the adverse decision by the Florida court on the case
presented could have had an adverse precedential impact on the Companys
Service Agreements with Florida affiliated practices. The Companys Service
Agreements contained provisions requiring modification of the Service
Agreements in such event in a manner that preserved the economic value of the
Service Agreement, but there can be no assurance that Florida courts would
specifically enforce such contractual provisions. The adverse determinations
of the Florida court could have had a material adverse effect on the Company.

Corporate Practice of MedicineMost 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 Service Agreements was 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 was 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 LawsLaws 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
operated 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 was in compliance with these laws in the states in which it
did business.

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

Reimbursement and Cost Containment

More than 50% of the net revenue of the Companys practice management division
and less than 2% of the revenue of the Companys IMPACT division were 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 have adversely affected
the operations of the Company. The Company expected that the Federal Government
would continue to constrain the growth of spending in the Medicare and Medicaid
programs. To the extent the Companys volume adjusted costs increased, the
Company would not have been 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, it was increasingly
unlikely that the Company would have been able to shift cost increases to non
governmental payors.

Employees

As of May 20, 2002, the Company employed 14 persons, approximately 10 of whom
were full-time employees. No employee of the Company is a member of a labor
union or subject to a collective bargaining agreement. The Company believes
that its employee relations are good.




ITEM 2. PROPERTIES

As of May 20, 2002, the Company leased approximately 9,000 square feet of space
at 1805 Moriah Woods Boulevard, in Memphis, Tennessee, where the Companys
headquarters and central business office are located. The lease expired May
15, 2002, and was extended for up to sixty (60) days while various wind-down
activities continue. Management believes that the Companys properties are
well maintained and suitable for its business operations until the liquidation
process is completed.




ITEM 3. LEGAL PROCEEDINGS

The Company filed voluntary petitions seeking reorganization under Chapter 11
of the United States Bankruptcy Code on March 29, 2001. Additional information
related to the filing is set forth under Part I, Item 1 and Part II, Item 7 of
this Form 10-K and Note B of the Notes to Consolidated Financial Statements.
Such information is incorporated herein by reference.

No material litigation is currently pending against the Company, and the
Company is not aware of any outstanding claims against any former affiliated
physician group that would have a material adverse effect on the Companys
financial condition or results of operations. The Company expects its former
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 formerly affiliated oncologists.




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

On or about May 15, 2002, the Plan and Disclosure Statement were mailed to all
shareholders of the Company. Because the secured claim of the Lenders and
unsecured non-priority claims are not being paid in full, shareholders will
receive nothing on account of their claims, and their interests in the Company
will be cancelled on the effective date of the Plan. Therefore, shareholders
were deemed to have rejected the Plan, and the votes of the shareholder class
were not solicited.

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PART II




ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Companys common stock traded on the Nasdaq Stock Market under the symbol
ROIX through March 14, 2001. The Companys common stock was delisted from
the Nasdaq Stock Market effective March 15, 2001 due to non-compliance with the
listing standard that requires the Companys stock to maintain a minimum bid
price of $1.00 or more. The Companys common stock is currently traded on the
OTC Bulletin Board. As of May 20, 2002, the Companys common stock was held by
approximately 1,831 shareholders of record. Under the terms of the Plan, all
issued and outstanding shares of the Companys common stock will be cancelled
and shareholders will receive no consideration for them.

The high and low closing sale prices of the Companys common stock, as listed
on the OTC Bulletin Board or Nasdaq National Market, were as follows for the
quarterly periods indicated. Over-the-counter market quotations reflect
inter-dealer prices, without retail mark-up, mark-down, or commission, and may
not necessarily represent actual transactions.

|                             |  |                              |        |     |  |   |       |      |  |                |  |   |       |  |  |   |       | 
|---------------------------- |  | ---------------------------- | ------ | --- |  | - | ----- | ---- |  | -------------- |  | - | ----- |  |  | - | ----- | 
|Year Ended December 31, 2001 |  | Year Ended December 31, 2000
|                             |  |                             
|                             |  | High                         |        | Low |  |   |       | High |  | Low           
|                             |  |                              |        |     |  |   |       |      |  |               
|First Quarter                |  |                              | $0.469 |     |  | $ | 0.040 |      |  | First Quarter  |  | $ | 3.063 |  |  | $ | 1.125 | 
|Second Quarter               |  |                              | $0.110 |     |  | $ | 0.040 |      |  | Second Quarter |  | $ | 1.375 |  |  | $ | 0.781 | 
|Third Quarter                |  |                              | $0.090 |     |  | $ | 0.035 |      |  | Third Quarter  |  | $ | 1.875 |  |  | $ | 0.875 | 
|Fourth Quarter               |  |                              | $0.075 |     |  | $ | 0.030 |      |  | Fourth Quarter |  | $ | 0.969 |  |  | $ | 0.156 | 

The Company has not paid any cash dividends on its common stock since the
Companys inception. Because the secured claim of the Lenders and unsecured
non-priority claims are not being paid in full, shareholders will receive
nothing on account of their claims and their interests in the Company will be
cancelled on the effective date of the Plan.

Recent Sales of Unregistered Securities

There have been no recent sales of unregistered securities by the Company.

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

The following table sets forth certain selected consolidated financial data and
should be read in conjunction with the Companys consolidated financial
statements and related notes appearing elsewhere in this report. See ITEM 7,
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS for information relating to the dispositions of business operations
that affect the comparability of the information reflected herein and
information regarding the uncertainty of the Companys future financial
condition.

|                                             |         |   |                          |        |      |   |         |        |      |   |         |        |   |   |         |        |   |   |         |      | 
|-------------------------------------------- | ------- | - | ------------------------ | ------ | ---- | - | ------- | ------ | ---- | - | ------- | ------ | - | - | ------- | ------ | - | - | ------- | ---- | 
|                                             |         |   | Years Ended December 31,
|                                             |         |   |                         
|                                             |         |   | 2001                     |        | 2000 |   | 1999    |        | 1998 |   | 1997   
|                                             |         |   |                          |        |      |   |         |        |      |   |        
|Net revenue                                  |         | $ | 118,085                  |        |      | $ | 130,833 |        |      | $ | 135,567 |        |   | $ | 128,246 |        |   | $ | 101,920 |     
|Net earnings (loss)                          |         |   | (51,393                  | )      |      |   | (14,419 | )      |      |   | (1,693  | )      |   |   | (17,448 | )      |   |   | 4,202   |     
|Net earnings (loss) to common stockholders   |         |   | (51,393                  | )      |      |   | (14,419 | )      |      |   | (1,693  | )      |   |   | (17,449 | )      |   |   | 4,199   |     
|Total assets                                 |         |   | 28,902                   |        |      |   | 92,413  |        |      |   | 119,645 |        |   |   | 126,753 |        |   |   | 149,075 |     
|Long-term debt and capital lease obligations |         |   | -0-                      |        |      |   | 303     |        |      |   | 36,025  |        |   |   | 33,252  |        |   |   | 35,443  |     
|Earnings (loss) per common share:            |         |   |                          |        |      |   |         |        |      |   |         |        |   |   |         |        |   |   |         |     
|                                             | Basic   |   |                          | ($4.18 | )    |   |         | ($1.17 | )    |   |         | ($0.14 | ) |   |         | ($1.45 | ) |   | $       | 0.36 | 
|                                             |         |   |                          |        |      |   |         |        |      |   |         |        |   |   |         |        |   |   |         |     
|                                             | Diluted |   |                          | ($4.18 | )    |   |         | ($1.17 | )    |   |         | ($0.14 | ) |   |         | ($1.45 | ) |   | $       | 0.36 | 
|                                             |         |   |                          |        |      |   |         |        |      |   |         |        |   |   |         |        |   |   |         |     

On March 29, 2001, the Company filed voluntary petitions for relief under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the Western District of Tennessee, Western Division. Although the
Company is currently operating its business as a debtor-in-possession under the
jurisdiction of the Bankruptcy Court, the Company and the Lenders have filed a
Joint Plan that provides for the liquidation of all of the Companys assets and
ultimate dissolution. The selected financial data above was derived from the
Companys consolidated financial statements. At December 31, 2001, the Company
adjusted all of its physician practice management Service Agreements and
associated assets to their net realizable values as measured by the termination
and sale agreements that were finalized in the first and second quarters of
2002. However, the consolidated financial statements do not include any
adjustments that might result from the establishment, settlement and
classification of liabilities that may be required in connection with
liquidation of the Company under Chapter 11 of the United States Bankruptcy
Code.




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

Overview

Response Oncology, Inc. and its wholly-owned subsidiaries (the Company) was,
prior to the events described herein, a comprehensive cancer management
company. As of May 20, 2002, the Company has liquidated substantially all of
its operating assets and anticipates that the remaining assets will be
liquidated and all wind-down activities completed by the end of 2002. Prior to
the sale of its assets, the Company provided advanced cancer treatment services
through outpatient facilities known as IMPACT® Centers under the direction of
practicing oncologists; owned the assets of and managed the nonmedical aspects
of oncology practices; compounded and dispensed pharmaceuticals to certain
oncologists for a fixed or cost plus fee; and conducted outcomes research on
behalf of pharmaceutical manufacturers.

Filings Under Chapter 11 of the Bankruptcy Code

On March 29, 2001, the Company (excluding entities that are majority-owned by
Response Oncology, Inc.) filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code (the Code) in the United
States Bankruptcy Court for the Western District of Tennessee, Western Division
(the Court). The case is jointly administered under case number
01-24607-DSK. The Company is operating as a debtor-in-possession under the
Code, which protects it from its creditors pending reorganization or
liquidation under the jurisdiction of the Court. As

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debtor-in-possession, the
Company is authorized to operate its business but may not engage in
transactions outside the ordinary course of business without approval of the
Court. A statutory creditors committee may be appointed in the Chapter 11
case, but at this point such a committee has not been formed. As part of the
Chapter 11 process, the Company has attempted to notify all known or potential
creditors of the Chapter 11 filing for the purpose of identifying all
prepetition claims against the Company.

The Court approved a disclosure statement (the Disclosure Statement) filed in
connection with the First Amended Joint Plan (the Plan) by the Company and
AmSouth Bank, as agent for itself, Bank of America, N.A. and Union Planters
Bank, N.A. (the Lenders) on Friday, May 3, 2002. Under the Plan, originally
filed April 12, 2002, and amended April 19, 2002, the Companys outstanding
common stock, preferred stock, options and warrants will be cancelled and
current shareholders and warrantholders will not receive any consideration.
The Plan is a liquidating plan and does not contemplate the financial
rehabilitation of the Company or the continuation of its business. Most of the
Companys assets have been sold or are in the process of being liquidated, with
such funds being paid to creditors as set forth in the Plan.

Under the Plan, the Lenders, whose outstanding secured claim was allowed in the
amount of $29,545,087.31 by Court order dated October 26, 2001, will be paid
all proceeds from the liquidation, except for amounts to be paid on account of
allowed administrative and priority claims (estimated to be approximately
$3,500,000), and $250,000, which will be distributed to general unsecured
creditors. The liquidation of the Companys assets will not return to the
Lenders or general unsecured creditors the full amount of their claims.

The Court has set a hearing on the confirmation of the Plan for June 14, 2002,
at 11:00 a.m. CDT. If the Plan is confirmed, upon completion of the liquidation
of all the Companys assets and distribution of those proceeds, the Company
will be dissolved.

Generally, substantially all of the Companys liabilities as of the filing date
(prepetition liabilities) are subject to settlement under a plan of
reorganization. Actions to enforce or otherwise effect repayment of all
prepetition liabilities as well as all pending litigation against the Company
are stayed while the Company continues to operate as debtor-in-possession.
Absent approval from the Court, the Company is prohibited from paying
prepetition obligations. The Court has approved payment of certain prepetition
obligations such as employee wages and benefits. Additionally, the Court has
approved the retention of various legal, financial and other professionals.
Schedules were filed by the Company with the Court setting forth its assets and
liabilities as of the filing date as reflected in the Companys accounting
records. Differences between amounts reflected in such schedules and claims
filed by creditors will be investigated and either amicably resolved or
subsequently adjudicated before the Court. As previously discussed, a Plan has
been filed by the Company and its secured lenders, but has not been confirmed.
There can be no assurance that the Plan will be approved by the Companys
creditors.

Under the Code, the Company may elect to assume or reject real property leases,
employment contracts, personal property leases, service contracts and other
executory prepetition contracts, subject to Bankruptcy Court review. Parties
affected by such rejections may file prepetition claims with the Bankruptcy
Court in accordance with bankruptcy procedures. At this time, because of
material uncertainties, prepetition claims are generally carried at face value
in the accompanying financial statements. The Company cannot presently
determine or reasonably estimate the ultimate liability that may result from
rejecting leases or from filing of claims for any rejected contracts, and no
provisions have been made for the majority of these items. Additionally, the
net expense resulting from the Chapter 11 filing by the Company has been
segregated and reported as reorganization costs in the consolidated statements
of operations for the year ended December 31, 2001.

The Companys consolidated financial statements have been prepared in
accordance with the American Institute of Certified Public Accountants (AICPA)
Statement of Position 90-7 (SOP 90-7), Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code. In addition, the consolidated
financial statements have been prepared using accounting principles applicable
to a going concern, which contemplates the realization of assets and the
payment of liabilities in the ordinary course of business. As a result of the
Chapter 11 filing, such realization of assets and liquidation of liabilities is
subject to uncertainty. Based on the liquidation values of the Companys
assets sold in April and May of 2002, the carrying value of these assets has
been adjusted to their net realizable value as of December 31, 2001. The
financial statements include reclassifications made to reflect the liabilities
that have been deferred under the

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Chapter 11 proceedings as Liabilities
Subject to Settlement under Reorganization Proceedings. Certain accounting
and business practices have been adopted that are applicable to companies that
are operating under Chapter 11.

IMPACT ServicesGenerally, the Company has exited its IMPACT Services
business that provided high dose chemotherapy with stem cell support to cancer
patients on an outpatient basis. Through its IMPACT Centers, the Company had
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 supported the
Companys clinical trials program, which involved 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 allowed the Company to develop a rational means of
improving future treatment regimens by predicting which patients are most
likely to benefit from different treatments. The Companys clinical trials
assets and related infrastructure were sold in April 2002.

Pharmaceutical Sales to PhysiciansThe Company provided pharmacy management
services to certain medical oncology practices through its IMPACT Center
pharmacies. These services included compounding and dispensing pharmaceuticals
for a fixed or cost plus fee. The Company has sold or is in the process of
selling all of its pharmacy management assets.

Oncology Practice Management ServicesDuring 1996, the Company adopted a
strategy of diversification into physician practice management and ultimately
consummated affiliations with 12 medical oncology practices, including 43
medical oncologists in Florida and Tennessee. Pursuant to management service
agreements (Service Agreements), the Company provided management services
that extended to all nonmedical aspects of the operations of the affiliated
practices. Beginning in 1998, the Company recognized deterioration in the
value of its Service Agreements through financial charges and termination and
modification negotiations. As of May 10, 2002, the Company had terminated all
of its Service Agreements and sold all of its assets related to oncology
practice management services.

Cancer Research ServicesThe Companys cancer research services assets and
related infrastructure were sold in April 2002. Since 1989, the Company had
conducted a clinical trials program pursuant to which carefully planned,
uniform treatments administered to a substantial number of IMPACT Center
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 chemotherapy as a treatment. In addition, the Company had recorded
outcomes from over 4,000 cases in which high dose chemotherapy was utilized as
a treatment and had developed treatment pathways, which forecast the best
outcome with the lowest possible cost. Pursuant to agreements between the
Company and the oncologists who supervised their patients treatment in IMPACT
Centers, such oncologists were obligated to record and monitor outcomes,
collect information and report such information to the Company.

Certain financial information relating to each of the Companys reportable
segments is included in Note L of the Companys consolidated financial
statements.

Results of Operations

2001 Compared to 2000

Net revenue decreased 10% to $118.1 million for the year ended December 31,
2001, compared to $130.8 million for the year ended December 31, 2000. The $9.1
million, or 65%, decrease in IMPACT Center revenue was due to overall decreases
in referrals to the IMPACT Centers, with some continued pullback in breast
cancer admissions resulting from high dose chemotherapy/breast cancer study
results presented at ASCO in May 1999. In addition, the Company experienced a
decline in insurance approvals on the high dose referrals obtained. These
decreases in referrals and approvals led to the closure of numerous IMPACT
Centers each year since 1999. As stated above, the Company has closed or is in
the process of selling all remaining IMPACT Centers. Practice management
service fees were $66.6 million in 2001 compared to $77.7 million in 2000
representing a 14% decrease. The net decrease was primarily due to the
termination of a Service Agreement in February 2001. This decrease was
partially offset by an 11% increase in practice management service fees on the
remaining practice groups. Additionally, pharmaceutical sales to physicians
increased $7.8 million, or 20%, from $38.5 million in 2000 to $46.3 million in
2001. This increase is due to increased drug utilization by the physicians
serviced under these agreements, and the addition of one new pharmacy
management

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contract effective February 1, 2001. The period over period
increase was also larger due to the termination of pharmaceutical sales
agreements with
two physician practices effective July 1, 2000. Clinical research revenue
decreased $.3 million in 2001 as compared to 2000. The Company sold this
segment in April 2002.

Salaries and benefits costs decreased $5.8 million, or 27%, from $21.3 million
in 2000 to $15.5 million in 2001. The decrease was primarily due to the
termination of a Service Agreement in February 2001, the closure of 16 IMPACT
Centers in 2001, and a significant reduction in corporate staffing. Salaries
and benefits expense as a percentage of net revenue was 13% in 2001 and 16% in
2000.

Supplies and pharmaceuticals expense increased $.5 million, or 1%, from 2000 to
2001. The increase was primarily related to greater utilization of new
chemotherapy agents with higher costs in the practice management division and
increased volume in pharmaceutical sales to physicians. Supplies and
pharmaceuticals expense as a percentage of net revenue was 76% and 68% for the
years ended 2001 and 2000, respectively. The increase as a percentage of net
revenue was due to the increase in pharmaceutical sales to physicians as well
as general price increases in pharmaceuticals used in the practice management
division. Pharmaceutical sales to physicians have lower margins than high dose
treatment and physician practice management pharmaceutical margins.

Other operating expenses decreased $3.7 million, or 43%, from $8.7 million in
2000 to $5.0 million in 2001. Other operating expenses consist primarily of
medical director fees, purchased services related to global case rate
contracts, rent expense, and other operational costs. The decrease was
primarily due to the closure of various IMPACT Centers and lower purchased
services and physician fees as a result of lower IMPACT and cancer research
volumes as compared to the year ended December 31, 2000.

General and administrative expense decreased $.8 million, or 12%, from $6.9
million in 2000 to $6.1 million in 2001. The decrease was primarily due to the
net effect of decreased administrative expenses due to the closure of various
IMPACT Centers and the termination of certain Service Agreements, offset by
increased expenses for professional services, principally legal and consulting
fees, related to the Companys restructuring efforts prior to the filing of
bankruptcy.

For the year ended December 31, 2001, all operating and general expenses other
than those related to pharmaceuticals and supplies were reduced by $10.4
million, or 28%, as compared with those for the year ended December 31, 2000.
These reductions reflect cost reduction and containment steps put in place in
the first quarter of 2000, the closure of 16 IMPACT Centers during 2001, lower
patient volumes, lower corporate overhead expenses, and the termination of a
Service Agreement in February 2001.

Depreciation and amortization decreased $1.0 million from $4.6 million in 2000
to $3.6 million in 2001. The decrease is principally attributable to the
write-off of the Service Agreement related to OHGSF in December 2000,
resulting in a lower amortization in 2001.

Impairment of management service agreements and associated assets reflects the
difference between the carrying value of the Companys physician practice
management assets (both tangible and intangible) and the amount of anticipated
proceeds resulting from the termination and sale agreements. During the first
and second quarters of 2002, the Company terminated all of its remaining
Service Agreements and sold the associated assets to the physician groups that
were parties to the agreements. At December 31, 2001, the Company adjusted the
Service Agreements and associated assets to their net realizable values as
measured by the termination and sale agreements. This resulted in an
impairment charge of $42.1 million related to the Service Agreements and $5.0
million related to adjustments to associated assets. For the year ended
December 31, 2000, the Company recorded an impairment charge related to the
termination and sale of OHGSF.

Reorganization costs of $1.9 million consist of expenses for professional
services, principally legal and consulting fees, that were incurred by the
Company in 2001 after the filing of the bankruptcy petitions.

