##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

|           |  |                                                                                         
|---------- |  | ----------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                         
|(X)        |  | Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 
|          
|           |  | For the quarterly period ended March 31, 2002 or                                        
|          
|(  )       |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|          
|           |  | For the transition period from

to                                                      
|          
|           |  | Commission file number 0-15416                                                          

RESPONSE ONCOLOGY, INC.

---

(Exact name of registrant as
specified in its charter)


|                                                               |  |                                       
|-------------------------------------------------------------- |  | --------------------------------------
|Tennessee                                                      |  | 62-1212264                            
|                                                               |  |                                       
|(State or Other Jurisdiction
of Incorporation or Organization) |  | (I. R. S. Employer
Identification No.)

|                                         |  |           
|---------------------------------------- |  | ----------
|1805 Moriah Woods Blvd., Memphis, TN     |  | 38117     
|                                         |  |           
|(Address of principal executive offices) |  | (Zip Code)

(901) 761-7000

---

(Registrants
telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

Yes [  ]         No [X]

Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date.

Common Stock, $.01 Par Value, 12,178,701 shares as of June 17, 2002.





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TABLE OF CONTENTS



|                                                                                              |                                                   |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                                                               
|ITEM 1: FINANCIAL STATEMENTS                                                                 
|                                                                                              | CONSOLIDATED BALANCE SHEETS                      
|                                                                                              | CONSOLIDATED BALANCE SHEETS                      
|                                                                                              | CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
|                                                                                              | CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|                                                                                              | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS       
|ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II  OTHER INFORMATION                                                                  
|ITEM 1. LEGAL PROCEEDINGS                                                                    
|ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|ITEM 5. OTHER INFORMATION                                                                    
|ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                                                                   
|SECOND AMENDED JOINT PLAN                                                                    
|ORDER CONFIRMING PLAN                                                                        



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##### Table of Contents



INDEX

|           |  |                                                                                       |  |  |    |      |    | 
|---------- |  | ------------------------------------------------------------------------------------- |  |  | -- | ---- | -- | 
|           |  |                                                                                       |  |  |    | Page
|PART I     |  | FINANCIAL INFORMATION                                                                 |  |  |    |     
|          
|Item 1     |  | Financial Statements                                                                  |  |  |    |     
|          
|           |  | Consolidated
Balance Sheets, March 31, 2002 and December 31, 2001                     |  |  | 3  |     
|          
|           |  | Consolidated
Statements of Operations for the Three Months Ended                      |  |  |    |     
|           |  | March 31, 2002 and March 31, 2001                                                     |  |  | 5  |     
|          
|           |  | Consolidated
Statements of Cash Flows for the Three Months Ended                      |  |  |    |     
|           |  | March 31, 2002 and March 31, 2001                                                     |  |  | 6  |     
|          
|           |  | Notes to Consolidated Financial Statements                                            |  |  | 7  |     
|          
|Item 2     |  | Management's
Discussion and Analysis of Financial Condition and Results of Operations |  |  | 13 |     
|          
|Item 3     |  | Quantitative and
Qualitative Disclosures About Market Risk                            |  |  | 23 |     
|          
|PART II    |  | OTHER INFORMATION                                                                     |  |  |    |     
|          
|Item 1     |  | Legal Proceedings                                                                     |  |  | 24 |     
|          
|Item 2     |  | Changes in Securities and Use of Proceeds                                             |  |  | 24 |     
|          
|Item 3     |  | Defaults Upon Senior Securities                                                       |  |  | 24 |     
|          
|Item 4     |  | Submission of Matters to a Vote of Security Holders                                   |  |  | 24 |     
|          
|Item 5     |  | Other Information                                                                     |  |  | 24 |     
|          
|Item 6     |  | Exhibits and Reports on Form 8-K                                                      |  |  | 25 |     
|          
|Signatures |  |                                                                                       |  |  |    |      | 26 | 

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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)