EBITDA (earnings (loss) before interest, taxes, depreciation and amortization)
decreased $34.6 million to ($48.0) million for the year ended December 31, 2001
in comparison to ($13.4) million for the year ended December 31, 2000.
Excluding the charge for impairment of management service agreements ($42.1
million) and related assets ($5.0 million), EBITDA decreased $3.4 to ($0.9)
million for the year ended December 31, 2001 in comparison to $2.5 million for
the year ended

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December 31, 2000. EBITDA from the IMPACT services segment
decreased $.3 million, or 119%, for the year ended
December 31, 2001 as compared to the year ended December 31, 2000. The
decrease is primarily due to a decrease in referral volumes and high dose
chemotherapy procedures. EBITDA from the physician practice management segment
decreased $33.7 million for the year ended December 31, 2001 as compared to the
year ended December 31, 2000. This decrease is primarily due to the charge of
$47.1 million recorded in the fourth quarter of 2001 to adjust the Service
Agreement and associated assets to their net realizable value related to the
sale of all the physician practices. EBITDA is presented because it is a
widely accepted financial indicator of a companys ability to service
indebtedness. However, EBITDA should not be considered as an alternative to
income (loss) from operations or to cash flows from operating, investing or
financing activities, as determined in accordance with generally accepted
accounting principles. EBITDA should also not be construed as an indication of
the Companys operating performance or as a measure of liquidity. In addition,
because EBITDA is not calculated identically by all companies, the presentation
herein may not be comparable to other similarly titled measures of other
companies.

2000 Compared to 1999

Net revenue decreased 3% to $130.8 million for the year ended December 31,
2000, compared to $135.6 million for the year ended December 31, 1999. The
$14.1 million, or 50%, decrease in IMPACT Center revenue reflected the
confusion and related pullback in breast cancer admissions resulting from high
dose chemotherapy/breast cancer study results presented at ASCO in May 1999.
In addition, the Company experienced a decline in insurance approvals on the
high dose referrals obtained. Since the release of the study results, the
Companys high dose business slowed significantly, as evidenced by a 49%
decrease in high dose procedures in 2000 as compared to 1999. Practice
management service fees were $77.7 million in 2000 compared to $68.4 million in
1999, for a 14% increase. This increase was due to growth in patient volumes
for both non-ancillary and ancillary services and pharmaceutical utilization,
and occurred despite a 7% decrease in the number of physicians under management
agreements during the year ended December 31, 2000 as compared to 1999.
Additionally, pharmaceutical sales to physicians increased $1 million, or 3%,
from $37.5 million in 1999 to $38.5 million in 2000. This increase was due to
increased drug utilization by the physicians serviced under pharmacy management
agreements, but was partially offset by the termination of pharmaceutical sales
agreements with two physician practices effective July 1, 2000.

Salaries and benefits costs decreased $4.5 million, or 17%, from $25.8 million
in 1999 to $21.3 million in 2000. The decrease was primarily due to the
termination of certain Service Agreements in 1999, the modification of a
Service Agreement that resulted in a change in the manner in which physician
compensation was recorded, the closing of various IMPACT Centers and a
reduction in corporate staffing. Salaries and benefits expense as a percentage
of net revenue was 16% in 2000 and 19% in 1999.

Supplies and pharmaceuticals expense increased $9.2 million, or 12%, from 1999
to 2000. The increase was primarily related to greater utilization of new
chemotherapy agents with higher costs in the practice management division and
increased volume in pharmaceutical sales to physicians. Supplies and
pharmaceuticals expense as a percentage of net revenue was 68% and 59% for the
years ended 2000 and 1999, respectively. The increase as a percentage of net
revenue was due to the increase in pharmaceutical sales to physicians as well
as general price increases in pharmaceuticals used in the practice management
division. Pharmaceutical sales to physicians have lower margins than high dose
treatment and physician practice management pharmaceutical margins.

Other operating expenses decreased $2.8 million, or 24%, from $11.5 million in
1999 to $8.7 million in 2000. Other operating expenses consist primarily of
medical director fees, purchased services related to global case rate
contracts, rent expense, and other operational costs. The decrease was
primarily due to the closure of various IMPACT Centers and lower purchased
services and physician fees as a result of lower IMPACT and cancer research
volumes as compared to the year ended December 31, 1999.

General and administrative expense increased $.4 million or 7%, from $6.5
million in 1999 to $6.9 million in 2000. The increase was primarily due to the
net effect of increased expenses for professional services, principally
consulting fees related to the Companys restructuring efforts, and decreased
administrative expenses due to the closure of various IMPACT Centers and the
termination of certain Service Agreements.

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For the year ended December 31, 2000, all operating and general expenses other
than those related to pharmaceuticals and supplies were reduced by $6.9
million, or 16%, as compared with those for the year ended December 31, 1999.
These reductions reflect cost reduction and containment steps put in place in
the first quarter of 2000, the closure of 19 IMPACT Centers, lower patient
volumes and the termination of certain Service Agreements.

Depreciation and amortization increased $.1 million from $4.5 million in 1999
to $4.6 million in 2000. Had the Oncology/Hematology Group sales transaction
been effected as of January 1, 2000, depreciation and amortization would have
declined to $3.6 million on a pro forma basis in 2000.

EBITDA (earnings before interest, taxes, depreciation and amortization)
decreased $19.8 million to ($13.4) million for the year ended December 31, 2000
in comparison to $6.4 million for the year ended December 31, 1999. EBITDA
from the IMPACT services segment decreased $6.8 million, or 103%, for the year
ended December 31, 2000 as compared to the year ended December 31, 1999. The
decrease was primarily due to a decrease in referral volumes and high dose
chemotherapy procedures. In addition, during the second quarter of 2000, the
Company received notices of termination of pharmaceutical sales agreements from
two physician practices effective July 1, 2000. EBITDA from the physician
practice management segment decreased $14.1 million, or 193%, for the year
ended December 31, 2000 as compared to the year ended December 31, 1999. This
decrease was primarily due to the charge of $16.0 million recorded in the
fourth quarter of 2000 to adjust the Service Agreement and associated assets to
their net realizable value related to the sale of a physician practice.

Liquidity and Capital Resources

At December 31, 2001, the Companys working capital totaled $25.9 million, with
current assets of $28.2 million and current liabilities of $2.3 million
(excluding liabilities subject to settlement under reorganization proceedings
of $44.1 million). Cash and cash equivalents represented $7.9 million of the
Companys current assets. As noted above, approximately $957,000 of the
Companys cash and cash equivalents as of December 31, 2001 is escrowed
pursuant to the Companys employee retention plan that was approved by the
Bankruptcy Court in the third quarter of 2001. Positive working capital is
primarily attributable to the change in balance sheet classification of
liabilities subject to settlement under reorganization proceedings, as further
described below.

Cash provided by operating activities was $9.1 million in 2001 as compared to
cash provided by operating activities of $5.1 million in 2000. The increase in
operating cash flow is largely attributable to a reduction on amounts due from
affiliated physician groups resulting from sale proceeds and recovery of
working capital associated with the sale and concurrent terminations of a
Service Agreement in the first quarter of 2001. The increase is also
attributable to the timing of payment of accounts payable and accrued expenses.

Cash provided by investing activities was $10,000 in 2001, principally related
to the proceeds from the sale of equipment. Cash used by investing activities
was $.6 million in 2000, principally related to the purchase of equipment.

Cash used in financing activities was $8.5 million in 2001 and $4.4 million in
2000. This increase is primarily attributable to additional payments on notes
payable in 2001 as compared to 2000 and an increase in distributions to joint
venture partners in 2001, as compared to 2000.

Under the terms of the Companys Bankruptcy case, liabilities in the amount of
$44.1 million are subject to settlement. Generally, actions to enforce or
otherwise effect repayment of all prepetition liabilities as well as all
pending litigation against the Company are stayed while the Company continues
its business operations as debtor-in-possession. The ultimate amount and
settlement terms for such liabilities are subject to the Plan, and accordingly,
are not presently determinable.

Since the filing of the bankruptcy petitions, the Company has been operating
under various interim cash collateral orders whereby the Company is authorized
to utilize cash according to cash budgets approved by the Court. On October
26, 2001, a permanent cash collateral order was approved by the Court. Pursuant to the terms of the permanent cash collateral order, the
Company was authorized to utilize cash according to approved cash budgets until
the earlier of the occurrence of a specific defined event or March 31, 2002.
Such defined events included, but were not limited to, the

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filing of a
reorganization plan, the sale of all of the assets of the Company, conversion
of the cases to Chapter 7 of the Code, or
the occurrence of an uncured default. Furthermore, a lump sum principal
payment to the Lenders of $2.6 million was made on October 31, 2001. The terms
of the permanent cash collateral order also provide for the payment of interest
to the Lenders at the non-default rate as set forth in the original credit
agreement (currently LIBOR plus 2.5%). On April 12, 2002, an order extending
and modifying the order entered on October 26, 2001 was approved by the
Bankruptcy Court. Pursuant to the terms of this amendment, the termination
date for the use of cash collateral was extended until July 15, 2002.
Furthermore, additional default provisions were added to the order. Such
additional defaults include, but are not limited to, failure of the Company to
support through confirmation the joint plan of liquidation, the disposition or
settlement of any assets without full consultation of the Lenders, payment of
any additional professional fees above the amount set forth in the budget, and
the accrual of additional professional fees in excess of $250,000 for services
performed for the period from April 1, 2002, through the effective date of the
Plan. The Companys historical cash flow since the filing of the petitions and
current cash budgets indicate sufficient liquidity to fund its operations
during the aforementioned periods.

On July 31, 2001 (and subsequently amended on or about January 25, 2002), the
Court approved the establishment of an Employee Retention Plan (ERP) by the
Company in order to provide monetary incentives for certain employees to remain
with the Company during its restructuring and liquidation efforts. The ERP
also provides severance benefits for certain employees in the event of a
without cause termination. In addition, amendments to certain employment
agreements of officers of the Company were approved. Pursuant to these court
orders, approximately $1.3 million was placed in escrow for the benefit of
various employees and officers related to the stay bonus components of the ERP
and employment contracts. At December 31, 2001, approximately $957,000 in ERP
funds is reflected in cash and cash and equivalents. The aggregate contingent
liability of the ERP, including certain employment agreements, is approximately
$1.9 million as of December 31, 2001. Approximately $1.1 million was paid out
to certain employees and officers from January 1, 2002, through May 20, 2002,
and such amounts were not accrued in the consolidated financial statements as
of and for the year ended December 31, 2001 because the triggers for payment of
such obligations occurred in 2002.

The terms of the Companys original lending agreement provided for a $42.0
million Credit Facility, to mature in June 2002, to fund the Companys
acquisition and working capital needs. The Credit Facility, originally
comprised of a $35.0 million Term Loan Facility and a $7.0 million Revolving
Credit Facility, is collateralized by the assets of the Company and the common
stock of its subsidiaries. The Credit Facility bears interest at a variable
rate equal to LIBOR plus an original spread between 1.375% and 2.5%, depending
upon borrowing levels. The Company was also obligated to a commitment
fee of .25% to .5% of the unused portion of the Revolving Credit Facility. The
Company is subject to certain affirmative and negative covenants which, among
other things, originally required that the Company maintain certain financial
ratios, including minimum fixed charge coverage, funded debt to EBITDA and
minimum net worth. This original lending agreement was subsequently and
significantly amended in November 1999 and March 2000, as described below.

In November 1999, the Company and its Lenders amended certain terms of the
Credit Facility. As a result of this amendment, the Revolving Credit Facility
was reduced from $7.0 million to $6.0 million and the interest rate was
adjusted to LIBOR plus a spread of 3.25%. The Companys obligation for
commitment fees was adjusted from a maximum of .5% to .625% of the unused
portion of the Revolving Credit Facility. Repayment of the January 1, 2000
quarterly installment was accelerated. In addition, certain affirmative and
negative covenants were added or modified, including minimum EBITDA
requirements for the fourth quarter of 1999 and the first quarter of 2000.
Compliance with certain covenants was also waived for the quarters ended
September 30, 1999 and December 31, 1999.

On March 30, 2000, the Company and its Lenders again amended various terms of
the Credit Facility. As a result of this amendment, certain affirmative and
negative covenants were added (including minimum quarterly cash flow
requirements through March 2001), and certain other existing covenants were
modified. Additionally, certain principal repayment terms were modified and
future and current compliance with specific covenants was waived. Finally, the
maturity date of the Credit Facility was accelerated to June 2001.

During the third quarter of 2000, the Company did not meet certain financial
covenants of the Credit Facility, including those related to minimum cash flow
requirements, resulting in an event of default under the Credit Facility. This
occurred primarily due to further erosion in high dose chemotherapy volumes.
As a result of this event of default, the Companys Lenders adjusted the
interest rates on the outstanding principal to the default rate of prime plus
3% (12.5% at

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the time of default) and terminated any obligation to advance
additional loans or issue letters of credit. Under the terms of the Credit
Facility, additional remedies available to the Lenders (as long as an event of
default exists and has not been cured) included
acceleration of all principal and accrued interest outstanding, the right to
foreclose on related security interests in the assets of the Company and stock
of its subsidiaries, and the right of setoff against any monies or deposits
that the Lenders have in their possession.

Effective December 29, 2000, the Company executed a forbearance agreement with
its Lenders. Under the terms of the forbearance agreement, the Lenders agreed
to forbear from enforcing their rights or remedies pursuant to the Credit
Facility documents until the earlier of (i) March 30, 2001 (as amended), or
(ii) certain defined events of default. During this period, the interest rate
was adjusted to prime plus 2%. The forbearance agreement also provided that a
financial advisor be retained by the Company to assist in the development of a
restructuring plan and to perform certain valuation analyses.

With the Companys March 29, 2001 Chapter 11 bankruptcy filing, any potential
future revisions to the Credit Facility are subject to Chapter 11
reorganization or liquidation processes (described elsewhere in conjunction
with discussion of the filing). Additionally, as of the date of the bankruptcy
filing, the Company was in technical default under the terms of the Credit
Facility. Consistent with all of the above-described factors, the Company has
classified all amounts due under the Companys Credit Facility as a liability
subject to settlement under reorganization proceedings in the accompanying
consolidated balance sheet as of December 31, 2001. The amounts due under the
Companys Credit Facility were classified as a current liability in the
accompanying consolidated balance sheet as of December 31, 2000. At December
31, 2001, $26.4 million aggregate principal was outstanding under the Credit
Facility with an interest rate of approximately 5.2%.

The Company entered into a LIBOR-based interest rate swap agreement (Swap
Agreement) with the Companys Lender as required by the terms of the Credit
Facility. Effective July 1, 2000, the Company entered into a new Swap
Agreement. Amounts hedged under this most recent Swap Agreement accrued
interest at the difference between 7.24% and the ninety-day LIBOR rate and were
settled quarterly. The Company has hedged $17.0 million under the terms of the
Swap Agreement. The Swap Agreement terminated upon the filing of the Companys
bankruptcy petitions and has not been renewed.

The installment notes payable to affiliated physicians and physician practices
were issued as partial consideration for the practice management affiliations.
Pursuant to the physician practice management sale transactions that occurred
in the first and second quarters of 2002, the related subordinated debt that
was forgiven as part of these transactions was adjusted to the net realizable
value at December 31, 2001. The unpaid principal amount of a note related to a
practice management affiliation was $50,000 at December 31, 2001.

The Company is committed to future minimum lease payments under operating
leases of $.6 million for administrative and operational facilities.

Health Insurance Portability and Accountability Act of 1996

The federal Health Insurance Portability and Accountability Act of 1996
(HIPAA) mandated the development of regulations to standardize electronic
healthcare transactions and to ensure the privacy and protection of
individually identifiable health information. On August 17, 2000, the
Department of Health and Human Services (HHS) published the first final rule
of this set, Standards for Electronic Transactions (Transactions Rule). Most
entities subject to the Transactions Rule must be in compliance by October 16,
2003. On December 28, 2000, HHS published a second final rule, addressing the
privacy of individually identifiable health information (Privacy Rule). Most
entities subject to the Privacy Rule are currently required to be in compliance
by April 14, 2003. A third final regulation establishing a unique identifier
for employers to use in electronic health care transactions was published on
May 31, 2002. Two other HIPAA components  a rule creating a unique
identifier for providers to use in such transactions and a rule setting
standards for

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the security of electronic health information  were proposed in
1998, but have not been finalized. Still to be proposed are rules establishing
a unique identifier for health plans for electronic transactions, standards for
claims attachments, and enforcement standards. Plans for a national individual
identifier rule have been placed on hold.

The Company will likely be dissolved prior to implementation of the HIPAA
regulations.

New Accounting Standards

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and
Other Intangible Assets. Statement 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001
as well as all purchase method business combinations completed after June 30,
2001. Statement 141 also specifies criteria intangible assets acquired in a
purchase method business combination must meet to be recognized and reported
apart from goodwill, noting that any purchase price allocable to an assembled
workforce may not be accounted for separately. Statement 142 requires that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provision of Statement 142. Statement 142 also requires that
intangible assets with estimable useful lives be amortized over their
respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with FAS Statement No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of.

The Company is required to adopt the provisions of Statement 141 immediately
except with regard to business combinations initiated prior to July 1, 2001,
and Statement 142 effective January 1, 2002. Furthermore, goodwill and
intangible assets determined to have an indefinite useful life acquired in a
purchase business combination completed after June 30, 2001, but before
Statement 142 is adopted in full will not be amortized, but will continue to be
evaluated for impairment in accordance with the appropriate pre-Statement 142
accounting literature. Goodwill and intangible assets acquired in business
combinations completed before July 1, 2001 will continue to be amortized and
tested for impairment in accordance with the appropriate pre-Statement 142
accounting requirements prior to the adoption of Statement 142.

Statement 141 requires upon adoption of Statement 142 that the Company evaluate
its existing intangible assets and goodwill that were acquired in prior
purchase business combinations, and make any necessary reclassifications in
order to conform with the new criteria in Statement 141 for recognition apart
from goodwill. Upon adoption of Statement 142, the Company will be required to
reassess the useful lives and residual values of all intangible assets
acquired, and make any necessary amortization period adjustments by the end of
the first interim period after adoption. In addition, to the extent an
intangible asset is identified as having an indefinite useful life, the Company
will be required to test the intangible asset for impairment in accordance with
the provisions of Statement 142 within the first interim period. Any
impairment loss will be measured as of the date of adoption and recognized as
the cumulative effect of a change in accounting principle in the first interim
period.

In connection with Statement 142s transitional goodwill impairment evaluation,
the Statement will require the Company to perform an assessment of whether
there is an indication that goodwill (and equity-method goodwill) is impaired
as of the date of adoption. To accomplish this, the Company must identify its
reporting units and determine the carrying value of each reporting unit by
assigning the assets and liabilities, including the existing goodwill and
intangible assets, to those reporting units as of the date of adoption. The
Company will then have up to six months from the date of adoption to determine
the fair value of each reporting unit and compare it to the reporting units
carrying amount. To the extent a reporting units carrying amount exceeds its
fair value, an indication exists that the reporting units goodwill may be
impaired and the Company must perform the second step of the transitional
impairment test. In the second step, the Company must compare the implied fair
value of the reporting units goodwill determined by allocating the reporting
units fair value to all of its assets (recognized and unrecognized) and
liabilities in a manner similar to a purchase price allocation in accordance
with Statement 141, to its carrying amount, both of which would be measured as
of the date of adoption. This second step is required to be completed as soon
as possible, but no later than the end of the year of adoption. Any
transitional impairment loss will be recognized as the cumulative effect of a
change in accounting principle in the Companys statement of earnings.

Any unamortized negative goodwill (and equity-method goodwill) existing at the
date Statement 142 is adopted must be written off as the cumulative effect of a
change in accounting principle.

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As of the date of adoption, the Company will have no unamortized identifiable
intangible assets that will be subject to the transitional provisions of
Statements 141 and 142. Amortization expense related to identifiable
intangible assets was $3.0 million and $2.2 million for the years ended
December 31, 2000 and 2001, respectively

In August 2001, the FASB issued FASB Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets(Statement 144), which supersedes
both FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of(Statement 121) and the accounting
and reporting provisions of APB Opinion No. 30, Reporting the Results of
OperationsReporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions
(Opinion 30), for the disposal of a segment of a business (as previously
defined in that Opinion). Statement 144 retains the fundamental provisions in
Statement 121 for recognizing and measuring impairment losses on long-lived
assets held for use and long-lived assets to be disposed of by sale, while also
resolving significant implementation issues associated with Statement 121. For
example, Statement 144 provides guidance on how a long-lived asset that is used
as part of a group should be evaluated for impairment, establishes criteria for
when a long-lived asset is held for sale, and prescribes the accounting for a
long-lived asset that will be disposed of other than by sale. Statement 144
retains the basic provisions of Opinion 30 on how to present discontinued
operations in the income statement but broadens that presentation to include a
component of an entity (rather than a segment of a business). Unlike Statement
121, an impairment assessment under Statement 144 will never result in a
write-down of goodwill. Rather, goodwill is evaluated for impairment under
Statement No. 142, Goodwill and
Other Intangible Assets.

The Company is required to adopt Statement 144 no later than the fiscal year
beginning after December 15, 2001, and has adopted its provisions for the
quarter ended March 31, 2002. Management does not expect the adoption of
Statement 144 for long-lived assets held for use to have a material impact on
the Companys financial statements because the impairment assessment under
Statement 144 is largely unchanged from Statement 121. Furthermore, the
Company will have no unamortized identifiable intangible assets. The provisions
of the Statement for assets held for sale or other disposal generally are
required to be applied prospectively after the adoption date to newly initiated
disposition activities.

Critical Accounting Policies

Financial Reporting Release No. 60, recently issued by the SEC, requires all
companies to include a discussion of critical accounting policies or methods
used in the preparation of the financial statements. Note 1 of the Notes to
the Consolidated Financial Statements includes a summary of the significant
accounting policies and methods used in the preparation of the Companys
Consolidated Financial Statements. The following is a brief discussion of the
Companys more significant accounting policies.

The Companys consolidated financial statements have been prepared in
accordance with the American Institute of Certified Public Accountants (AICPA)
Statement of Position 90-7 (SOP 90-7), Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code. In addition, the consolidated
financial statements have been prepared using accounting principles applicable
to a going concern, which contemplates the realization of assets and the
payment of liabilities in the ordinary course of business. As a result of the
Chapter 11 filing, such realization of assets and liquidation of liabilities is
subject to uncertainty. Based on the liquidation values of the Companys
assets sold in April and May of 2002, the carrying value of these assets has
been adjusted to their net realizable value as of December 31, 2001. The
financial statements include reclassifications made to reflect the liabilities
that have been deferred under the Chapter 11 proceedings as Liabilities
Subject to Settlement under Reorganization Proceedings. Certain accounting
and business practices have been adopted that are applicable to companies that
are operating under Chapter 11.




ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Companys primary market risk exposure has been to changes in interest
rates obtainable on its Credit Facility. The Companys interest rate risk
objective has been to limit the impact of interest rate fluctuations on
earnings and cash flows and to lower its overall borrowings by selecting
interest periods for tranches of the Credit Facility that are more favorable
to the Company based on the current market interest rates. Prior to the
Companys bankruptcy filing, the Company had the option of fixing current
interest rates for interest periods of 1, 2, 3 or 6 months. Since the filing
of the

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Companys
bankruptcy petitions and consistent with the cash collateral orders, interest
rates have been set exclusively for one-month periods.

The Company was also a party to a LIBOR based interest rate swap agreement
(Swap Agreement), effective July 1, 2000, with the Companys Lender as
required by the terms of the Credit Facility. Amounts hedged under the Swap
Agreement accrued interest at the difference between 7.24% and the ninety-day
LIBOR rate and were settled quarterly. The Swap Agreement terminated upon the
filing of the Companys bankruptcy petitions and has not been renewed. The
Company does not enter into derivative or interest rate transactions for
speculative purposes.

At December 31, 2001, $26.4 million aggregate principal was outstanding under
the Credit Facility with a current interest rate of approximately 5.2%. The
Company does not have any other material market-sensitive financial
instruments.




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

This item is submitted in a separate section of this report (see pages 36
through 55).




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

Not applicable.

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PART III




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

Executive Officers of the Company

Charles E. Sweet, President and Chief Executive Officer:Mr. Sweet, age 46,
joined the Company as President and Chief Executive Officer in April 2002.
Prior to joining Response Oncology, Inc., he served as President and Chief
Executive Officer of Physician Health Corporation, a PPM specializing in
radiation oncology and comprehensive cancer treatment from October 2000 until
April 2002. From December 1998 until January 2000 he served as President and
Chief Executive Officer and from May 1998 to December 1998 as Chief Operating
Officer and Chief Information Officer of BMJ Medical Management, Inc., a PPM
specializing in orthopedics. From 1984 until May 1998, Mr. Sweet held several
positions including Chief Operating Officer, Chief Information Officer, and
Regional Vice President with Mercy Health Services, a large, not-for-profit
health care system located in the Midwest. Mr. Sweet has been Chairman of the
Board of Sarcom, a value added reseller of computer equipment and services,
since October 2001. In addition, he has served as a director with BMK Inc., a
wholesale distributor of grocery and drug store products since March
2002, and
sole director of Rehab Designs of America, a prosthetics and orthotics company,
since December 2001.

Peter A. Stark, Executive Vice President and Chief Financial Officer:Mr.
Stark, age 33, has served as Executive Vice President and Chief Financial
Officer since November 2000. Prior to his appointment as CFO, Mr. Stark served
as the Companys Interim Chief Financial Officer from November 1999 until
October 2000 and as the Companys controller from March 1997 until October
1999. Prior to joining the Company, from November 1993 until March 1997, Mr.
Stark served as corporate controller for The Pallet Factory, Inc., a
manufacturing company headquartered in Memphis, Tennessee. From August 1990
until October 1993, Mr. Stark was a senior associate in business assurance with
the international accounting firm of Coopers & Lybrand. Mr. Stark is a
certified public accountant.

Directors

On April 24, 2002, pursuant to the Courts order extending permission for the
Company to use cash collateral and to make certain bonus and severance payments
(the Cash Collateral Order), Anthony LaMacchia, the Companys President and
Chief Executive Officer, was terminated, and resigned from his position on the
Companys Board of Directors (the Board) along with all other then-existing
members of the Board. Charles E. Sweet replaced Mr. LaMacchia as President and
Chief Executive Officer and also serves as Chairman of the Board. Peter A.
Stark, the Companys Chief Financial Officer, and James A. Skinner filled the
other Board positions, pursuant to the Courts Cash Collateral
Order. Biographical information on Mr. Skinner, the sole member of
the Company's Board who is not an executive officer, is provided
below.

James A. Skinner, Director:Mr. Skinner, age 63, joined the Board in April
2002. He has been President and director, Cumberland & Ohio Co. of Texas since
1970, specializing in consulting for distressed businesses, either in workout,
turnaround and/or bankruptcy. For the past several years, Mr. Skinner has been engaged by a trustee to manage defaulted municipal bonds
and private placement notes for which the trustee serves as indenture trustee.
Mr. Skinner has been involved with businesses such as brick manufacturing,
television production companies, healthcare (such as physician practice
management, nursing homes, hospitals, and assisted living facilities) meat
packing plants, recreational vehicle campgrounds, ready mix concrete, sand and
gravel aggregate ventures, and barge lines.

Pursuant to the terms of the Plan, upon
confirmation, Mr. Sweet will become
the sole director and officer of the Company and the designated wind-down
person.




ITEM 11. EXECUTIVE COMPENSATION

Employment Contracts; Change of Control Arrangements

Effective November 1, 1999, and January 1, 2001, respectively, each of
Messrs. LaMacchia and Stark executed an employment agreement. The employment
agreements provide for the following base salaries: Mr. LaMacchia 

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$325,000; and Mr. Stark  $185,000. Annual bonuses were determined in accordance
with policies, and were based on performance targets, established by the
Compensation Committee. The terms and conditions of each of the
employment agreements of Messrs. LaMacchia and Stark are described below.

As discussed below,
Mr. LaMacchias employment by
the Company was terminated on April 24, 2002. As discussed below in
Severance and Termination Agreements, Dr. Braslow, the
former Chief Medical Officer, executed a termination agreement with
the Company in 2001. The original contract with Dr. Braslow provided
for a base salary of $225,000.

Employment Agreement with Mr. LaMacchia.Mr. LaMacchia executed an
employment agreement effective as of November 1, 1999 pursuant to which he
agreed to serve as the Companys President and Chief Executive Officer.
Certain terms of Mr. LaMacchias employment agreement were amended effective
January 1, 2001, and further amended upon assumption of his contract by the
Company and by Court Order dated July 30, 2001 (Amended LaMacchia Agreement).

On April 24, 2002, pursuant to the Courts order extending permission for
the Company to use cash collateral and to make certain bonus and severance
payments (the Cash Collateral Order), Mr. LaMacchia was terminated and
resigned from his Board position along with all other then-existing members of
the Board. This was done in order to reduce the total costs of the estate and
because most, if not all, of the operating assets of the Company had been sold
or were in the process of being sold. Pursuant to the without cause
termination provisions of the Amended LaMacchia Agreement, Mr. LaMacchia was
paid approximately $859,000 (the Payment) upon his termination. The Payment
was in satisfaction of all of Mr. LaMacchias claims against the Company,
including bonuses, severance and other benefits. Pursuant to the Amended
LaMacchia Agreement, the Payment included a stay bonus in the amount of
$325,000, severance of $507,000, and approximately $27,000 in health benefits
and payments associated with loan forgiveness. In addition, the Company
forgave principal and interest on a note from Mr. LaMacchia in the approximate
amount of $100,000.

Prior to the funding of the Payment, Mr. LaMacchia was required to satisfy
several conditions as outlined in the Cash Collateral Order. These conditions
included: (i) the execution of certain asset purchase agreements related to the
physician practice management groups; (ii) the filing of motions seeking Court
approval of the aforementioned agreements; (iii) the approval of Charles Sweet
by resolution of the Board as successor to Mr. LaMacchia; (iv) the resignation
of the existing Board; (v) the filing of the Plan with the Court without it
being unilaterally withdrawn or amended by the Company; and (vi) the Cash
Collateral Order becoming a final order.

Employment Agreement with Mr. Stark. The Company executed an agreement
with Mr. Stark effective January 1, 2001, by which he agreed to serve as the
Companys Chief Financial Officer. Certain terms of Mr. Starks employment
agreement were amended upon assumption of his contract by the Company and by
Court Order dated July 30, 2001 (Amended Stark Agreement). The Amended Stark
Agreement provides a compensation package which includes a base salary of
$185,000 and an annual bonus for up to 40% of the base salary, subject to the
Boards evaluation of Mr. Starks performance and meeting performance targets
established annually by the Board. In addition, Mr. Stark is entitled
to all other employee benefits for which any salaried employee of the
Company is eligible.

Mr. Stark is eligible to receive a stay bonus equal to $148,000 to
encourage him to remain with the Company during the bankruptcy and
liquidation period. The stay bonus will be payable to Mr. Stark within ten
days of the effective date that the Company emerges from bankruptcy, confirms a
plan of liquidation, or converts to a Chapter 7. Pursuant to the terms of the
Amended Stark Agreement, the stay bonus is carved-out and escrowed for the
benefit of Mr. Stark.

Mr. Stark is also eligible to receive a restructuring bonus of up to
$292,000 based on the level of proceeds available to creditors of the
bankruptcy estate. If the secured debt of the Company is not paid in full or
assumed by a third party, then no portion of the restructuring bonus is earned.
The Amended Stark Agreement also provided time enhancement bonuses that would
have been payable if the bankruptcy case had been concluded by January 31,
2002. A portion of the restructuring bonus and/or severance benefits (as
described below) in the amount of $50,000 is carved-out and escrowed for the
benefit of Mr. Stark.

If Mr. Stark is terminated as a result of a change in control, as
defined by Section 280G of the Internal Revenue Code of 1986, as amended, or a
change in ownership of greater than 50% of the Companys assets, the Company
agreed

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to pay Mr. Stark a supplemental bonus. If Mr. Stark is terminated
within four months prior to or within one year following the change in control,
this bonus will be payable to Mr. Stark within 60 days of his termination, in a
lump-sum equal to the
lesser of (a) his stay bonus, plus an amount of money equal to 1.5 times the
sum of (i) his base salary plus (ii) his annual target bonus, which is 40% of
his base salary, or (b) the stay bonus, restructuring bonus (including any time
enhancement bonus) plus the cash severance payments described in subsection (a)
above.

If Mr. Stark is terminated without cause after November 30, 2001, the
Company has agreed to pay Mr. Stark an amount equal to 1.5 times his then base
salary plus any unpaid stay bonus, and the Company will continue his health and
welfare benefits for a period of eighteen (18) months or, if a lesser period,
until he obtains comparable benefits from another employer. It is anticipated
that Mr. Stark will be terminated without cause on or about June 30,
2002.

In accordance with his employment agreement, the Company granted Mr. Stark
options to purchase 100,000 shares of the Companys common stock from its 1996
Stock Incentive Plan, all vesting on the grant date with an exercise price of
$0.313 a share.

Mr. Starks agreement has a term of two years from the effective date and
is automatically renewed for successive one-year terms, unless terminated by
either party within 90 calendar days before the end of the initial or renewal
terms.

Severance and Termination Agreement

Dr. Braslow executed an employment agreement effective September 18, 2000,
pursuant to which he agreed to serve as the Companys Executive Vice President
and Chief Medical Officer. Effective June 30, 2001, Dr. Braslow executed a
termination agreement and release with the Company. Pursuant to the terms of
his termination agreement, Dr. Braslow agreed to accept a lump-sum severance of
$77,000, less applicable withholding and employment taxes. Dr. Braslow agreed
to forfeit all options and all rights to exercise such options that were
granted to him in his original employment agreement and released the Company
from any and all claims.

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##### Table of Contents



Compensation Tables

The following table sets forth the compensation for services rendered in
all capacities to the Company for each of the fiscal years ended December 31,
2001, 2000 and 1999, of (1) each individual who served as the Companys Chief
Executive Officer during the year ended December 31, 2001, (2) the Companys
other most highly compensated executive officer as of December 31, 2001 whose
total annual salary and bonus exceeded $100,000 and (3) one additional person
who ceased being executive officers during the year ended December 31, 2001 but
who would have been one of the four most highly compensated executive officers
as of year end if he had been an executive officer as of such time
(collectively, the named executive officers):

SUMMARY COMPENSATION TABLE

|                         |  |      |      |        |  |              |         |                     |  |                    |        |                 |  |           |         |      |  |  |   |  |  |   |       |  |  |   |         |    
|------------------------ |  | ---- | ---- | ------ |  | ------------ | ------- | ------------------- |  | ------------------ | ------ | --------------- |  | --------- | ------- | ---- |  |  | - |  |  | - | ----- |  |  | - | ------- | ---
|                         |  |      |      |        |  | ANNUAL       |         | LONG TERM           |  | OTHER COMPENSATION
|                         |  |      |      |        |  | COMPENSATION |         | COMPENSATION AWARDS |  |                   
|                         |  |      |      |        |  |              |         |                     |  |                    |        |                 |  |           |         |     
|NAME AND PRINCIPAL       |  |      |      |        |  |              |         |                     |  |                    |        |                 |  | OPTIONS/  |         | LTIP |  |  |   |  |  |   |       | 
|POSITION                 |  | YEAR |      | SALARY |  | BONUS        |         | SARs                |  | PAYOUTS            |        | 401(k) PLAN (1) |  | OTHER (2)
|Nelson M. Braslow, M.D.  |  |      |      |        |  |              |         |                     |  |                    |        |                 |  |           |         |      |  |  |   |  |  |   |       |  |  |   |         |    
|Executive Vice           |  |      | 2001 |        |  | $            | 113,339 |                     |  |                    |       |                 |  |           |        |      |  |  |  |  |  |   |      |  |  | $ | 116,700 | (4)
|President and Chief      |  |      | 2000 |        |  |              | 60,577  |                     |  |                    |       |                 |  |           | 150,000 |      |  |  |  |  |  | $ | 110   |  |  |   | 25,460  |    
|Medical Officer (3)      |  |      | 1999 |        |  |              |        |                     |  |                    |       |                 |  |           |        |      |  |  |  |  |  |   |      |  |  |   |        |    
|Anthony M. LaMacchia     |  |      | 2001 |        |  | $            | 315,742 |                     |  |                    |       |                 |  |           |        |      |  |  |  |  |  |   |      |  |  | $ | 16,000  |    
|President and Chief      |  |      | 2000 |        |  |              | 315,000 |                     |  | $                  | 70,000 |                 |  |           |        |      |  |  |  |  |  | $ | 1,750 |  |  |   | 92,674  | (6)
|Executive Officer (5)    |  |      | 1999 |        |  |              | 48,462  |                     |  |                    |       |                 |  |           | 500,000 |      |  |  |  |  |  |   |      |  |  |   |        |    
|Peter A. Stark
Executive |  |      | 2001 |        |  | $            | 182,896 |                     |  | $                  | 50,000 |                 |  |           | 100,000 |      |  |  |  |  |  |   |      |  |  |   |        |    
|Vice President and Chief |  |      | 2000 |        |  |              | 154,711 |                     |  |                    | 22,125 |                 |  |           |        |      |  |  |  |  |  | $ | 1,750 |  |  |   |        |    
|Financial Officer (7)    |  |      | 1999 |        |  |              | 113,462 |                     |  |                    | 27,125 |                 |  |           | 50,000  |      |  |  |  |  |  |   | 1,750 |  |  |   |        |    



---

|(1) |  | The amounts set forth in this column include Company matching
contributions paid or accrued to the named executive officers account in
the Companys 401(k) Profit Sharing Plan, pursuant to which substantially
all employees of the Company are eligible to participate. The Company
suspended matching contributions to this plan in 2001 and terminated this
plan effective February 28, 2002.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Other compensation includes amounts paid by the Company to executive
officers for severance agreements, vacation payouts, relocation
assistance, and loan forgiveness.                                                                                                                                                                                                                             
|   
|(3) |  | Dr. Braslow commenced employment with the Company as Chief Medical
Officer in September 2000 and terminated his employment in June 2001. See
Severance and Termination Agreement.                                                                                                                                                                                                                
|   
|(4) |  | Dr. Braslow was paid $77,000 pursuant to his severance agreement and
$39,700 in relocation assistance in 2001.                                                                                                                                                                                                                                                                                     
|   
|(5) |  | Mr. LaMacchia commenced employment with the Company as President and
Chief Executive Officer in November 1999 and terminated his employment in
April 2002.                                                                                                                                                                                                                                         
|   
|(6) |  | The Company loaned Mr. LaMacchia $40,000 on November 16, 1999 pursuant to
the terms of his employment agreement. This loan was forgiven on January
31, 2001. Mr. LaMacchia received certain termination payments in April
2002. See Employment Agreements; Change of Control Arrangements.                                                                                                       
|   
|(7) |  | Mr. Stark served as the Companys Controller from March 1997 until his
appointment to Interim Chief Financial Officer in November 1999. He was
appointed Executive Vice President and Chief Financial Officer in November
2000.                                                                                                                                                                    

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##### Table of Contents



OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table provides information on option grants during the 2001
fiscal year to the named executive officers. No other options were granted to
the named executive officers in fiscal 2001.

|               |  |                   |         |             |  |                      |      |            |  |                  |       |  |  |                    |          |                     |  |           |        |   |  |   |        |  
|-------------- |  | ----------------- | ------- | ----------- |  | -------------------- | ---- | ---------- |  | ---------------- | ----- |  |  | ------------------ | -------- | ------------------- |  | --------- | ------ | - |  | - | ------ | -
|               |  | Individual Grants |         |             |  |                      |      |            |  |                 
|               |  |                   |         |             |  |                      |      |            |  |                 
|               |  |                   |         |             |  |                      |      |            |  |                  |       |  |  |                    |          |                     |  | Potential
|               |  |                   |         |             |  | % of Total           |      |            |  |                  |       |  |  |                    |          | Realizable Value   
|               |  |                   |         |             |  | Options              |      |            |  |                  |       |  |  |                    |          | At Assumed Rates of
|               |  |                   |         |             |  | Granted To Employees |      | Exercise   |  |                  |       |  |  | Annual Stock Price
|               |  | Options           |         | In          |  | Price                |      | Expiration |  | Appreciation for
|               |  | Granted           |         | Fiscal Year |  | ($/Share)(1)         |      | Date       |  | Option Term (2) 
|               |  |                   |         |             |  |                      |      |            |  |                  |       |  |  |                    |          |                     |  |           | 5      | % |  |   | 10     | %
|Peter A. Stark |  |                   | 100,000 |             |  |                      | 12.6 | %          |  | $                | 0.313 |  |  |                    | 01/31/11 |                     |  | $         | 19,684 |   |  | $ | 49,884 |  



---

|(1) |  | Exercise price represents fair market value of the Common Stock at the
date the stock option was granted.                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The amounts reflected were computed pursuant to instruction 7 to Item
402(c) of Regulation S-K and are not intended to be a prediction of future
appreciation in market value of the Common Stock. No gain to the
recipient of the foregoing options is realizable by the named executive
without an increase in the market value of the Common Stock that benefits
all shareholders. Pursuant to the Plan, upon confirmation, all options
and warrants for the Companys common stock will be cancelled.
The confirmation hearing is currently set for June 14, 2002.