|                            |                                                                                |                      |     |                |        |                   |     |       |        | 
|--------------------------- | ------------------------------------------------------------------------------ | -------------------- | --- | -------------- | ------ | ----------------- | --- | ----- | ------ | 
|                            |                                                                                |                      |     | March 31, 2002 |        | December 31, 2001
|                            |                                                                                |                      |     | (Unaudited)    |        | (Note 2)         
|                            |                                                                                |                      |     |                |        |                  
|ASSETS                      |                                                                                |                      |     |                |        |                   |     |      
|CURRENT ASSETS              |                                                                                |                      |     |                |        |                   |     |      
|                            | Cash and cash equivalents                                                      |                      | $   | 9,008          |        |                   | $   | 7,914 |       
|                            | Accounts receivable, less allowance for doubtful accounts
of $1,524 and $2,342 |                      |     | 3,455          |        |                   |     | 5,915 |       
|                            | Pharmaceuticals and supplies                                                   |                      |     | 2,496          |        |                   |     | 3,193 |       
|                            | Prepaid expenses and other current assets                                      |                      |     | 2,504          |        |                   |     | 2,472 |       
|                            | Due from affiliated physician groups                                           |                      |     | 8,353          |        |                   |     | 8,661 |       
|                            |                                                                                |                      |     |                |        |                   |     |      
|                            |                                                                                | TOTAL CURRENT ASSETS |     |                | 25,816 |                   |     |       | 28,155 | 
|                            |                                                                                |                      |     |                |        |                   |     |      
|Property and equipment, net |                                                                                |                      | 260 |                |        |                   | 614 |      
|Other assets                |                                                                                |                      | 98  |                |        |                   | 133 |      
|                            |                                                                                |                      |     |                |        |                   |     |      
|                            |                                                                                | TOTAL ASSETS         |     | $              | 26,174 |                   |     | $     | 28,902 | 
|                            |                                                                                |                      |     |                |        |                   |     |      

Continued:

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RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)





CONSOLIDATED BALANCE SHEETS


(Dollar amounts in thousands)


Continued:

|                                        |                                                                                                                                                                             |                            |                                             |                                         |   |                |         |                   |   |        |        | 
|--------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------- | --------------------------------------- | - | -------------- | ------- | ----------------- | - | ------ | ------ | 
|                                        |                                                                                                                                                                             |                            |                                             |                                         |   | March 31, 2002 |         | December 31, 2001
|                                        |                                                                                                                                                                             |                            |                                             |                                         |   | (Unaudited)    |         | (Note 2)         
|                                        |                                                                                                                                                                             |                            |                                             |                                         |   |                |         |                  
|LIABILITIES AND STOCKHOLDERS DEFICIT   |                                                                                                                                                                             |                            |                                             |                                         |   |                |         |                  
|CURRENT LIABILITIES                     |                                                                                                                                                                             |                            |                                             |                                         |   |                |         |                  
|                                        | Accounts payable                                                                                                                                                            |                            | $                                           | 456                                     |   |                | $       | 276               |  
|                                        | Accrued expenses and other liabilities                                                                                                                                      |                            |                                             | 1,478                                   |   |                |         | 2,035             |  
|                                        |                                                                                                                                                                             |                            |                                             |                                         |   |                |         |                  
|                                        |                                                                                                                                                                             |                            | TOTAL CURRENT LIABILITIES                   |                                         |   | 1,934          |         |                   |   | 2,311  |       
|NON-CURRENT LIABILITIES                 |                                                                                                                                                                             |                            |                                             |                                         |   |                |         |                  
|                                        | Minority interest                                                                                                                                                           |                            |                                             | 433                                     |   |                |         | 447               |  
|                                        |                                                                                                                                                                             |                            |                                             |                                         |   |                |         |                  
|                                        |                                                                                                                                                                             |                            | TOTAL NON-CURRENT LIABILITIES               |                                         |   | 433            |         |                   |   | 447    |       
|LIABILITIES SUBJECT TO SETTLEMENT UNDER |                                                                                                                                                                             |                            |                                             |                                         |   |                |         |                  
|                                        |                                                                                                                                                                             | REORGANIZATION PROCEEDINGS |                                             |                                         |   |                |         |                   |   |       
|                                        | Accounts payable                                                                                                                                                            |                            |                                             | 15,654                                  |   |                |         | 15,654            |  
|                                        | Accrued expenses and other liabilities                                                                                                                                      |                            |                                             | 1,895                                   |   |                |         | 1,955             |  
|                                        | Secured notes payable                                                                                                                                                       |                            |                                             | 25,042                                  |   |                |         | 26,404            |  
|                                        | Subordinated notes payable                                                                                                                                                  |                            |                                             | 50                                      |   |                |         | 50                |  
|                                        | Capital lease obligations                                                                                                                                                   |                            |                                             | 85                                      |   |                |         | 85                |  
|                                        |                                                                                                                                                                             |                            |                                             |                                         |   |                |         |                  
|                                        |                                                                                                                                                                             |                            |                                             | TOTAL LIABILITIES SUBJECT TO SETTLEMENT |   |                |         |                   |   |        |        | 
|                                        |                                                                                                                                                                             |                            |                                             | UNDER REORGANIZATION PROCEEDINGS        |   |                | 42,726  |                   |   |        | 44,148 | 
|STOCKHOLDERS 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 shares                                                                        |                            |                                             | 123                                     |   |                |         | 123               |  
|                                        | Paid-in capital                                                                                                                                                             |                            |                                             | 102,011                                 |   |                |         | 102,011           |  
|                                        | Accumulated deficit                                                                                                                                                         |                            |                                             | (121,070                                | ) |                |         | (120,155          | )
|                                        |                                                                                                                                                                             |                            |                                             |                                         |   |                |         |                  
|TOTAL STOCKHOLDERS DEFICIT             |                                                                                                                                                                             |                            | (18,919                                     | )                                       |   |                | (18,004 | )                
|                                        |                                                                                                                                                                             |                            |                                             |                                         |   |                |         |                  
|                                        |                                                                                                                                                                             |                            | TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT |                                         | $ | 26,174         |         |                   | $ | 28,902 |       
|                                        |                                                                                                                                                                             |                            |                                             |                                         |   |                |         |                  