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##### Table of Contents



AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

The following table provides information with respect to the value of
unexercised options of each named executive officer at December 31, 2001. No
named executive officer exercised any options during the year ended December
31, 2001.

|                         |  |                             |         |                          |  |             |   |               |  |   |   |  |  |   |   | 
|------------------------ |  | --------------------------- | ------- | ------------------------ |  | ----------- | - | ------------- |  | - | - |  |  | - | - | 
|                         |  | Number of Shares Underlying |         | Value of Unexercised    
|                         |  | Unexercised Options         |         | In-the-Money Options    
|                         |  | At Fiscal Year End          |         | at December 31, 2001 (1)
|                         |  |                             |         |                         
|Name                     |  | Exercisable                 |         | Unexercisable            |  | Exercisable |   | Unexercisable
|Anthony M. LaMacchia (2) |  |                             | 500,000 |                          |  |             | 0 |               |  | $ | 0 |  |  | $ | 0 | 
|Peter A. Stark           |  |                             | 180,000 |                          |  |             | 0 |               |  | $ | 0 |  |  | $ | 0 | 



---

|(1) |  | Pursuant to the Plan, upon
confirmation, all options and warrants for the Companys common
stock will be cancelled. The
confirmation hearing is currently set for June 14, 2002.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Mr. LaMacchias options were cancelled upon his termination in April 2002.                                                                                                      




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

The following table sets forth information as of May 20, 2002, based on
filings with the Securities and Exchange Commission (SEC) and information
otherwise known to the Company, regarding each beneficial owner of more than
five percent of its common stock:

|                                                                   |  |                      |           |                      |  |  |      |  
|------------------------------------------------------------------ |  | -------------------- | --------- | -------------------- |  |  | ---- | -
|                                                                   |  | Amount and Nature of |           |                      |  | 
|Name of Beneficial Owner                                           |  | Beneficial Owner     |           | Percent of Class (1)
|                                                                   |  |                      |           |                     
|William
D. Grant
One Ward Parkway,
Suite 130
Kansas City, MO 64112 |  |                      | 1,086,527 |                      |  |  | 8.92 | %
|                                                                  
|William H. West, M.D.
1805 Moriah Woods Blvd.
Memphis, TN 38117    |  |                      | 937,463   | (2)                  |  |  | 7.70 | %



---

|(1) |  | The percentages shown are based on 12,178,701 shares of common stock
outstanding on May 20, 2002 plus, as to each individual and group listed,
the number of shares of common stock deemed to be owned by such holder,
for purposes of Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the Exchange Act), assuming conversion of any shares of the
Companys Series A Preferred Stock and exercise of any options and
warrants held by such holder, which stock, options and warrants may be
converted or exercised within 60 days of May 20, 2002.
Pursuant to the Plan filed
 upon confirmation, all options and warrants
for the Companys common stock will be cancelled. The confirmation hearing is currently set
for June 14, 2002.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes 246,483 shares of common stock which Dr. West has the right to
acquire pursuant to the exercise of options and excludes options to
purchase 16,666 shares of common stock that are not exercisable within 60
days of May 20, 2002. Pursuant to the Plan filed upon
confirmation, all options and warrants for the Companys common
stock will be cancelled. The
confirmation hearing is currently set for June 14, 2002.                                                                                                                                                                                                                                                                                                                             

29



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##### Table of Contents



Security Ownership of Management

The following table sets forth the beneficial ownership of Common Stock as of
May 20, 2002 by (i) each director, (ii) the Chief Executive Officer and one
other executive officer named in the Summary Compensation Table, and (iii) all
directors and executive officers as a group. Unless otherwise noted, the
persons named in the table have sole voting and sole investment power or share
voting an investment power with their respective spouses.

|                                                                                  |  |                      |         |            |  |  |      |  
|--------------------------------------------------------------------------------- |  | -------------------- | ------- | ---------- |  |  | ---- | -
|                                                                                  |  | Amount and Nature of |         | Percent of
|Name of Beneficial Owner                                                          |  | Beneficial Ownership |         | Class (1) 
|                                                                                  |  |                      |         |           
|Nelson M. Braslow, M.D.
Former Executive Vice President and
Chief Medical Officer |  |                      |        |            |  |  |     |  
|Anthony M. LaMacchia
Former President and Chief Executive
Officerand Director     |  |                      |        |            |  |  |     |  
|James A. Skinner
Director                                                         |  |                      |        |            |  |  |     |  
|Peter A. Stark
Executive Vice President, Chief
Financial Officerand Director      |  |                      | 180,000 | (2)        |  |  | 1.48 | %
|Charles E. Sweet
President, Chief Executive Officer
and Director                  |  |                      |        |            |  |  |     |  
|All directors and officers as a group
(5 persons)                                 |  |                      | 180,000 | (2)        |  |  | 1.48 | %



|(1) |  | The percentages shown are based on 12,178,701 shares of common stock
outstanding on May 20, 2002 plus, as to each individual and group listed,
the number of shares of common stock deemed to be owned by such holder,
for purposes of Rule 13d-3 under the Exchange Act, assuming exercise of
any options held by such holder, which options may be exercised within 60
days of May 20, 2002. Pursuant to the Plan filed upon confirmation,
all options and warrants for the Companys common stock will be
cancelled. The
confirmation hearing is currently set for June 14, 2002.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes 180,000 shares of common stock which Mr. Stark has the right to
acquire pursuant to the exercise of options. Pursuant to the Plan filed upon confirmation, all options and warrants for the
Companys common stock will be cancelled. The confirmation hearing is currently set for
June 14, 2002.                                                                                                                                                                                                                                                                         

Section 16(a) Beneficial
Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Companys officers, directors,
and persons who own more than 10% of a registered class of the Companys
securities to file reports of ownership and changes in ownership with the SEC.
Based solely on a review of copies of reports filed with the SEC, all reports
required to be filed with the SEC by Section 16(a) of the Exchange Act during
the most recent fiscal year or prior fiscal years have been filed in a timely
manner.

Compensation of Directors

Directors who are executive officers or employees of the Company do not receive
additional remuneration as directors. Until their resignation in April 2002,
independent directors of the Company received an annual retainer fee of
$10,000, $1,500 for each Board meeting attended, and $750 for each committee
meeting attended. Such compensation was

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payable in respect of all duly noticed meetings and was payable whether the director
attended in person or by telephone. Such compensation could have been deferred
at the election of the director and paid later in cash or in shares of common
stock. Independent directors were granted options to purchase 1,000 shares of
common stock during each calendar quarter of service as a director. To ensure
compliance with Rule 16b-3 under the Exchange Act, no options granted to such
independent directors could be exercised earlier than six months from
the grant date.

Currently, the Companys only director who is not an executive officer is
compensated at a rate of $200 per hour. All directors are eligible to receive
reimbursement of expenses, if any, incurred in attending meetings of the Board
and its committees.

Compensation Committee Interlocks And Insider Participation In Compensation
Decisions

There were no compensation interlocks in 2001, and no insider participated in
decisions relating to his compensation in 2001. The members of the Companys
Compensation Committee during 2001 were as follows: P. Anthony Jacobs
(Chairman), Frank M. Bumstead, Lawrence Kugelman, and James R. Seward.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to his original employment agreement, the Company sold to Mr.
LaMacchia on November 16, 1999, 300,000 shares of common stock in consideration
of Mr. LaMacchias promissory note in the principal amount of $300,000 payable
in full on the fifth anniversary of the date of the note, bearing interest at
the annual rate of 6.08% payable annually in arrears. Payment under the note
was subject to demand and acceleration of (i) the entire principal amount if
Mr. LaMacchias employment was terminated with cause or in connection with a
change of control or if he voluntarily terminated his employment and (ii)
one-half of the principal amount, with the other half forgiven, if his
employment was terminated without cause. On January 1, 2001, the Company
amended Mr. LaMacchias promissory note and agreed to reduce the principal
amount by and forgive the repayment of $204,000. The Company also loaned to
Mr. LaMacchia $40,000 on November 16, 1999, evidenced by an unsecured
promissory note bearing interest at the annual rate of 5.57%. The note was to
be repaid on January 31, 2000 unless Mr. LaMacchia had not by that time been
terminated for cause, in which case the note would be forgiven. The note and
accrued interest were forgiven as of January 31, 2000.

Pursuant to the terms of Mr. LaMacchias termination in April 2002, all
remaining principal and interest on the above-referenced $300,000 note was
forgiven.

31



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##### Table of Contents






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

|        |  |                                                                                                                                                                                                                                                                                                                                     
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2(a)    |  | Stock Purchase Agreement between the Registrant and stockholders of
Oncology Hematology Group of South Florida (filed as Exhibit 10(m) to
Registrants Form 8-K filed January 17, 1996 (File No. 0-15416) and
incorporated herein by reference)                                                                                     
|2(b)    |  | Purchase and Sale Agreement between the Registrant, Knoxville Hematology
Oncology Associates and Partners of Knoxville Hematology Oncology
Associates (filed as Exhibit 10(q) to Registrants Form 8-K filed April
15, 1996 (File No. 0-15416) and incorporated herein by reference)                                                
|2(c)    |  | Stock Purchase Agreement between the Registrant and stockholders of
Jeffrey L. Paonessa, M.D., P.A. (filed as Exhibit 10(s) to Registrants
Form 8-K filed July 5, 1996 (File No. 0-15416) and incorporated herein by
reference)                                                                                                    
|2(d)    |  | Stock Purchase Agreement between the Registrant and stockholders of
Southeast Florida Hematology Oncology Group, P.A. (filed as Exhibit 2(d)
to Registrants Form 8-K filed July 15, 1996 (File No. 0-15416) and
incorporated herein by reference)                                                                                  
|2(e)    |  | Asset Purchase Agreement by and among the Registrant, stockholders of The
Center for Hematology-Oncology, P.A. and the Registrants Form 8-K filed
October 21, 1996 (File No. 1-09922) and incorporated herein by reference                                                                                                         
|2(f)    |  | 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. (filed as Exhibit 10(z) to
the Registrants Form 8-K filed November 5, 1996 (File No 1-09922) and
incorporated herein by reference)
|2(g)    |  | First Amended Joint Plan and Disclosure Statement filed by Registrant and
AmSouth Bank, as Agent for the Lenders, filed April 19, 2002                                                                                                                                                                                              
|3(a)    |  | Charter (1)                                                                                                                                                                                                                                                                                                                         
|3(b)    |  | Bylaws (2)                                                                                                                                                                                                                                                                                                                          
|4       |  | Trust Indenture, Deed of Trust and Security Agreement dated April 3, 1990 (3)                                                                                                                                                                                                                                                       
|10(a)   |  | Registrants 1985 Stock Option Plan, as amended (4)                                                                                                                                                                                                                                                                                 
|10(b)*  |  | Registrants 1990 Non-Qualified Stock Option Plan, as amended** (6)(8)                                                                                                                                                                                                                                                              
|10(c)*  |  | Employment agreement between the Registrant and William H. West, M.D. dated January 1, 1995*                                                                                                                                                                                                                                        
|10(d)*  |  | Employment agreement between the Registrant and Joseph T. Clark dated July 1, 1995**(7)                                                                                                                                                                                                                                             
|10(e)   |  | Service Agreement between the Registrant and stockholders of Oncology
Hematology Group of South Florida (filed as Exhibit 10(n) to Registrants
Form 8-K filed January 17, 1996 (File No. 0-15416) and incorporated herein
by reference)                                                                                            
|10(f)** |  | Amendment to 1990 Registrants Non-Qualified Stock Option Plan adopted
April 20, 1995 (7)                                                                                                                                                                                                                                           
|10(g)   |  | Service Agreement between the Registrant and stockholders of Jeffrey L.
Paonessa, M.D., P.A. (filed as Exhibit 10(t) to Registrants Form 8-K
filed July 5, 1996 (File No. 0-15416) and incorporated herein by
reference)                                                                                                           
|10(h)   |  | Service Agreement between the Registrant and stockholders of Southeast
Florida Hematology Oncology Group, P.A. (filed as Exhibit 10(u) to
Registrants Form 8-K filed July 15, 1996 (File No 0-15416) and
incorporated herein by reference)                                                                                         
|10(i)** |  | Amendment No. 3 to 1990 Registrants Non-qualified Stock Option Plan
adopted December 16, 1995 (8)                                                                                                                                                                                                                                  
|10(j)   |  | Service Agreement between the Registrant, Rosenberg & Kalman, M.D.,
P.A., and stockholders of R&K, M.D., P.A. (filed as Exhibit 10(x) to
Registrants Form 8-K filed September 18, 1996 (File No. 1-09922) and
incorporated herein by reference)                                                                                    
|10(k)   |  | Loan Agreement dated April 21, 1997 between Registrant, NationsBank of
Tennessee, N.A., AmSouth Bank of Tennessee and Union Planters National
Bank (10)                                                                                                                                                                             
|10(l)   |  | Registrants 1996 Stock Incentive Plan (9)                                                                                                                                                                                                                                                                                          
|10(m)   |  | Second amendment to First Amended and Restated Loan Agreement dated
March 31, 1999 between Registrant, NationsBank of Tennessee, N.A., AmSouth
Bank of Tennessee and Union Planters National Bank (11)                                                                                                                              

32



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##### Table of Contents



|       |  |                                                                                                                                                                                                    
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10(n)  |  | First Amendment to Revolving Credit Note dated March 31, 1999 between
Registrant, NationsBank of Tennessee, N.A., AmSouth Bank of Tennessee and
Union Planters National Bank (11)                  
|10(o)  |  | Credit Agreement dated June 10, 1999 between Registrant, AmSouth Bank,
Union Planters National Bank and NationsBank, N.A. (12)                                                                     
|10(p)  |  | Swap Agreement dated June 25, 1999 between Registrant and NationsBank, N.A. (12)                                                                                                                   
|10(q)  |  | Employment Agreement between Registrant and Anthony M. LaMacchia (13)                                                                                                                              
|10(r)  |  | First Amendment to Credit Agreement dated September 30, 1999, between
Registrant, AmSouth Bank, Union Planters Bank, N.A. and Bank of America,
N.A. (14)                                           
|10(s)  |  | Second Amendment to Credit Agreement dated March 30, 2000, between
Registrant, AmSouth Bank, Union Planters Bank, N.A. and Bank of America,
N.A (15)                                               
|10(t)  |  | Employment Agreement between Registrant and Patrick J. McDonough (16)                                                                                                                              
|10(u)  |  | Swap Agreement dated June 29, 2000 between Registrant and Bank of America, N.A. (16)                                                                                                               
|10(v)  |  | Employment Agreement between Registrant and Nelson M. Braslow, M.D. (17)                                                                                                                           
|10(w)  |  | Forbearance Agreement dated December 29, 2000, between Registrant,
AmSouth Bank, Union Planters Bank, N.A. and Bank of America, N.A. (18)                                                          
|10(x)  |  | First Amendment to Forbearance Agreement dated February 28, 2001,
between Registrant, AmSouth Bank, Union Planters Bank, N.A. and Bank of
America, N.A. (18)                                       
|10(y)  |  | Termination Agreement and Release between Registrant and Patrick J.
McDonough dated January 15, 2001 (19)                                                                                          
|10(z)  |  | Employment Agreement and Amendment No. 1 thereto between Registrant and Peter A. Stark (20)                                                                                                        
|10(aa) |  | Amendment No. 1 to Employment Agreement between Registrant and Anthony M. LaMacchia (20)                                                                                                           
|10(ab) |  | Termination Agreement and Release between Registrant and Nelson Braslow, M.D. (21)                                                                                                                 
|10(ac) |  | Termination of Service Agreement and Agreement for Purchase and Sale of
Assets between Registrant and Oncology Hematology Group of South Florida,
P.A.                                             
|10(ad) |  | Asset Purchase/Settlement Agreement between Registrant and Hem-Onc
Associates of the Treasure Coast, P.A.                                                                                          
|10(ae) |  | Settlement Agreement between Registrant and J. Paonessa, M.D., P.A.                                                                                                                                
|10(af) |  | Termination Agreement between Registrant and The Center for Hematology Oncology, P.A.                                                                                                              
|10(ag) |  | Settlement Agreement between Registrant and Oncology Hematology Consultants, P.L.L.C.                                                                                                              
|10(ah) |  | Termination of Service Agreement and Agreement for Purchase and Sale of
Assets between Registrant and Oncology Hematology Associates of West
Broward, P.A. and the Stockholders of the R&K Division
|11     |  | Statement regarding Computation of Per Share Earnings                                                                                                                                              
|21     |  | List of Subsidiaries                                                                                                                                                                               
|23     |  | Consent of Independent Auditors                                                                                                                                                                    



---

|*    |  | These documents may be obtained by stockholders of Registrant upon
written request to: Response Oncology, Inc., 1805 Moriah Woods Blvd.,
Memphis, Tennessee 38117
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|**   |  | Executive Compensation Plan or Arrangement                                                                                                                       
|    
|(1)  |  | Incorporated by reference to the Registrants 1989 10-K, dated July 31, 1989                                                                                     
|    
|(2)  |  | Incorporated by reference to the Registrants Registration Statement on
Form S-1 under the Securities Act of 1933 (File No. 33-5016) effective
April 21, 1986    
|    
|(3)  |  | Incorporated by reference in the initial filing of the Registrants 1990
10-K, dated July 18, 1990, filed July 20, 1990 and amended on September
19, 1990        
|    
|(4)  |  | 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   
|    
|(5)  |  | Incorporated by reference to the Registrants 1991 10-K, dated July 26, 1991                                                                                     
|    
|(6)  |  | 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
|    
|(7)  |  | Incorporated by reference to the Registrants 1995 10-K, dated March 29, 1996                                                                                    
|    
|(8)  |  | 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
|    
|(9)  |  | Incorporated by reference to the Registrants Statement on Form S-8 under
the Securities Act of 1933 (File No. 333-28973) effective June 11, 1997                
|    
|(10) |  | Incorporated by reference to the Registrants 1997 10-K dated March 31, 1998                                                                                     

33



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##### Table of Contents



|(11) |  | Incorporated by reference to the Registrants 1998 10-K dated March 31, 1999                                                                
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|    
|(12) |  | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 1999                             
|    
|(13) |  | Incorporated by reference to the Registrants Quarterly Report on Form
10-Q for the quarter ended September 30, 1999                        
|    
|(14) |  | Incorporated by reference to the Registrants 1999 10-K, dated March 30,
2000                                                               
|    
|(15) |  | Incorporated by reference to the Registrants Quarterly Report on Form
10-Q for the quarter ended March 31, 2000                            
|    
|(16) |  | Incorporated by reference to the Registrants Quarterly Report on Form
10-Q for the quarter ended June 30, 2000                             
|    
|(17) |  | Incorporated by reference to the Registrants Quarterly Report on Form
10-Q for the quarter ended September 30, 2000                        
|    
|(18) |  | Incorporated by reference to the Registrants 2000 10-K, dated April 17,
2001                                                               
|    
|(19) |  | Incorporated by reference to the Registrants Quarterly Report on Form
10-Q for the quarter ended March 31, 2001                            
|    
|(20) |  | Incorporated by reference to the Registrants Quarterly Report on Form
10-Q for the quarter ended June 30, 2001                             
|    
|(21) |  | Incorporated by reference to the Registrants Quarterly Report on Form
10-Q for the quarter ended September 30, 2001                        
|    
|(b)  |  | Reports on Form 8-K filed in the fourth quarter of 2001  None                                                                              
|    
|(c)  |  | Exhibits  The response to this portion of Item 14 is submitted as a separate section of this report. See Item 14(a)(3).                    
|    
|(d)  |  | Financial Statement Schedules  The response to this portion of Item 14
is submitted as a separate section of this report. SeeItem 14(a)(2).

34



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##### Table of Contents






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/ Charles E. Sweet                                               
|                       |  |     |  |                                                                    
|                       |  |     |  | Charles E. Sweet
President and Chief Executive
Officer and Director
|                      
|                       |  |     |  | Date: June 11, 2002                                                

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/ Charles E. Sweet                                                 |  | By: |  | /s/ Peter A. Stark                                                              
|    |  |                                                                      |  |     |  |                                                                                 
|    |  | Charles E. Sweet
President and Chief Executive Officer,
and Director |  |     |  | Peter A. Stark
Executive Vice President and Chief Financial Officer
and Director
|   
|    |  | Date: June 11, 2002                                                  |  |     |  | Date: June 11, 2002                                                             
|   
|By: |  | /s/ James A. Skinner                                                 |  |     |  |                                                                                 
|    |  |                                                                      |  |     |  |                                                                                 
|    |  | Director                                                             |  |     |  |                                                                                 
|   
|    |  | Date: June 11, 2002                                                  |  |     |  |                                                                                 

35



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##### Table of Contents



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

We have audited the accompanying consolidated balance sheets of Response
Oncology, Inc. and subsidiaries (Debtors-in-Possession) as of December 31, 2001 and 2000, and the
related consolidated statements of operations, stockholders equity (deficit)
and cash flows for each of the years in the three-year period ended December
31, 2001. In connection with our audits of the consolidated financial
statements, we have also audited the financial statement schedule as listed in
the accompanying index at Item 14. These consolidated financial statements and
financial statement schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 (Debtors-in-Possession) as of December 31, 2001 and 2000, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America. 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.

The accompanying consolidated financial statements and financial statement
schedule have been prepared assuming that the Company will continue as a going
concern. As discussed in Note B, on March 29, 2001, the Company filed
voluntary petitions for relief under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court. This event and related
circumstances, including those discussed in Note F, raise substantial doubt
about the Companys ability to continue as a going concern. The consolidated
financial statements and financial statement schedule do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ KPMG LLP

---

Memphis, Tennessee
June 11, 2002

36



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##### Table of Contents



PART I  FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except for share data)

|                                                                                            |                                                                                |                      |     |                   |        |  |        |        |        | 
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | -------------------- | --- | ----------------- | ------ |  | ------ | ------ | ------ | 
|ASSETS                                                                                      |                                                                                | December 31, 2001    |     | December 31, 2000
|                                                                                            |                                                                                |                      |     |                  
|CURRENT ASSETS                                                                              |                                                                                |                      |     |                   |        |  |        |       
|                                                                                            | Cash and cash equivalents                                                      |                      | $   | 7,914             |        |  | $      | 7,327  |       
|                                                                                            | Accounts receivable, less allowance for doubtful accounts
of $2,342 and $3,489 |                      |     | 5,915             |        |  |        | 9,469  |       
|                                                                                            | Pharmaceuticals and supplies                                                   |                      |     | 3,193             |        |  |        | 3,702  |       
|                                                                                            | Prepaid expenses and other current assets                                      |                      |     | 2,472             |        |  |        | 3,529  |       
|                                                                                            | Due from affiliated physician groups                                           |                      |     | 8,661             |        |  |        | 19,121 |       
|                                                                                            | Deferred income taxes                                                          |                      |     |                  |        |  |        | 1,168  |       
|                                                                                            |                                                                                |                      |     |                   |        |  |        |       
|                                                                                            |                                                                                | TOTAL CURRENT ASSETS |     |                   | 28,155 |  |        |        | 44,316 | 
|                                                                                            |                                                                                |                      |     |                   |        |  |        |       
|Property and equipment, net                                                                 |                                                                                |                      | 614 |                   |        |  | 3,212  |       
|Management service agreements, less accumulated amortization of
$7,685 at December 31, 2000 |                                                                                |                      |    |                   |        |  | 44,231 |       
|Other assets                                                                                |                                                                                |                      | 133 |                   |        |  | 654    |       
|                                                                                            |                                                                                |                      |     |                   |        |  |        |       
|                                                                                            |                                                                                | TOTAL ASSETS         |     | $                 | 28,902 |  |        | $      | 92,413 | 
|                                                                                            |                                                                                |                      |     |                   |        |  |        |       

Continued:

37



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##### Table of Contents



RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except for share data)

Continued:

|                                               |                                                                                                                                                                             |                                                                          |   |                   |         |   |   |         |        | 
|---------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | - | ----------------- | ------- | - | - | ------- | ------ | 
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |                                                                                                                                                                             | December 31, 2001                                                        |   | December 31, 2000
|                                               |                                                                                                                                                                             |                                                                          |   |                  
|CURRENT LIABILITIES                            |                                                                                                                                                                             |                                                                          |   |                   |         |   |   |        
|                                               | Accounts payable                                                                                                                                                            |                                                                          | $ | 276               |         |   | $ | 14,665  |       
|                                               | Accrued expenses and other liabilities                                                                                                                                      |                                                                          |   | 2,035             |         |   |   | 4,581   |       
|                                               | Current portion of notes payable                                                                                                                                            |                                                                          |   |                  |         |   |   | 34,509  |       
|                                               | Current portion of capital lease obligations                                                                                                                                |                                                                          |   |                  |         |   |   | 277     |       
|                                               |                                                                                                                                                                             |                                                                          |   |                   |         |   |   |        
|                                               |                                                                                                                                                                             | TOTAL CURRENT LIABILITIES                                                |   |                   | 2,311   |   |   |         | 54,032 | 
|NON-CURRENT LIABILITIES                        |                                                                                                                                                                             |                                                                          |   |                   |         |   |   |        
|                                               | Capital lease obligations, less current portion                                                                                                                             |                                                                          |   |                  |         |   |   | 303     |       
|                                               | Deferred income taxes                                                                                                                                                       |                                                                          |   |                  |         |   |   | 3,525   |       
|                                               | Minority interest                                                                                                                                                           |                                                                          |   | 447               |         |   |   | 1,164   |       
|                                               |                                                                                                                                                                             |                                                                          |   |                   |         |   |   |        
|                                               |                                                                                                                                                                             | TOTAL NON-CURRENT LIABILITIES                                            |   |                   | 447     |   |   |         | 4,992  | 
|LIABILITIES SUBJECT TO SETTLEMENT UNDER        |                                                                                                                                                                             |                                                                          |   |                   |         |   |   |        
|                                               | REORGANIZATION PROCEEDINGS                                                                                                                                                  |                                                                          |   |                   |         |   |   |         |       
|                                               | Accounts payable                                                                                                                                                            |                                                                          |   | 15,654            |         |   |   |        |       
|                                               | Accrued expenses and other liabilities                                                                                                                                      |                                                                          |   | 1,955             |         |   |   |        |       
|                                               | Secured notes payable                                                                                                                                                       |                                                                          |   | 26,404            |         |   |   |        |       
|                                               | Subordinated notes payable                                                                                                                                                  |                                                                          |   | 50                |         |   |   |        |       
|                                               | Capital lease obligations                                                                                                                                                   |                                                                          |   | 85                |         |   |   |        |       
|                                               |                                                                                                                                                                             |                                                                          |   |                   |         |   |   |        
|                                               |                                                                                                                                                                             | TOTAL LIABILITIES SUBJECT TO SETTLEMENT
UNDER REORGANIZATION PROCEEDINGS |   |                   | 44,148  |   |   |         |       | 
|                                               |                                                                                                                                                                             |                                                                         
|STOCKHOLDERS EQUITY (DEFICIT)                 |                                                                                                                                                                             |                                                                          |   |                   |         |   |   |        
|                                               | Series A convertible preferred stock, $1.00 par value (aggregate
involuntary liquidation preference $183) authorized
3,000,000
shares; issued and outstanding 16,631 shares |                                                                          |   | 17                |         |   |   | 17      |       
|                                               | Common stock, $.01 par value, authorized 30,000,000 shares;
issued and outstanding 12,279,555 and 12,290,764 shares,
respectively                                           |                                                                          |   | 123               |         |   |   | 123     |       
|                                               | Paid-in capital                                                                                                                                                             |                                                                          |   | 102,011           |         |   |   | 102,011 |       
|                                               | Accumulated deficit                                                                                                                                                         |                                                                          |   | (120,155          | )       |   |   | (68,762 | )     
|                                               |                                                                                                                                                                             |                                                                          |   |                   |         |   |   |        
|                                               |                                                                                                                                                                             | TOTAL
STOCKHOLDERS EQUITY (DEFICIT)                                     |   |                   | (18,004 | ) |   |         | 33,389 | 
|                                               |                                                                                                                                                                             |                                                                          |   |                   |         |   |   |        
|                                               |                                                                                                                                                                             | TOTAL
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                     |   | $                 | 28,902  |   |   | $       | 92,413 | 
|                                               |                                                                                                                                                                             |                                                                          |   |                   |         |   |   |        

See accompanying notes to consolidated financial statements.

38



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##### Table of Contents



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

|                                               |         |                                                                   |         |                          |        |      |         |            |        |   |         |            |        |  
|---------------------------------------------- | ------- | ----------------------------------------------------------------- | ------- | ------------------------ | ------ | ---- | ------- | ---------- | ------ | - | ------- | ---------- | ------ | -
|                                               |         |                                                                   |         | Years Ended December 31,
|                                               |         |                                                                   |         |                         
|                                               |         |                                                                   |         | 2001                     |        | 2000 |         | 1999      
|                                               |         |                                                                   |         |                          |        |      |         |           
|NET REVENUE                                    |         | $                                                                 | 118,085 |                          |        | $    | 130,833 |            |        | $ | 135,567 |           
|COSTS AND EXPENSES                             |         |                                                                   |         |                          |        |      |         |            |        |   |         |           
|                                               |         | Salaries and benefits                                             |         |                          | 15,476 |      |         |            | 21,308 |   |         |            | 25,810 |  
|                                               |         | Pharmaceuticals and supplies                                      |         |                          | 89,917 |      |         |            | 89,444 |   |         |            | 80,210 |  
|                                               |         | Other operating costs                                             |         |                          | 4,988  |      |         |            | 8,683  |   |         |            | 11,529 |  
|                                               |         | General and administrative                                        |         |                          | 6,068  |      |         |            | 6,927  |   |         |            | 6,487  |  
|                                               |         | Depreciation and amortization                                     |         |                          | 3,552  |      |         |            | 4,610  |   |         |            | 4,509  |  
|                                               |         | Interest                                                          |         |                          | 2,417  |      |         |            | 3,680  |   |         |            | 3,305  |  
|                                               |         | Provision for doubtful accounts                                   |         |                          | 406    |      |         |            | 1,309  |   |         |            | 2,625  |  
|                                               |         | Impairment of management service
agreements and associated assets |         |                          | 47,047 |      |         |            | 15,951 |   |         |            | 1,921  |  
|                                               |         |                                                                   |         |                          |        |      |         |            |        |   |         |           
|                                               |         |                                                                   | 169,871 |                          |        |      | 151,912 |            |        |   | 136,396 |           
|REORGANIZATION COSTS                           |         |                                                                   | 1,939   |                          |        |      |        |            |        |   |        |           
|LOSS BEFORE INCOME TAXES AND MINORITY
INTEREST |         |                                                                   | (53,725 | )                        |        |      | (21,079 | )          |        |   | (829    | )         
|                                               |         | Minority owners share of net earnings                            |         |                          | (222   | )    |         |            | (633   | ) |         |            | (700   | )
|                                               |         |                                                                   |         |                          |        |      |         |            |        |   |         |           
|LOSS BEFORE INCOME TAXES                       |         |                                                                   | (53,947 | )                        |        |      | (21,712 | )          |        |   | (1,529  | )         
|                                               |         | Income tax provision (benefit)                                    |         |                          | (2,554 | )    |         |            | (7,293 | ) |         |            | 164    |  
|                                               |         |                                                                   |         |                          |        |      |         |            |        |   |         |           
|NET LOSS                                       |         | $                                                                 | (51,393 | )                        |        | $    | (14,419 | )          |        | $ | (1,693  | )         
|                                               |         |                                                                   |         |                          |        |      |         |            |        |   |         |           
|LOSS PER COMMON SHARE:                         |         |                                                                   |         |                          |        |      |         |            |        |   |         |           
|                                               | Basic   |                                                                   | $       | (4.18                    | )      |      | $       | (1.17      | )      |   | $       | (0.14      | )     
|                                               |         |                                                                   |         |                          |        |      |         |            |        |   |         |           
|                                               | Diluted |                                                                   | $       | (4.18                    | )      |      | $       | (1.17      | )      |   | $       | (0.14      | )     
|                                               |         |                                                                   |         |                          |        |      |         |            |        |   |         |           
|Weighted average number of common shares:      |         |                                                                   |         |                          |        |      |         |            |        |   |         |           
|                                               | Basic   |                                                                   |         | 12,290,734               |        |      |         | 12,288,352 |        |   |         | 12,014,153 |       
|                                               |         |                                                                   |         |                          |        |      |         |            |        |   |         |           
|                                               | Diluted |                                                                   |         | 12,290,734               |        |      |         | 12,288,352 |        |   |         | 12,014,153 |       
|                                               |         |                                                                   |         |                          |        |      |         |            |        |   |         |           

See accompanying notes to consolidated financial statements.

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RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
(Dollar amounts in thousands except for share data)

|                              |                                                               |  |                      |         |              |   |           |     |                |  |            |          |           |   |           |    |             |   |         |      |   |   |          |         |              |   |         |         |  
|----------------------------- | ------------------------------------------------------------- |  | -------------------- | ------- | ------------ | - | --------- | --- | -------------- |  | ---------- | -------- | --------- | - | --------- | -- | ----------- | - | ------- | ---- | - | - | -------- | ------- | ------------ | - | ------- | ------- | -
|                              |                                                               |  | Series A Convertible |         |              |   |           |     |                |  |            |          |           |   |           |    |             |   |         |      |   |   |         
|                              |                                                               |  | Preferred Stock      |         | Common Stock |   |           |     |                |  |            |          |           |   |           |    |            
|                              |                                                               |  |                      |         |              |   |           |     |                |  |            |          |           |   | Total    
|                              |                                                               |  |                      |         |              |   | Par Value |     |                |  |            |          |           |   |           |    |             |   |         |      |   |   |          |         | Stockholders
|                              |                                                               |  |                      |         |              |   | $1.00 Per |     |                |  |            |          | Par Value |   | Paid-In   |    | Accumulated |   | Equity 
|                              |                                                               |  | Shares               |         | Share        |   | Shares    |     | $.01 Per Share |  | Capital    |          | Deficit   |   | (Deficit)
|                              |                                                               |  |                      |         |              |   |           |     |                |  |            |          |           |   |          
|Balances at December 31, 1998 |                                                               |  | 26,631               |         |              | $ | 27        |     |                |  | 12,049,331 |          |           | $ | 120       |    |             | $ | 101,913 |      |   | $ | (52,650  | )       |              | $ | 49,410  |        
|                              | Net loss                                                      |  |                      |         |              |   |           |     |                |  |            |          |           |   |           |    |             |   |         |      |   |   |          | (1,693  | )            |   |         | (1,693  | )
|                              | Common stock issued in
connection with practice
affiliations  |  |                      |         |              |   |           |     |                |  |            | 36,870   |           |   |           | 1  |             |   |         | 112  |   |   |          |         |              |   |         | 113     |  
|                              | Common stock issued under
compensation plan                   |  |                      |         |              |   |           |     |                |  |            | 300,000  |           |   |           | 3  |             |   |         | 297  |   |   |          |         |              |   |         | 300     |  
|                              | Common stock received in
connection with practice
termination |  |                      |         |              |   |           |     |                |  |            | (117,811 | )         |   |           | (1 | )           |   |         | (352 | ) |   |          |         |              |   |         | (353    | )
|                              | Conversion of preferred stock                                 |  |                      | (10,000 | )            |   |           | (10 | )              |  |            | 1,833    |           |   |           |    |             |   |         | 10   |   |   |          |         |              |   |         |         |  
|                              | Dividend on preferred stock                                   |  |                      |         |              |   |           |     |                |  |            | 183      |           |   |           |    |             |   |         |      |   |   |          |         |              |   |         |         |  
|                              |                                                               |  |                      |         |              |   |           |     |                |  |            |          |           |   |           |    |             |   |         |      |   |   |          |         |              |   |         |         |  
|Balances at December 31, 1999 |                                                               |  | 16,631               |         |              |   | 17        |     |                |  | 12,270,406 |          |           |   | 123       |    |             |   | 101,980 |      |   |   | (54,343  | )       |              |   | 47,777  |        
|                              | Net loss                                                      |  |                      |         |              |   |           |     |                |  |            |          |           |   |           |    |             |   |         |      |   |   |          | (14,419 | )            |   |         | (14,419 | )
|                              | Exercise of common stock options                              |  |                      |         |              |   |           |     |                |  |            | 20,175   |           |   |           |    |             |   |         | 31   |   |   |          |         |              |   |         | 31      |  
|                              | Dividend on preferred stock                                   |  |                      |         |              |   |           |     |                |  |            | 183      |           |   |           |    |             |   |         |      |   |   |          |         |              |   |         |         |  
|                              |                                                               |  |                      |         |              |   |           |     |                |  |            |          |           |   |           |    |             |   |         |      |   |   |          |         |              |   |         |         |  
|Balances at December 31, 2000 |                                                               |  | 16,631               |         |              |   | 17        |     |                |  | 12,290,764 |          |           |   | 123       |    |             |   | 102,011 |      |   |   | (68,762  | )       |              |   | 33,389  |        
|                              | Net loss                                                      |  |                      |         |              |   |           |     |                |  |            |          |           |   |           |    |             |   |         |      |   |   |          | (51,393 | )            |   |         | (51,393 | )
|                              | Common stock received in
connection with practice
termination |  |                      |         |              |   |           |     |                |  |            | (11,392  | )         |   |           |    |             |   |         |      |   |   |          |         |              |   |         |         |  
|                              | Dividend on preferred stock                                   |  |                      |         |              |   |           |     |                |  |            | 183      |           |   |           |    |             |   |         |      |   |   |          |         |              |   |         |         |  
|                              |                                                               |  |                      |         |              |   |           |     |                |  |            |          |           |   |           |    |             |   |         |      |   |   |          |         |              |   |         |         |  
|Balances at December 31, 2001 |                                                               |  | 16,631               |         |              | $ | 17        |     |                |  | 12,279,555 |          |           | $ | 123       |    |             | $ | 102,011 |      |   | $ | (120,155 | )       |              | $ | (18,004 | )      
|                              |                                                               |  |                      |         |              |   |           |     |                |  |            |          |           |   |           |    |             |   |         |      |   |   |          |         |              |   |         |         |  

See accompanying notes to consolidated financial statements.