See accompanying notes to consolidated financial statements.

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##### Table of Contents



RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)





CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


(Dollar amounts in thousands except for share data)


|                                               |                          |                                               |         |      |        |                    |         |           |        |            |   | 
|---------------------------------------------- | ------------------------ | --------------------------------------------- | ------- | ---- | ------ | ------------------ | ------- | --------- | ------ | ---------- | - | 
|                                               |                          |                                               |         |      |        | Three Months Ended
|                                               |                          |                                               |         |      |        |                   
|                                               |                          |                                               |         |      |        | March 31,          |         | March 31,
|                                               |                          |                                               |         |      |        | 2002               |         | 2001     
|                                               |                          |                                               |         |      |        |                    |         |          
|NET REVENUE                                    |                          | $                                             | 22,790  |      |        | $                  | 31,552  |          
|COSTS AND EXPENSES                             |                          |                                               |         |      |        |                    |         |          
|                                               |                          | Salaries and benefits                         |         |      | 2,620  |                    |         |           | 4,684  |           
|                                               |                          | Pharmaceuticals and supplies                  |         |      | 18,222 |                    |         |           | 22,852 |           
|                                               |                          | Other operating costs                         |         |      | 570    |                    |         |           | 1,787  |           
|                                               |                          | General and administrative                    |         |      | 1,223  |                    |         |           | 1,838  |           
|                                               |                          | Depreciation and amortization                 |         |      | 127    |                    |         |           | 986    |           
|                                               |                          | Interest                                      |         |      | 323    |                    |         |           | 990    |           
|                                               |                          | Provision for (recovery of) doubtful accounts |         |      | (92    | )                  |         |           | 232    |           
|                                               |                          |                                               |         |      |        |                    |         |          
|                                               |                          |                                               | 22,993  |      |        |                    | 33,368  |          
|REORGANIZATION COSTS                           |                          |                                               | 727     |      |        |                    |        |          
|                                              
|LOSS BEFORE INCOME TAXES AND MINORITY INTEREST |                          |                                               | (930    | )    |        |                    | (1,817  | )        
|                                               |                          | Minority owners share of net earnings        |         |      | (15    | )                  |         |           | 4      |           
|                                               |                          |                                               |         |      |        |                    |         |          
|                                               | LOSS BEFORE INCOME TAXES |                                               |         | (915 | )      |                    |         | (1,821    | )     
|                                               |                          | Income tax benefit                            |         |      |       |                    |         |           | (601   | )         
|                                               |                          |                                               |         |      |        |                    |         |          
|NET LOSS                                       |                          |                                               | ($915   | )    |        |                    | ($1,220 | )        
|                                               |                          |                                               |         |      |        |                    |         |          
|LOSS PER COMMON SHARE:                         |                          |                                               |         |      |        |                    |         |          
|                                               |                          |                                               | Basic   |      |        | ($0.07             | )       |           |        | ($0.10     | )
|                                               |                          |                                               |         |      |        |                    |         |          
|                                               |                          |                                               | Diluted |      |        | ($0.07             | )       |           |        | ($0.10     | )
|                                               |                          |                                               |         |      |        |                    |         |          
|Weighted average number of common shares:      |                          |                                               |         |      |        |                    |         |          
|                                               |                          |                                               | Basic   |      |        | 12,279,555         |         |           |        | 12,290,764 |  
|                                               |                          |                                               |         |      |        |                    |         |          
|                                               |                          |                                               | Diluted |      |        | 12,279,555         |         |           |        | 12,290,764 |  
|                                               |                          |                                               |         |      |        |                    |         |          

See accompanying notes to consolidated financial statements.