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

|                                                                      |                                                                                 |                                                                            |                                                                         |         |                          |       |        |         |        |        |        |        |       |        |  
|--------------------------------------------------------------------- | ------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------- | ------------------------ | ----- | ------ | ------- | ------ | ------ | ------ | ------ | ----- | ------ | -
|                                                                      |                                                                                 |                                                                            |                                                                         |         | Years Ended December 31,
|                                                                      |                                                                                 |                                                                            |                                                                         |         |                         
|                                                                      |                                                                                 |                                                                            |                                                                         |         | 2001                     |       | 2000   |         | 1999  
|                                                                      |                                                                                 |                                                                            |                                                                         |         |                          |       |        |         |       
|OPERATING ACTIVITIES                                                  |                                                                                 |                                                                            |                                                                         |         |                          |       |        |         |        |        |        |       
|                                                                      | Net loss                                                                        |                                                                            | $                                                                       | (51,393 | )                        |       | $      | (14,419 | )      |        | $      | (1,693 | )    
|                                                                      | Adjustments to reconcile net loss to net cash
provided by operating activities: |                                                                            |                                                                         |         |                          |       |        |         |        |        |        |        |      
|                                                                      |                                                                                 | Depreciation and amortization                                              |                                                                         |         | 3,552                    |       |        |         | 4,610  |        |        |        | 4,509 |       
|                                                                      |                                                                                 | Impairment of management service agreements and associated
assets          |                                                                         |         | 47,047                   |       |        |         | 15,951 |        |        |        | 1,921 |       
|                                                                      |                                                                                 | Deferred income taxes                                                      |                                                                         |         | (2,357                   | )     |        |         | (7,331 | )      |        |        | 1,920 |       
|                                                                      |                                                                                 | Provision for doubtful accounts                                            |                                                                         |         | 406                      |       |        |         | 1,309  |        |        |        | 2,625 |       
|                                                                      |                                                                                 | Gain on sale of property and equipment                                     |                                                                         |         | (21                      | )     |        |         | (67    | )      |        |        |      |       
|                                                                      |                                                                                 | Minority owners share of net earnings                                     |                                                                         |         | 222                      |       |        |         | 633    |        |        |        | 700   |       
|                                                                      |                                                                                 | Write-off of note receivable                                               |                                                                         |         | 327                      |       |        |         |       |        |        |        |      |       
|                                                                      |                                                                                 | Changes in operating assets and liabilities net of effect
of acquisitions: |                                                                         |         |                          |       |        |         |        |        |        |        |       |       
|                                                                      |                                                                                 |                                                                            | Accounts receivable                                                     |         |                          | 3,202 |        |         |        | 5,229  |        |        |       | 4,212  |  
|                                                                      |                                                                                 |                                                                            | Supplies and pharmaceuticals, prepaid expenses and other
current assets |         |                          | 679   |        |         |        | 880    |        |        |       | 1,359  |  
|                                                                      |                                                                                 |                                                                            | Other assets                                                            |         |                          | 73    |        |         |        | 193    |        |        |       | (178   | )
|                                                                      |                                                                                 |                                                                            | Due from affiliated physician groups                                    |         |                          | 6,752 |        |         |        | (1,067 | )      |        |       | (108   | )
|                                                                      |                                                                                 |                                                                            | Accounts payable and accrued expenses                                   |         |                          | 2,029 |        |         |        | (800   | )      |        |       | (2,472 | )
|                                                                      |                                                                                 |                                                                            |                                                                         |         |                          |       |        |         |        |        |        |       
|NET CASH PROVIDED BY OPERATING ACTIVITIES
BEFORE REORGANIZATION ITEMS |                                                                                 |                                                                            | 10,518                                                                  |         |                          |       | 5,121  |         |        |        | 12,795 |       
|OPERATING CASH FLOW FROM REORGANIZATION ITEMS                         |                                                                                 |                                                                            |                                                                         |         |                          |       |        |         |        |        |        |       
|                                                                      | Bankruptcy related professional fees paid                                       |                                                                            |                                                                         | (1,419  | )                        |       |        |        |        |        |        |       |      
|                                                                      |                                                                                 |                                                                            |                                                                         |         |                          |       |        |         |        |        |        |       
|NET CASH PROVIDED BY OPERATING ACTIVITIES                             |                                                                                 |                                                                            | 9,099                                                                   |         |                          |       | 5,121  |         |        |        | 12,795 |       
|INVESTING ACTIVITIES                                                  |                                                                                 |                                                                            |                                                                         |         |                          |       |        |         |        |        |        |       
|                                                                      | Purchase of equipment                                                           |                                                                            |                                                                         | (125    | )                        |       |        | (645    | )      |        |        | (741   | )    
|                                                                      | Proceeds from sale of property and equipment                                    |                                                                            |                                                                         | 135     |                          |       |        | 87      |        |        |        |       |      
|                                                                      |                                                                                 |                                                                            |                                                                         |         |                          |       |        |         |        |        |        |       
|NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                   |                                                                                 |                                                                            | 10                                                                      |         |                          |       | (558   | )       |        |        | (741   | )     
|                                                                      |                                                                                 |                                                                            |                                                                         |         |                          |       |        |         |        |        |        |       
|FINANCING ACTIVITIES                                                  |                                                                                 |                                                                            |                                                                         |         |                          |       |        |         |        |        |        |       
|                                                                      | Financing costs incurred                                                        |                                                                            |                                                                         |        |                          |       |        |        |        |        |        | (416   | )    
|                                                                      | Proceeds from exercise of stock options and warrants                            |                                                                            |                                                                         |        |                          |       |        | 32      |        |        |        |       |      
|                                                                      | Distributions to joint venture partners                                         |                                                                            |                                                                         | (939    | )                        |       |        | (392    | )      |        |        | (757   | )    
|                                                                      | Proceeds from notes payable                                                     |                                                                            |                                                                         |        |                          |       |        |        |        |        |        | 1,734  |      
|                                                                      | Principal payments on notes payable                                             |                                                                            |                                                                         | (7,348  | )                        |       |        | (3,804  | )      |        |        | (6,202 | )    
|                                                                      | Principal payments on capital lease obligations                                 |                                                                            |                                                                         | (235    | )                        |       |        | (267    | )      |        |        | (301   | )    
|                                                                      |                                                                                 |                                                                            |                                                                         |         |                          |       |        |         |        |        |        |       
|NET CASH USED IN FINANCING ACTIVITIES                                 |                                                                                 |                                                                            | (8,522                                                                  | )       |                          |       | (4,431 | )       |        |        | (5,942 | )     
|                                                                      |                                                                                 |                                                                            |                                                                         |         |                          |       |        |         |        |        |        |       
|INCREASE IN CASH AND CASH EQUIVALENTS                                 |                                                                                 |                                                                            | 587                                                                     |         |                          |       | 132    |         |        |        | 6,112  |       
|                                                                      | Cash and cash equivalents at beginning of period                                |                                                                            |                                                                         | 7,327   |                          |       |        | 7,195   |        |        |        | 1,083  |      
|                                                                      |                                                                                 |                                                                            |                                                                         |         |                          |       |        |         |        |        |        |       
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                            |                                                                                 | $                                                                          | 7,914                                                                   |         |                          | $     | 7,327  |         |        | $      | 7,195  |       
|                                                                      |                                                                                 |                                                                            |                                                                         |         |                          |       |        |         |        |        |        |       

Continued:

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

|                                                                     |                                  |                                                    |       |                          |   |      |       |      |   |   |       |   |       |  
|-------------------------------------------------------------------- | -------------------------------- | -------------------------------------------------- | ----- | ------------------------ | - | ---- | ----- | ---- | - | - | ----- | - | ----- | -
|                                                                     |                                  |                                                    |       | Years Ended December 31,
|                                                                     |                                  |                                                    |       |                         
|                                                                     |                                  |                                                    |       | 2001                     |   | 2000 |       | 1999
|                                                                     |                                  |                                                    |       |                          |   |      |       |     
|Supplemental schedule of noncash
investing and financing activities: |                                  |                                                    |       |                          |   |      |       |      |   |   |       |  
|                                                                     | Effect of practice affiliations: |                                                    |       |                          |   |      |       |      |   |   |       |   |      
|                                                                     |                                  | Intangible assets                                  |       |                          |  |      |       |      |  |   |       | $ | 1,036 |  
|                                                                     |                                  | Property and equipment                             |       |                          |  |      |       |      |  |   |       |   | 15    |  
|                                                                     |                                  | Other assets                                       |       |                          |  |      |       |      |  |   |       |   | (695  | )
|                                                                     |                                  |                                                    |       |                          |   |      |       |      |   |   |       |  
|                                                                     |                                  | Total assets acquired, net of cash                 |       |                          |  |      |       |      |  |   |       |   | 356   |  
|                                                                     |                                  |                                                    |       |                          |   |      |       |      |   |   |       |  
|                                                                     |                                  | Issuance of notes payable                          |       |                          |  |      |       |      |  |   |       |   | (244  | )
|                                                                     |                                  | Issuance of common stock                           |       |                          |  |      |       |      |  |   |       |   | (112  | )
|                                                                     |                                  |                                                    |       |                          |   |      |       |      |   |   |       |  
|                                                                     |                                  | Payments for practice affiliation
operating assets |       |                          |  |      |       |      |  |   |       |   |      |  
|                                                                     |                                  |                                                    |       |                          |   |      |       |      |   |   |       |  
|Cash paid for interest                                               |                                  | $                                                  | 2,820 |                          |   | $    | 3,500 |      |   | $ | 3,831 |  
|                                                                     |                                  |                                                    |       |                          |   |      |       |      |   |   |       |  
|Cash paid for income taxes                                           |                                  | $                                                  | 48    |                          |   | $    | 280   |      |   | $ | 55    |  
|                                                                     |                                  |                                                    |       |                          |   |      |       |      |   |   |       |  

See accompanying notes to consolidated financial statements.

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RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001

NOTE AORGANIZATION AND DESCRIPTION OF BUSINESS

Response Oncology, Inc. and its wholly-owned and majority-owned subsidiaries
(the Company) was, prior to the events discussed below, a comprehensive
cancer management company. As of May 20, 2002, the Company has liquidated
substantially all of its operating assets and anticipates that the remaining
assets will be liquidated and all wind-down activities completed by the end of
2002. Prior to the sale of its assets, the Company provided advanced cancer
treatment services through outpatient facilities known as IMPACT® Centers under
the direction of practicing oncologists; owned the assets of and managed the
nonmedical aspects of oncology practices; compounded and dispensed
pharmaceuticals to certain oncologists for a fixed or cost plus fee; and
conducted outcomes research on behalf of pharmaceutical manufacturers.

NOTE BBANKRUPTCY PROCEEDINGS

On March 29, 2001, the Company (excluding entities that are majority-owned by
Response Oncology, Inc.) filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code (the Code) in the United
States Bankruptcy Court for the Western District of Tennessee, Western Division
(the Court). The case is jointly administered under case number
01-24607-DSK. The Company is operating as a debtor-in-possession under the
Code, which protects it from its creditors pending reorganization or
liquidation under the jurisdiction of the Court. As debtor-in-possession, the
Company is authorized to operate its business but may not engage in
transactions outside the ordinary course of business without approval of the
Court. A statutory creditors committee may be appointed in the Chapter 11
case, but at this point such a committee has not been formed. As part of the
Chapter 11 process, the Company has attempted to notify all known or potential
creditors of the Chapter 11 filing for the purpose of identifying all
prepetition claims against the Company.

The Court approved a disclosure statement (the Disclosure Statement) filed in
connection with the First Amended Joint Plan (the Plan) filed by the Company
and AmSouth Bank, as agent for itself, Bank of America, N.A. and Union Planters
Bank, N.A. (the Lenders) on Friday, May 3, 2002. Under the Plan, originally
filed April 12, 2002, and amended April 19, 2002, the Companys outstanding
common stock, preferred stock, options and warrants will be cancelled and
current shareholders and warrantholders will not receive any consideration.
The Plan is a liquidating plan and does not contemplate the financial
rehabilitation of the Company or the continuation of its business. Most of the
Companys assets have been sold or are in the process of being liquidated, with
such funds being paid to creditors as set forth in the Plan.

Under the Plan, the Lenders, whose outstanding secured claim was allowed in an
amount totaling approximately $29.5 million by Court order dated October 26,
2001, will be paid all proceeds from the liquidation, except for amounts to be
paid on account of allowed administrative and priority claims (estimated to be
approximately $3,500,000), and $250,000, which will be distributed to general
unsecured creditors. The liquidation of the Companys assets will not return to
the Lenders or general unsecured creditors the full amount of their claims.

The Court has set a hearing on the confirmation of the Plan for June 14, 2002
at 11:00 a.m. CDT. If the Plan is confirmed, upon completion of the liquidation
of all the Companys assets and distribution of those proceeds, the Company
will be dissolved.

Generally, substantially all of the Companys liabilities as of the filing date
(prepetition liabilities) are subject to settlement under a plan of
reorganization. Actions to enforce or otherwise effect repayment of all
prepetition liabilities as well as all pending litigation against the Company
are stayed while the Company continues to operate as debtor-in-possession.
Absent approval from the Court, the Company is prohibited from paying
prepetition obligations. The Court has approved payment of certain prepetition
obligations such as employee wages and benefits. Additionally, the Court has
approved the retention of various legal, financial and other professionals.
Schedules were filed by the Company with the Court setting forth its assets and
liabilities as of the filing date as reflected in the Companys accounting
records.

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Differences between amounts reflected in such schedules and claims
filed by creditors will be investigated and either amicably resolved or
subsequently adjudicated before the Court. As previously discussed, a
Plan has been filed by the Company and its secured lenders, but has not been confirmed. There can be no
assurance that the Plan will be approved by the Companys creditors.

Under the Code, the Company may elect to assume or reject real property leases,
employment contracts, personal property leases, service contracts and other
executory prepetition contracts, subject to Bankruptcy Court review. Parties
affected by such rejections may file prepetition claims with the Bankruptcy
Court in accordance with bankruptcy procedures. At this time, because of
material uncertainties, prepetition claims are generally carried at face value
in the accompanying financial statements. The Company cannot presently
determine or reasonably estimate the ultimate liability that may result from
rejecting leases or from filing of claims for any rejected contracts, and no
provisions have been made for the majority of these items. Additionally, the
net expense resulting from the Chapter 11 filing by the Company has been
segregated and reported as reorganization costs in the consolidated statements
of operations for the year ended December 31, 2001.

The Companys consolidated financial statements have been prepared in
accordance with the American Institute of Certified Public Accountants (AICPA)
Statement of Position 90-7 (SOP 90-7), Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code. In addition, the consolidated
financial statements have been prepared using accounting principles applicable
to a going concern, which contemplates the realization of assets and the
payment of liabilities in the ordinary course of business. As a result of the
Chapter 11 filing, such realization of assets and liquidation of liabilities is
subject to uncertainty. Based on the liquidation values of the Companys
assets sold in April and May of 2002, the carrying value of these assets has
been adjusted to their net realizable value as of December 31, 2001. The
financial statements include reclassifications made to reflect the liabilities
that have been deferred under the Chapter 11 proceedings as Liabilities
Subject to Settlement under Reorganization Proceedings. Certain accounting
and business practices have been adopted that are applicable to companies that
are operating under Chapter 11.

NOTE C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. The medical
practices that are parties to long-term Service Agreements with the Company are
not consolidated. Considering the guidelines established under Emerging Issues
Task Force Issue 97-2, Application of FASB Statement No. 84 and APB Opinion
No. 16 to Physician Practice Management Entities and Certain Other Entities
with Contractual Management Arrangements, the Company does not meet all six of
the requirements for a controlling financial interest that would result in the
consolidation of those entities. The Company is a majority member in certain
joint ventures organized as limited liability companies (LLCs) that performed
outpatient high dose chemotherapy services. The company exercises control over
each of the LLCs through greater than fifty percent financial equity interest
as well as greater than fifty percent governance interest. Based on this
majority ownership and control, the Company consolidates the LLCs through the
application of Financial Accounting Standards Board Statement No. 94,
Consolidation of All Majority-Owned Subsidiaries. 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.
Approximately $957,000 of cash and equivalents is in escrow at December 31,
2001 for the benefit of various employees and officers related to stay bonus
components of the Companys Employee Retention Plan (ERP). The ERP was
established by the Company in order to incentivize certain employees to remain
with the Company throughout its restructuring and liquidation efforts. The
aggregate contingent liability associated with the ERP and associated
agreements at December 31, 2001 is approximately $1.9 million, which has not
been accrued at the balance sheet date because related conditions for payment
of any such amounts were not met at December 31, 2001.

Accounts Receivable: Accounts receivable primarily consists of receivables
from pharmacy management oncology groups, patients, insurers, government
programs and other third-party payors for medical services provided. Such
amounts are reduced by an allowance for contractual adjustments and other
uncollectible amounts. Contractual adjustments result from the differences
between the amounts charged for services performed and the amounts allowed by
the Medicare and Medicaid programs and other public and private insurers.

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Due From Affiliated Physicians: Due from affiliated physicians consists of
management fees earned and due pursuant to related Management Service
Agreements (Service Agreements  see below). In addition, the Company funds
certain working capital needs of affiliated physicians from time to time.

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.

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

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

Equipment under capital lease obligations is amortized using the straight-line
method over the shorter of the lease term or the estimated useful life of the
equipment. Such amortization is included in depreciation and amortization in
the consolidated financial statements.

Management Service Agreements: The recorded value of Service Agreements
resulted from the excess of the purchase price over the fair value of net
assets of acquired practices and were being amortized on a straight-line basis
over a twenty-five year period. 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 value and pay substantial
liquidated damages.

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 relevant amortization periods need 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. Additionally, the impairment evaluation also
routinely considers the Companys current strategic and operational plans with
respect to its Service Agreement portfolio, including active and/or
contemplated negotiations with related physicians, and assesses implications
for the fair value of Service Agreement and associated assets. If impairment
is indicated, then an adjustment will be made to reduce the carrying value of
intangible and, if applicable, associated net assets to fair value. Certain
Service Agreements were determined to be impaired during 2001, 2000 and 1999,
as more fully discussed in Note D.

Net Revenue: The Companys net patient service revenue includes charges to
patients, insurers, government programs and other third-party payers for
medical services provided. Such amounts are recorded net of contractual
adjustments and other uncollectible amounts. Contractual adjustments result
from the differences between the amounts charged for services performed and the
amounts allowed by government programs and other public and private insurers.

The Companys revenue from practice management affiliations includes a fee
equal to practice operating expenses incurred by the Company (which excludes
expenses that are the obligation of the physicians, such as physician salaries
and benefits) 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.

Pharmaceutical sales to physicians are recorded based upon the Companys
contracts with physician groups to manage the pharmacy component of the groups
practices. Revenue recorded for these contracts represents the cost of
pharmaceuticals plus a fixed or percentage fee.

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Clinical research revenue is recorded based upon the Companys contracts with
certain pharmaceutical companies to manage clinical trials and is generally
measured on a per patient basis for monitoring and collection of data.

The following table is a summary of net revenue by source.

|                                   |  |                          |         |      |  |      |         |  |  |   |         | 
|---------------------------------- |  | ------------------------ | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                                   |  | Years Ended December 31,
|                                   |  |                         
|                                   |  | (In thousands)          
|                                   |  | 2001                     |         | 2000 |  | 1999
|                                   |  |                          |         |      |  |     
|Net patient service revenue        |  | $                        | 5,030   |      |  | $    | 14,105  |  |  | $ | 28,179  | 
|Practice management service fees   |  |                          | 66,615  |      |  |      | 77,671  |  |  |   | 68,413  | 
|Pharmaceutical sales to physicians |  |                          | 46,262  |      |  |      | 38,510  |  |  |   | 37,530  | 
|Clinical research revenue          |  |                          | 178     |      |  |      | 547     |  |  |   | 1,445   | 
|                                   |  |                          |         |      |  |      |         |  |  |   |         | 
|                                   |  | $                        | 118,085 |      |  | $    | 130,833 |  |  | $ | 135,567 | 
|                                   |  |                          |         |      |  |      |         |  |  |   |         | 

Revenue is recognized when earned. Revenues and related cost of revenues are
generally recognized upon delivery of goods or performance of services.

Income Taxes: The asset and liability method is used 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.

Loss Per Common Share: 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.

Fair Value of Financial Instruments: Fair value of a financial instrument is
defined as the amount at which such an instrument could be exchanged in a
current transaction between willing parties. Given the circumstances outlined
in Notes B and F, it is not practicable to estimate the fair value of any such
instruments in the Companys consolidated balance sheet at December 31, 2001.

Use of Estimates: Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with accounting principles generally accepted in the
United States of America. Actual results could differ from those estimates.

Reclassifications: Certain reclassifications have been made in the 2000 and
1999 consolidated financial statements to conform with the 2001 presentation,
with no impact on consolidated results of the Company.

NOTE D  IMPAIRMENT OF MANAGEMENT SERVICE AGREEMENTS AND ASSOCIATED ASSETS

In the fourth quarter of 1999, the Company terminated its Service Agreement
with one single-physician practice in Florida. During the same period, the
Company began negotiations to terminate another Service Agreement with a
single-physician practice. The Company experienced deteriorating returns on
this particular Service Agreement and concluded that continuing the
relationship was not economically feasible. At December 31, 1999, the Company
recorded an impairment charge, based on similar evaluation processes as
described above, related to the Service Agreements and associated assets
totaling $1,185,000. The Company terminated the second Service Agreement in
the second quarter of 2000.

In the fourth quarter of 2000, the Company began negotiating, in response to
certain contract disputes, to sell the assets of the OHG Group, to the
existing physician group. Concurrent with the sale of the assets, the Service
Agreement was terminated, and the parties signed a pharmacy management
agreement for the Company to provide turnkey pharmacy management services to
the practice. The sale and pharmacy management agreement were completed and
effective

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February 1, 2001. At December 31, 2000, the Company recorded an impairment
charge totaling $15,951,000 related to the Service Agreement and associated
assets, based on the terms of the related agreement.

During the first and second quarters of 2002, the Company terminated all of the
remaining Service Agreements and sold the associated assets to the physician
groups that were parties to the agreements. At December 31, 2001, the Company
adjusted the Service Agreements and associated assets to their net realizable
values as measured by the termination and sale agreements. This resulted in an
impairment charge of $42.1 million related to the Service
Agreements and $5.0
million related to adjustments to associated assets. The aggregate proceeds
generated from the termination of the remaining six Service Agreements as sale
of related assets were approximately $11.3 million.

NOTE EPROPERTY AND EQUIPMENT

Balances of major classes of property and equipment at December 31, 2001 and
2000 are as follows:

(In thousands)

|                                               |  |      |        |      |  |   |         |  
|---------------------------------------------- |  | ---- | ------ | ---- |  | - | ------- | -
|                                               |  | 2001 |        | 2000
|                                               |  |      |        |     
|Lab and pharmacy equipment                     |  | $    | 3,940  |      |  | $ | 5,480   |  
|Furniture and office equipment                 |  |      | 3,978  |      |  |   | 5,532   |  
|Equipment under capital leases                 |  |      | 1,631  |      |  |   | 2,597   |  
|Leasehold improvements                         |  |      | 747    |      |  |   | 2,292   |  
|                                               |  |      |        |      |  |   |         |  
|                                               |  |      | 10,296 |      |  |   | 15,901  |  
|Less accumulated depreciation and amortization |  |      | (9,682 | )    |  |   | (12,689 | )
|                                               |  |      |        |      |  |   |         |  
|                                               |  | $    | 614    |      |  | $ | 3,212   |  
|                                               |  |      |        |      |  |   |         |  

NOTE FNOTES PAYABLE

Notes payable at December 31, 2001 and 2000 consist of the following:

(In thousands)

|                                                                                                                                                                              |  |      |        |      |  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------- | -
|                                                                                                                                                                              |  | 2001 |        | 2000
|                                                                                                                                                                              |  |      |        |     
|Credit Facility (see below)                                                                                                                                                   |  | $    | 26,404 |      |  | $ | 33,749  |  
|Various subordinated notes payable to affiliated physicians and
physician practices, bearing interest ranging from 4% to 9%
with scheduled maturity dates through 2001        |  |      | 50     |      |  |   | 758     |  
|Other notes payable collateralized by furniture and equipment, with
interest rates between 8% and 10%, payable in monthly installments
of principal and interest through 2001 |  |      |       |      |  |   | 2       |  
|                                                                                                                                                                              |  |      |        |      |  |   |         |  
|Total notes payable (classified as a liability subject to
settlement under reorganization proceedings at December 31, 2001)                                                   |  |      | 26,454 |      |  |   | 34,509  |  
|Less current portion                                                                                                                                                          |  |      |       |      |  |   | (34,509 | )
|                                                                                                                                                                              |  |      |        |      |  |   |         |  
|                                                                                                                                                                              |  | $    | 26,454 |      |  |   |        |  
|                                                                                                                                                                              |  |      |        |      |  |   |         |  

The terms of the Companys original lending agreement provided for a $42.0
million Credit Facility, to mature in June 2002, to fund the Companys
acquisition and working capital needs. The Credit Facility, originally
comprised of a $35.0 million Term Loan Facility and a $7.0 million Revolving
Credit Facility, is collateralized by the assets of the Company and the common
stock of its subsidiaries. The Credit Facility bears interest at a variable
rate equal to LIBOR plus an original spread between 1.375% and 2.5%, depending
upon borrowing levels. The Company was also obligated to a commitment
fee of 25% to .5% of the unused portion of the Revolving Credit Facility. The
Company was subject to certain affirmative and negative covenants which, among
other things, originally required that the Company maintain certain financial
ratios, including minimum fixed charge coverage, funded debt to EBITDA and
minimum net worth. This original lending agreement was subsequently and
significantly amended in November 1999 and March 2000, as described below.

In November 1999, the Company and its Lenders amended certain terms of the
Credit Facility. As a result of this amendment, the Revolving Credit Facility
was reduced from $7.0 million to $6.0 million and the interest rate was
adjusted to LIBOR plus a spread of 3.25%. The Companys obligation for
commitment fees was adjusted from a

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maximum of .5% to .625% of the unused portion of the Revolving Credit Facility. Repayment of the
January 1, 2000 quarterly installment was accelerated. In addition, certain
affirmative and negative covenants were added or modified, including minimum
EBITDA requirements for the fourth quarter of 1999 and the first quarter of
2000. Compliance with certain covenants was also waived for the quarters ended
September 30, 1999 and December 31, 1999.

On March 30, 2000, the Company and its Lenders again amended various terms of
the Credit Facility. As a result of this amendment, certain affirmative and
negative covenants were added (including minimum quarterly cash flow
requirements through March 2001), and certain other existing covenants were
modified. Additionally, certain principal repayment terms were modified and
certain future and current compliance with specific covenants was waived.
Finally, the maturity date of the Credit Facility was accelerated to June 2001.

During the third quarter of 2000, the Company did not meet certain financial
covenants of the Credit Facility, including those related to minimum cash flow
requirements, resulting in an event of default under the Credit Facility. As a result of this event of default, the Companys Lenders adjusted the
interest rates on the outstanding principal to the default rate of prime plus
3% (12.5% at the time of default) and terminated any obligation to advance
additional loans or issue letters of credit. As a result of this termination,
the Company has not experienced an impact on operating cash flow. Under the
terms of the Credit Facility, additional remedies available to the Lenders (as
long as an event of default exists and has not been cured) included
acceleration of all principal and accrued interest outstanding, the right to
foreclose on related security interests in the assets of the Company and stock
of its subsidiaries, and the right of setoff against any monies or deposits
that the Lenders have in their possession.

Effective December 29, 2000, the Company executed a forbearance agreement with
its Lenders. Under the terms of the forbearance agreement, the Lenders agreed
to forbear from enforcing their rights or remedies pursuant to the Credit
Facility documents until the earlier of (i) March 30, 2001 (as amended), or
(ii) certain defined events of default. During this period, the interest rate
was adjusted to prime plus 2%. The forbearance agreement also provided that a
financial advisor be retained by the Company to assist in the development of a
restructuring plan and to perform certain valuation analyses.

With the Companys March 29, 2001 Chapter 11 bankruptcy filing, any potential
future revisions to the Credit Facility are subject to Chapter 11
reorganization or liquidation processes (described elsewhere herein in
conjunction with discussion of the filing). The terms of the permanent cash
collateral order provide for the payment of interest to the Lenders at the
non-default rate as set forth in the original credit agreement (currently LIBOR
plus 2.5%). Additionally, as of the date of the bankruptcy filing, the Company
was in technical default under the terms of the Credit Facility. Consistent
with all of the above-described factors, the Company has classified all amounts
due under the Companys Credit Facility as a liability subject to settlement
under reorganization proceedings in the accompanying consolidated balance sheet
as of December 31, 2001. The amounts due under the Companys Credit Facility
were classified as a current liability in the accompanying consolidated balance
sheet as of December 31, 2001. At December 31, 2001, $26.4 million aggregate
principal was outstanding under the Credit Facility with an interest rate of
approximately 5.2%.

The Company entered into a LIBOR-based interest rate swap agreement (Swap
Agreement) with the Companys lender as required by the terms of the Credit
Facility. Effective July 1, 2000, the Company entered into a new Swap
Agreement. Amounts hedged under this most recent Swap
Agreement accrued interest at the difference between 7.24% and the ninety-day
LIBOR rate and were settled quarterly. The Company has hedged $17.0 million
under the terms of the Swap Agreement. The Swap Agreement terminated upon the
filing of the Companys bankruptcy petitions and has not been renewed.

The installment notes payable to affiliated physicians and physician practices
were issued as partial consideration for the practice management affiliations.
Pursuant to the physician practice management sale transactions that occurred
in the first and second quarters of 2002, the related subordinated debt that
was forgiven as part of these transactions was

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adjusted to the net realizable value at December 31, 2001. The unpaid principal amount of
a note related to a physician practice management affiliation was $50,000 at
December 31, 2001.

Absent the impact of the Companys bankruptcy filing, amounts under the Credit
Facility are contractually due entirely in the Companys fiscal 2002.

NOTE G  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 $1,850,000 and
$2,063,000 at December 31, 2001 and 2000, respectively. Amortization of leased
assets is included in depreciation and amortization expense.

Total rental expense under operating leases amounted to $2,334,000, $3,331,000,
and $3,838,000 for the years ended December 31, 2001, 2000, and 1999
respectively. The Company is generally obligated to the lessors for its
proportionate share of operating expenses of the leased premises. At December
31, 2001, future minimum lease payments under capital and operating leases with
initial terms of one year or more are as follows (in thousands):

|                                                |                       |   |                |    |                  |   |     |  | 
|----------------------------------------------- | --------------------- | - | -------------- | -- | ---------------- | - | --- |  | 
|                                                |                       |   | Capital Leases |    | Operating Leases
|                                                |                       |   |                |    |                 
|Year
ending December 31, 2002                   |                       | $ | 90             |    |                  | $ | 545 | 
|                                                |                       |   |                |    |                  |   |     | 
|Total minimum payments                          |                       |   | 90             |    |                  | $ | 545 | 
|                                                |                       |   |                |    |                  |   |     | 
|                                                | Less imputed interest |   |                | (5 | )                |   |     |  | 
|                                                |                       |   |                |    |                  |   |     | 
|Present value of minimum rental payments        |                       |   | 85             |    |                  |   |     | 
|Less current portion                            |                       |   | 85             |    |                  |   |     | 
|                                                |                       |   |                |    |                  |   |     | 
|Capital lease obligations,
less current portion |                       | $ | -0-            |    |                  |   |     | 
|                                                |                       |   |                |    |                  |   |     | 

NOTE H  INCOME TAXES

The components of the actual expense or benefit for the years ended 2001,
2000, and 1999 are as follows (in thousands):

|                                       |  |      |        |      |  |      |        |   |  |   |        |  
|-------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                       |  | 2001 |        | 2000 |  | 1999
|                                       |  |      |        |      |  |     
|Federal current tax expense (benefit)  |  |      |       |      |  |      |       |   |  | $ | (1,756 | )
|State current tax expense (benefit)    |  |      | (197   | )    |  |      | 38     |   |  |   |       |  
|Deferred federal tax expense (benefit) |  |      | (1,983 | )    |  |      | (6,201 | ) |  |   | 1,914  |  
|Deferred state tax expense (benefit)   |  |      | (374   | )    |  |      | (1,130 | ) |  |   | 6      |  
|                                       |  |      |        |      |  |      |        |   |  |   |        |  
|                                       |  | $    | (2,554 | )    |  | $    | (7,293 | ) |  | $ | 164    |  
|                                       |  |      |        |      |  |      |        |   |  |   |        |  

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The actual tax expense or benefit for the years ended December 31, 2001, 2000,
and 1999, respectively, differs from the expected tax expense or benefit for
those years (computed by applying the federal corporate tax rate of 34% to
earnings or loss before income taxes) as follows (in thousands):

|                                    |  |      |         |      |  |      |        |   |  |   |      |  
|----------------------------------- |  | ---- | ------- | ---- |  | ---- | ------ | - |  | - | ---- | -
|                                    |  | 2001 |         | 2000 |  | 1999
|                                    |  |      |         |      |  |     
|Computed expected tax benefit       |  | $    | (18,342 | )    |  | $    | (7,382 | ) |  | $ | (520 | )
|Non-deductible expenses             |  |      | 12      |      |  |      | 4      |   |  |   | 19   |  
|State tax expense (benefit)         |  |      | (2,136  | )    |  |      | (721   | ) |  |   | 4    |  
|Valuation allowance                 |  |      | 18,051  |      |  |      | 1,200  |   |  |   | 779  |  
|Other                               |  |      | (139    | )    |  |      | (394   | ) |  |   | (118 | )
|                                    |  |      |         |      |  |      |        |   |  |   |      |  
|Actual income tax expense (benefit) |  | $    | (2,554  | )    |  | $    | (7,293 | ) |  | $ | 164  |  
|                                    |  |      |         |      |  |      |        |   |  |   |      |  

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):

|                        |                              |                                                                   |         |       |        |  |        |       |       |  | 
|----------------------- | ---------------------------- | ----------------------------------------------------------------- | ------- | ----- | ------ |  | ------ | ----- | ----- |  | 
|                        |                              |                                                                   |         |       | 2001   |  | 2000  
|                        |                              |                                                                   |         |       |        |  |       
|Deferred tax assets:    |                              |                                                                   |         |       |        |  |        |      
|                        |                              | Net operating loss carryforwards                                  |         | $     | 7,503  |  |        | $     | 4,929 | 
|                        |                              | Reserve for bad debts                                             |         |       | 889    |  |        |       | 887   | 
|                        |                              | Excess book depreciation/amortization                             |         |       | 629    |  |        |       | 546   | 
|                        |                              | Minimum tax credit                                                |         |       | 181    |  |        |       | 181   | 
|                        |                              | Accrued expenses                                                  |         |       | 231    |  |        |       | 228   | 
|                        |                              | Impairment of management service
agreements and associated assets |         |       | 20,759 |  |        |       | 3,369 | 
|                        |                              |                                                                   |         |       |        |  |        |      
|Total deferred assets   |                              |                                                                   | 30,192  |       |        |  | 10,140 |      
|Valuation allowance     |                              |                                                                   | (22,268 | )     |        |  | (4,217 | )    
|                        |                              |                                                                   |         |       |        |  |        |      
|Net deferred tax assets |                              |                                                                   | 7,924   |       |        |  | 5,923  |      
|                        |                              |                                                                   |         |       |        |  |        |      
|Deferred tax liability: |                              |                                                                   |         |       |        |  |        |      
|                        |                              | Management service agreements                                     |         |       | 7,863  |  |        |       | 8,268 | 
|                        |                              | Other                                                             |         |       | 61     |  |        |       | 12    | 
|                        |                              |                                                                   |         |       |        |  |        |      
|                        | Total deferred tax liability |                                                                   |         | 7,924 |        |  |        | 8,280 |      
|                        |                              |                                                                   |         |       |        |  |        |      
|                        | Net deferred tax liability   |                                                                   |         |      |        |  | $      | 2,357 |      
|                        |                              |                                                                   |         |       |        |  |        |      

The valuation allowance for the deferred tax assets as of December 31, 2001 is
$22,268,000. The net change in the total valuation allowance for the year
ended December 31, 2001, was an increase of $18,051,000. Management believes
that a valuation allowance is necessary with respect to certain losses that
will expire. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not some portion or all of the
deferred tax assets will be realized. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, income
taxes paid in prior years eligible to be offset by net operating loss
carrybacks, and tax planning strategies in making this assessment.

As of December 31, 2001, the Company had available for federal income tax
purposes net operating loss carryforwards totaling approximately $19.0 million.
Of this amount, $3.0 million of the net operating loss carryforward is subject
to annual limitations and is likely to expire. In addition, as of December 31,
2001, the Company had approximately $24.1 million of state net operating loss
carryforwards available. In addition to the net operating losses available to
offset future taxable income, the Company has a minimum tax credit of $181,000
that can be carried forward indefinitely.

NOTE I  COMMON STOCK, CONVERTIBLE PREFERRED STOCK, WARRANTS, AND OPTIONS

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 payment-in-kind dividends in
the form of shares of

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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.

During the year ended December 31, 1999, 10,000 shares of Series A Convertible
Preferred Stock were converted into 1,833 shares of common stock.

In December 2001, 2000, and 1999, the Board of Directors approved an aggregate
common stock dividend of 183 shares each year to the holders of the Series A
Convertible Preferred Stock of record as of December 15, 2001, 2000, and 1999,
respectively, that was paid January 2002, 2001, and 2000, respectively. The
market value of the common stock distributed was approximately $6, $34, and
$297 at December 15, 2001, 2000 and 1999, respectively. The dividends have
been reflected in the Statement of Operations, and the weighted average
number of common shares in the determination of net loss to common stockholders
and the loss per common share calculations. The par value of the common stock
distributed was recorded to paid-in capital.

Options:The 1985 Stock Option Plan (the 1985 Plan), as amended, allows for
granting of incentive stock options, non-qualified stock options, and stock
appreciation rights for 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 market price of the common stock on the date of grant for an incentive
stock option and not less than 85% of the market price 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.

The 1990 Non-Qualified Stock Option Plan (the 1990 Plan), as amended, allows
for the granting of up to 1,125,000 non-qualified stock 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.

The 1996 Incentive and Non-Qualified Stock Option Plan (the 1996 Plan), as
amended, allows for the granting of up to 1,630,000 options to eligible
officers, directors, advisors, medical directors, consultants, and key
employees 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.

A summary status of the 1985 Plan as of December 31, 2001, 2000, and 1999 and
changes during the years then ended is presented below:

|                                 |  |           |     |          |  |           |       |          |  |           |         |          |  |   |       |  |  |          |        |   |  |   |      | 
|-------------------------------- |  | --------- | --- | -------- |  | --------- | ----- | -------- |  | --------- | ------- | -------- |  | - | ----- |  |  | -------- | ------ | - |  | - | ---- | 
|                                 |  | 2001      |     | 2000     |  | 1999     
|                                 |  |           |     |          |  |          
|                                 |  |           |     |          |  | Weighted  |       |          |  |           |         | Weighted |  |   |       |  |  | Weighted
|                                 |  |           |     |          |  | Average   |       |          |  |           |         | Average  |  |   |       |  |  | Average 
|                                 |  | Number    |     | Exercise |  | Number    |       | Exercise |  | Number    |         | Exercise
|Fixed Options                    |  | of shares |     | Price    |  | of shares |       | Price    |  | of shares |         | Price   
|                                 |  |           |     |          |  |           |       |          |  |           |         |         
|Outstanding at beginning of
year |  |           | 200 |          |  | $         | 11.88 |          |  |           | 51,100  |          |  | $ | 3.79  |  |  |          | 60,203 |   |  | $ | 3.85 | 
|Exercised                        |  |           |    |          |  |           |      |          |  |           |        |          |  |   |      |  |  |          |       |   |  |   |     | 
|Forfeited                        |  |           |    |          |  |           |      |          |  |           | (50,900 | )        |  |   | 3.75  |  |  |          | (9,103 | ) |  |   | 3.59 | 
|                                 |  |           |     |          |  |           |       |          |  |           |         |          |  |   |       |  |  |          |        |   |  |   |      | 
|Outstanding at end of year       |  |           | 200 |          |  |           | 11.88 |          |  |           | 200     |          |  |   | 11.88 |  |  |          | 51,100 |   |  |   | 3.79 | 
|                                 |  |           |     |          |  |           |       |          |  |           |         |          |  |   |       |  |  |          |        |   |  |   |      | 
|Options exercisable end of year  |  |           | 200 |          |  |           |       |          |  |           | 200     |          |  |   |       |  |  |          | 51,100 |   |  |   |      | 
|                                 |  |           |     |          |  |           |       |          |  |           |         |          |  |   |       |  |  |          |        |   |  |   |      | 

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A summary status of the 1990 Plan as of December 31, 2001, 2000, and 1999 and
changes during the years then ended is presented below:

|                                 |  |           |          |          |  |           |      |          |  |           |          |          |  |   |      |  |  |          |          |   |  |   |      | 
|-------------------------------- |  | --------- | -------- | -------- |  | --------- | ---- | -------- |  | --------- | -------- | -------- |  | - | ---- |  |  | -------- | -------- | - |  | - | ---- | 
|                                 |  | 2001      |          | 2000     |  | 1999     
|                                 |  |           |          |          |  |          
|                                 |  |           |          |          |  | Weighted  |      |          |  |           |          | Weighted |  |   |      |  |  | Weighted
|                                 |  |           |          |          |  | Average   |      |          |  |           |          | Average  |  |   |      |  |  | Average 
|                                 |  | Number    |          | Exercise |  | Number    |      | Exercise |  | Number    |          | Exercise
|Fixed Options                    |  | of shares |          | Price    |  | of shares |      | Price    |  | of shares |          | Price   
|                                 |  |           |          |          |  |           |      |          |  |           |          |         
|Outstanding at beginning of
year |  |           | 649,065  |          |  | $         | 5.18 |          |  |           | 783,972  |          |  | $ | 4.86 |  |  |          | 779,108  |   |  | $ | 6.34 | 
|Granted                          |  |           |         |          |  |           |     |          |  |           |         |          |  |   |     |  |  |          | 220,000  |   |  |   | .69  | 
|Exercised                        |  |           |         |          |  |           |     |          |  |           | (20,175  | )        |  |   | 1.56 |  |  |          |         |   |  |   |     | 
|Forfeited                        |  |           | (305,888 | )        |  |           | 6.53 |          |  |           | (114,732 | )        |  |   | 3.61 |  |  |          | (215,136 | ) |  |   | 5.96 | 
|                                 |  |           |          |          |  |           |      |          |  |           |          |          |  |   |      |  |  |          |          |   |  |   |      | 
|Outstanding at end of year       |  |           | 343,177  |          |  |           | 4.31 |          |  |           | 649,065  |          |  |   | 5.18 |  |  |          | 783,972  |   |  |   | 4.86 | 
|                                 |  |           |          |          |  |           |      |          |  |           |          |          |  |   |      |  |  |          |          |   |  |   |      | 
|Options exercisable end of year  |  |           | 304,313  |          |  |           |      |          |  |           | 530,736  |          |  |   |      |  |  |          | 569,609  |   |  |   |      | 
|                                 |  |           |          |          |  |           |      |          |  |           |          |          |  |   |      |  |  |          |          |   |  |   |      | 

A summary status of the 1996 Plan for the years ended December 31, 2001, 2000,
and 1999 and changes during the years then ended is presented below:

|                                 |  |           |           |          |  |           |      |          |  |           |           |          |  |   |      |  |  |          |           |   |  |   |      | 
|-------------------------------- |  | --------- | --------- | -------- |  | --------- | ---- | -------- |  | --------- | --------- | -------- |  | - | ---- |  |  | -------- | --------- | - |  | - | ---- | 
|                                 |  | 2001      |           | 2000     |  | 1999     
|                                 |  |           |           |          |  |          
|                                 |  |           |           |          |  | Weighted  |      |          |  |           |           | Weighted |  |   |      |  |  | Weighted
|                                 |  |           |           |          |  | Average   |      |          |  |           |           | Average  |  |   |      |  |  | Average 
|                                 |  | Number    |           | Exercise |  | Number    |      | Exercise |  | Number    |           | Exercise
|Fixed Options                    |  | of shares |           | Price    |  | of shares |      | Price    |  | of shares |           | Price   
|                                 |  |           |           |          |  |           |      |          |  |           |           |         
|Outstanding at beginning of
year |  |           | 1,162,511 |          |  | $         | 2.57 |          |  |           | 1,019,933 |          |  | $ | 3.67 |  |  |          | 1,101,690 |   |  | $ | 6.54 | 
|Granted                          |  |           | 794,000   |          |  |           | 0.30 |          |  |           | 324,000   |          |  |   | 1.10 |  |  |          | 579,000   |   |  |   | .85  | 
|Exercised                        |  |           |          |          |  |           |     |          |  |           |          |          |  |   |     |  |  |          |          |   |  |   |     | 
|Forfeited                        |  |           | (917,000  | )        |  |           | 1.51 |          |  |           | (181,422  | )        |  |   | 6.16 |  |  |          | (660,757  | ) |  |   | 5.98 | 
|                                 |  |           |           |          |  |           |      |          |  |           |           |          |  |   |      |  |  |          |           |   |  |   |      | 
|Outstanding at end of year       |  |           | 1,039,511 |          |  |           | 1.72 |          |  |           | 1,162,511 |          |  |   | 2.57 |  |  |          | 1,019,933 |   |  |   | 3.67 | 
|                                 |  |           |           |          |  |           |      |          |  |           |           |          |  |   |      |  |  |          |           |   |  |   |      | 
|Options exercisable end of year  |  |           | 932,846   |          |  |           |      |          |  |           | 639,178   |          |  |   |      |  |  |          | 665,601   |   |  |   |      | 
|                                 |  |           |           |          |  |           |      |          |  |           |           |          |  |   |      |  |  |          |           |   |  |   |      | 

The following table summarizes information about fixed stock options
outstanding at December 31, 2001:

|                |  |                     |         |                     |  |                  |      |             |  |          |       |  |  |  |         |          |  |   |       | 
|--------------- |  | ------------------- | ------- | ------------------- |  | ---------------- | ---- | ----------- |  | -------- | ----- |  |  |  | ------- | -------- |  | - | ----- | 
|                |  | Options Outstanding |         | Options Exercisable
|                |  |                     |         |                    
|                |  |                     |         |                     |  | Weighted Average |      |             |  |          |       |  |  |  |         | Weighted
|                |  |                     |         |                     |  | Remaining        |      |             |  |          |       |  |  |  |         | Average 
|Range of        |  | Number              |         | Contractual         |  | Weighted Average |      | Number      |  | Exercise
|Exercise Prices |  | Outstanding         |         | Life (Years)        |  | Exercise Price   |      | Exercisable |  | Price   
|                |  |                     |         |                     |  |                  |      |             |  |         
|$0.06    $0.22 |  |                     | 24,000  |                     |  |                  | 9.38 |             |  | $        | 0.10  |  |  |  | 24,000  |          |  | $ | 0.10  | 
|$0.31    $0.31 |  |                     | 680,000 |                     |  |                  | 9.08 |             |  | $        | 0.31  |  |  |  | 600,000 |          |  | $ | 0.31  | 
|$0.69    $1.13 |  |                     | 206,867 |                     |  |                  | 7.96 |             |  | $        | 0.84  |  |  |  | 141,338 |          |  | $ | 0.84  | 
|$1.38    $5.25 |  |                     | 35,000  |                     |  |                  | 6.84 |             |  | $        | 3.69  |  |  |  | 35,000  |          |  | $ | 3.69  | 
|$6.00
 $6.00   |  |                     | 281,121 |                     |  |                  | 5.40 |             |  | $        | 6.00  |  |  |  | 281,121 |          |  | $ | 6.00  | 
|$6.25
 $16.875 |  |                     | 155,900 |                     |  |                  | 4.08 |             |  | $        | 10.31 |  |  |  | 155,900 |          |  | $ | 10.31 | 

The Company accounts for employee 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. On December
31, 1995, the Company adopted Statement of Financial Accounting Standards No.
123, Accounting for Stock Based Compensation (SFAS 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, SFAS 123 allows entities to continue to apply the provisions of
APB 25 and provide certain disclosures for employee stock option grants made in

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1995 and future years as if the fair-value-based method defined in SFAS 123 had
been applied. The Company has elected to continue to apply the provisions of
APB 25 and provide the pro forma disclosures required by SFAS 123.

The per share weighted average fair value of stock options granted during 2001,
2000, and 1999 was $.30, $.92, and $.61 on the date of grant. The fair values
were calculated by using the Black Scholes option-pricing model with the
following average assumptions: 2001  expected dividend yield of 0%, risk-free
interest rate of 4.3%, expected volatility factor of 200% and an expected life
of five years; 2000  expected dividend yield of 0%, risk-free interest rate of
4.7%, expected volatility factor of 117% and an expected life of five years;
1999  expected dividend yield of 0%, risk-free interest rate of 6.5%, expected
volatility factor of 100% and an expected life of five years. 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 SFAS 123, the Companys net loss and loss per
common share would have been increased by the pro forma amounts indicated below
(in thousands except for per share data):

|                                          |  |      |      |      |  |      |      |  |  |   |      | 
|----------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- |  |  | - | ---- | 
|                                          |  | 2001 |      | 2000 |  | 1999
|                                          |  |      |      |      |  |     
|Increase in net loss                      |  | $    | 178  |      |  | $    | 277  |  |  | $ | 517  | 
|Increase in basic loss per common share   |  | $    | 0.01 |      |  | $    | 0.02 |  |  | $ | 0.04 | 
|Increase in diluted loss per common share |  | $    | 0.01 |      |  | $    | 0.02 |  |  | $ | 0.04 | 

Pro forma net loss reflect only options granted subsequent to 1995. Therefore,
the full impact of calculating compensation cost for stock options under SFAS
123 is not reflected in the pro forma net loss amounts presented above because
compensation costs are reflected over the options vesting period of five years
for the 2001, 2000, and 1999 options.

NOTE J  BENEFIT PLAN

The Company established a 401(k) Profit Sharing Plan (the Plan) which allows
qualifying employees electing participation 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. The Company suspended matching contributions in
2001. For the Plan year ended December 31, 2000, the approved matching
percentage was 35% up to a maximum of $1,750 per employee. Expense recognized
for the Companys contributions to the plan amounted to $121,000 and $177,000
in 2000 and 1999, respectively. The Plan was terminated by the Company
effective February 28, 2002.

NOTE K  PROFESSIONAL AND LIABILITY INSURANCE

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, 2002, 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 $5,000,000 umbrella policy
with respect to potential professional and general liability claims. Since
inception, the Company has incurred no professional or general liability
losses. As of December 31, 2001 the Company was not aware of any pending
professional or general liability claims that would have a material adverse
effect on the Companys financial condition or results of operations.

NOTE L  SEGMENT INFORMATION

The Companys reportable segments are strategic business units that offer
different services. The Company had three reportable segments: IMPACT
Services, Physician Practice Management and Cancer Research Services. The
IMPACT Services segment provided stem cell supported high dose chemotherapy and
other advanced cancer treatment services under the direction of practicing
oncologists and pharmacy management services for certain medical oncology
practices through IMPACT Center pharmacies. The Physician Practice Management
segment owned the assets of and managed oncology practices.
The Cancer Research Services segment conducted clinical cancer
research on behalf of pharmaceutical manufacturers.

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The accounting policies of the segments are the same as those described in the
summary of significant accounting policies except that the Company does not
allocate interest expense, taxes or corporate overhead to the individual
segments. The Company evaluates performance based on profit or loss from
operations before income taxes and unallocated amounts.

(In thousands)

|                                                                  |  |                 |        |            |  |                          |         |       |  |   |      |   |  |   |         |  
|----------------------------------------------------------------- |  | --------------- | ------ | ---------- |  | ------------------------ | ------- | ----- |  | - | ---- | - |  | - | ------- | -
|                                                                  |  |                 |        |            |  | Physician Practice       |         |       |  |   |      |   |  |  
|                                                                  |  | IMPACT Services |        | Management |  | Cancer Research Services |         | Total
|                                                                  |  |                 |        |            |  |                          |         |      
|For the year ended December 31, 2001:                             |  |                 |        |            |  |                          |         |       |  |   |      |   |  |   |         |  
|Net revenue                                                       |  | $               | 51,292 |            |  | $                        | 66,615  |       |  | $ | 178  |   |  | $ | 118,085 |  
|Total operating expenses                                          |  |                 | 51,332 |            |  |                          | 60,053  |       |  |   | 306  |   |  |   | 111,691 |  
|Impairment of management service agreements
and associated assets |  |                 |       |            |  |                          | 47,047  |       |  |   |     |   |  |   | 47,047  |  
|                                                                  |  |                 |        |            |  |                          |         |       |  |   |      |   |  |   |         |  
|Segment deficit                                                   |  |                 | (40    | )          |  |                          | (40,485 | )     |  |   | (128 | ) |  |   | (40,653 | )
|Depreciation and amortization                                     |  |                 | 273    |            |  |                          | 2,940   |       |  |   |     |   |  |   | 3,213   |  
|                                                                  |  |                 |        |            |  |                          |         |       |  |   |      |   |  |   |         |  
|Segment loss                                                      |  | $               | (313   | )          |  | $                        | (43,425 | )     |  | $ | (128 | ) |  | $ | (43,866 | )
|                                                                  |  |                 |        |            |  |                          |         |       |  |   |      |   |  |   |         |  
|Segment assets                                                    |  | $               | 8,428  |            |  | $                        | 11,299  |       |  | $ | 102  |   |  | $ | 19,829  |  
|                                                                  |  |                 |        |            |  |                          |         |       |  |   |      |   |  |   |         |  
|Capital expenditures                                              |  |                 |       |            |  | $                        | 117     |       |  |   |     |   |  | $ | 117     |  
|                                                                  |  |                 |        |            |  |                          |         |       |  |   |      |   |  |   |         |  

|                                                                   |  |   |                 |   |            |   |                          |   |       |   |     |   |  |   |         |   | 
|------------------------------------------------------------------ |  | - | --------------- | - | ---------- | - | ------------------------ | - | ----- | - | --- | - |  | - | ------- | - | 
|                                                                   |  |   |                 |   |            |   | Physician Practice       |   |       |   |     |   |  |   |        
|                                                                   |  |   | IMPACT Services |   | Management |   | Cancer Research Services |   | Total
|                                                                   |  |   |                 |   |            |   |                          |   |      
|For the year ended December 31, 2000:                              |  |   |                 |   |            |   |                          |   |       |   |     |   |  |   |         |  
|Net revenue                                                        |  | $ | 52,615          |   |            | $ | 77,671                   |   |       | $ | 547 |   |  | $ | 130,833 |  
|Total operating expenses                                           |  |   | 52,404          |   |            |   | 68,500                   |   |       |   | 634 |   |  |   | 121,538 |  
|Impairment
of management services agreements and associated assets |  |   |                |   |            |   | 15,951                   |   |       |   |    |   |  |   | 15,951  |  
|                                                                   |  |   |                 |   |            |   |                          |   |       |   |     |   |  |   |         |  
|Segment contribution (deficit)                                     |  |   | 211             |   |            |   | (6,780                   | ) |       |   | (87 | ) |  |   | (6,656  | )
|Depreciation and amortization                                      |  |   | 408             |   |            |   | 3,972                    |   |       |   |    |   |  |   | 4,380   |  
|                                                                   |  |   |                 |   |            |   |                          |   |       |   |     |   |  |   |         |  
|Segment loss                                                       |  | $ | (197            | ) |            | $ | (10,752                  | ) |       | $ | (87 | ) |  | $ | (11,036 | )
|                                                                   |  |   |                 |   |            |   |                          |   |       |   |     |   |  |   |         |  
|Segment assets                                                     |  | $ | 12,463          |   |            | $ | 68,146                   |   |       | $ | 769 |   |  | $ | 81,378  |  
|                                                                   |  |   |                 |   |            |   |                          |   |       |   |     |   |  |   |         |  
|Capital expenditures                                               |  | $ | 168             |   |            | $ | 354                      |   |       |   |    |   |  | $ | 522     |  
|                                                                   |  |   |                 |   |            |   |                          |   |       |   |     |   |  |   |         |  

|                                                                  |  |                 |        |                               |  |                          |        |       |  |   |       |  |  |   |         | 
|----------------------------------------------------------------- |  | --------------- | ------ | ----------------------------- |  | ------------------------ | ------ | ----- |  | - | ----- |  |  | - | ------- | 
|                                                                  |  | IMPACT Services |        | Physician Practice Management |  | Cancer Research Services |        | Total
|                                                                  |  |                 |        |                               |  |                          |        |      
|For the year ended December 31, 1999:                             |  |                 |        |                               |  |                          |        |       |  |   |       |  |  |   |         | 
|Net revenue                                                       |  | $               | 65,709 |                               |  | $                        | 68,413 |       |  | $ | 1,445 |  |  | $ | 135,567 | 
|Total operating expenses                                          |  |                 | 59,120 |                               |  |                          | 59,280 |       |  |   | 1,438 |  |  |   | 119,838 | 
|Impairment of management service
agreements and associated assets |  |                 |       |                               |  |                          | 1,921  |       |  |   |      |  |  |   | 1,921   | 
|                                                                  |  |                 |        |                               |  |                          |        |       |  |   |       |  |  |   |         | 
|Segment contribution                                              |  |                 | 6,589  |                               |  |                          | 7,212  |       |  |   | 7     |  |  |   | 13,808  | 
|Depreciation and amortization                                     |  |                 | 536    |                               |  |                          | 3,777  |       |  |   |      |  |  |   | 4,313   | 
|                                                                  |  |                 |        |                               |  |                          |        |       |  |   |       |  |  |   |         | 
|Segment profit                                                    |  | $               | 6,053  |                               |  | $                        | 3,435  |       |  | $ | 7     |  |  | $ | 9,495   | 
|                                                                  |  |                 |        |                               |  |                          |        |       |  |   |       |  |  |   |         | 
|Segment assets                                                    |  | $               | 18,448 |                               |  | $                        | 87,483 |       |  | $ | 1,669 |  |  | $ | 107,600 | 
|                                                                  |  |                 |        |                               |  |                          |        |       |  |   |       |  |  |   |         | 
|Capital expenditures                                              |  | $               | 112    |                               |  | $                        | 741    |       |  | $ |      |  |  | $ | 853     | 
|                                                                  |  |                 |        |                               |  |                          |        |       |  |   |       |  |  |   |         | 

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|                                 |                                         |      |         |       |  |             |         |       |  |   |        |       | 
|-------------------------------- | --------------------------------------- | ---- | ------- | ----- |  | ----------- | ------- | ----- |  | - | ------ | ----- | 
|                                 |                                         |      |         |       |  | Years Ended |         |       |  |  
|                                 |                                         |     
|Reconciliation of profit (loss): |                                         | 2001 |         | 2000  |  | 1999       
|                                 |                                         |      |         |       |  |             |        
|Segment profit (loss)            |                                         | $    | (43,866 | )     |  | $           | (11,036 | )     |  | $ | 9,495  |      
|Unallocated amounts:             |                                         |      |         |       |  |             |         |       |  |   |        |      
|                                 | Corporate general and administrative    |      |         | 7,332 |  |             |         | 6,754 |  |   |        | 7,755 | 
|                                 | Corporate depreciation and amortization |      |         | 339   |  |             |         | 230   |  |   |        | 195   | 
|                                 | Corporate interest expense              |      |         | 2,410 |  |             |         | 3,692 |  |   |        | 3,074 | 
|                                 |                                         |      |         |       |  |             |         |       |  |   |        |      
|Loss before income taxes         |                                         | $    | (53,947 | )     |  | $           | (21,712 | )     |  | $ | (1,529 | )    
|                                 |                                         |      |         |       |  |             |         |       |  |   |        |      

|                                       |                                   |             |        |       |  |      |        |       |  |   |         |       | 
|-------------------------------------- | --------------------------------- | ----------- | ------ | ----- |  | ---- | ------ | ----- |  | - | ------- | ----- | 
|                                       |                                   | Years Ended
|                                       |                                   |            
|Reconciliation of consolidated assets: |                                   | 2001        |        | 2000  |  | 1999
|                                       |                                   |             |        |       |  |      |       
|Segment assets                         |                                   | $           | 19,829 |       |  | $    | 81,378 |       |  | $ | 107,600 |      
|Unallocated amounts:                   |                                   |             |        |       |  |      |        |       |  |   |         |      
|                                       | Cash and cash equivalents         |             |        | 7,914 |  |      |        | 7,327 |  |   |         | 7,195 | 
|                                       | Prepaid expenses and other assets |             |        | 942   |  |      |        | 2,940 |  |   |         | 3,966 | 
|                                       | Property and equipment, net       |             |        | 217   |  |      |        | 768   |  |   |         | 884   | 
|                                       |                                   |             |        |       |  |      |        |       |  |   |         |      
|Consolidated assets                    |                                   | $           | 28,902 |       |  | $    | 92,413 |       |  | $ | 119,645 |      
|                                       |                                   |             |        |       |  |      |        |       |  |   |         |      

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##### Table of Contents



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
(Dollar amounts in thousands)

|                                                      |  |                     |       |                   |  |                     |       |              |  |                |  |  |  |   |       |  |  |   |       | 
|----------------------------------------------------- |  | ------------------- | ----- | ----------------- |  | ------------------- | ----- | ------------ |  | -------------- |  |  |  | - | ----- |  |  | - | ----- | 
|Col A                                                 |  | Col B               |       | Col C  Additions |  | Col D               |       | Col E       
|                                                      |  |                     |       |                   |  |                     |       |             
|                                                      |  | Balance at          |       | Charged to Costs  |  | Charged to Other    |       | Deductions  |  | Balance at End
|Classification                                        |  | Beginning of Period |       | and Expenses      |  | Accounts  Describe |       | Describe (1) |  | of Period     
|                                                      |  |                     |       |                   |  |                     |       |              |  |               
|Year ended December 31, 2001                          |  |                     |       |                   |  |                     |       |              |  |                |  |  |  |   |       |  |  |   |       | 
|Deducted from asset accounts:                         |  |                     |       |                   |  |                     |       |              |  |                |  |  |  |   |       |  |  |   |       | 
|Allowance for doubtful
accounts  accounts receivable |  | $                   | 3,489 |                   |  | $                   | 406   |              |  |                |  |  |  | $ | 741   |  |  | $ | 2,342 | 
|                                                      |  |                     |       |                   |  |                     |       |              |  |                |  |  |  |   |       |  |  |   |       | 
|Year ended December 31, 2000                          |  |                     |       |                   |  |                     |       |              |  |                |  |  |  |   |       |  |  |   |       | 
|Deducted from asset accounts:                         |  |                     |       |                   |  |                     |       |              |  |                |  |  |  |   |       |  |  |   |       | 
|Allowance for doubtful
accounts  accounts receivable |  | $                   | 2,632 |                   |  | $                   | 1,309 |              |  |                |  |  |  | $ | 452   |  |  | $ | 3,489 | 
|                                                      |  |                     |       |                   |  |                     |       |              |  |                |  |  |  |   |       |  |  |   |       | 
|Year ended December 31, 1999:                         |  |                     |       |                   |  |                     |       |              |  |                |  |  |  |   |       |  |  |   |       | 
|Deducted from asset accounts:                         |  |                     |       |                   |  |                     |       |              |  |                |  |  |  |   |       |  |  |   |       | 
|Allowance for doubtful
accounts  accounts receivable |  | $                   | 2,772 |                   |  | $                   | 2,625 |              |  |                |  |  |  | $ | 2,765 |  |  | $ | 2,632 | 
|                                                      |  |                     |       |                   |  |                     |       |              |  |                |  |  |  |   |       |  |  |   |       | 



|(1) |  | Accounts written off, net of recoveries
|--- |  | ---------------------------------------

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