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RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)





CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


(Dollar amounts in thousands)


|                                                                                |                             |                                                  |                                                                         |       |                    |       |           |       |        |        |   |  |  |  | 
|------------------------------------------------------------------------------- | --------------------------- | ------------------------------------------------ | ----------------------------------------------------------------------- | ----- | ------------------ | ----- | --------- | ----- | ------ | ------ | - |  |  |  | 
|                                                                                |                             |                                                  |                                                                         |       | Three Months Ended
|                                                                                |                             |                                                  |                                                                         |       |                   
|                                                                                |                             |                                                  |                                                                         |       | March 31,          |       | March 31, |       |        |        |  
|                                                                                |                             |                                                  |                                                                         |       | 2002               |       | 2001      |       |        |        |  
|                                                                                |                             |                                                  |                                                                         |       |                    |       |           |       |        |        |  
|OPERATING ACTIVITIES                                                            |                             |                                                  |                                                                         |       |                    |       |           |      
|Net loss                                                                        |                             |                                                  | ($915                                                                   | )     |                    |       | ($1,220   | )    
|Adjustments to reconcile net loss to net cash provided by operating
activities: |                             |                                                  |                                                                         |       |                    |       |           |      
|                                                                                |                             | Depreciation and amortization                    |                                                                         |       | 127                |       |           |       | 986    |       
|                                                                                |                             | Provision for (recovery of) doubtful accounts    |                                                                         |       | (92                | )     |           |       | 232    |       
|                                                                                |                             | (Gain)/loss on sale of property and equipment    |                                                                         |       | 208                |       |           |       | (10    | )     
|                                                                                |                             | Minority owners share of net earnings           |                                                                         |       | (15                | )     |           |       | 4      |       
|                                                                                |                             | Changes in operating assets and liabilities:     |                                                                         |       |                    |       |           |       |        |       
|                                                                                |                             |                                                  | Accounts receivable                                                     |       |                    | 2,551 |           |       |        | (1,585 | )
|                                                                                |                             |                                                  | Supplies and pharmaceuticals, prepaid expenses and other current
assets |       |                    | 665   |           |       |        | 198    |  
|                                                                                |                             |                                                  | Other assets                                                            |       |                    | 35    |           |       |        | 77     |  
|                                                                                |                             |                                                  | Due from affiliated physician groups                                    |       |                    | 308   |           |       |        | 4,456  |  
|                                                                                |                             |                                                  | Accounts payable and accrued expenses                                   |       |                    | 14    |           |       |        | 560    |  
|                                                                                |                             |                                                  |                                                                         |       |                    |       |           |      
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                       |                             |                                                  |                                                                         |       |                    |       |           |      
|                                                                                | BEFORE REORGANIZATION ITEMS |                                                  |                                                                         | 2,886 |                    |       |           | 3,698 |       
|OPERATING CASH FLOW USED IN REORGANIZATION ITEMS                                |                             |                                                  |                                                                         |       |                    |       |           |      
|                                                                                |                             | Bankruptcy related professional fees paid        |                                                                         |       | (449               | )     |           |       |       |       
|                                                                                |                             |                                                  |                                                                         |       |                    |       |           |      
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                       |                             |                                                  | 2,437                                                                   |       |                    |       | 3,698     |      
|INVESTING ACTIVITIES                                                            |                             |                                                  |                                                                         |       |                    |       |           |      
|                                                                                |                             | Proceeds from sale of property and equipment     |                                                                         |       | 32                 |       |           |       | 22     |       
|                                                                                |                             | Purchase of equipment                            |                                                                         |       | (13                | )     |           |       | (42    | )     
|                                                                                |                             |                                                  |                                                                         |       |                    |       |           |      
|NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                             |                             |                                                  | 19                                                                      |       |                    |       | (20       | )    
|FINANCING ACTIVITIES                                                            |                             |                                                  |                                                                         |       |                    |       |           |      
|                                                                                |                             | Distributions to joint venture partners          |                                                                         |       |                   |       |           |       | (793   | )     
|                                                                                |                             | Principal payments on notes payable              |                                                                         |       | (1,362             | )     |           |       | (4,554 | )     
|                                                                                |                             | Principal payments on capital lease obligations  |                                                                         |       |                   |       |           |       | (68    | )     
|                                                                                |                             |                                                  |                                                                         |       |                    |       |           |      
|NET CASH USED IN FINANCING ACTIVITIES                                           |                             |                                                  | (1,362                                                                  | )     |                    |       | (5,415    | )    
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                |                             |                                                  | 1,094                                                                   |       |                    |       | (1,737    | )    
|                                                                                |                             | Cash and cash equivalents at beginning of period |                                                                         |       | 7,914              |       |           |       | 7,327  |       
|                                                                                |                             |                                                  |                                                                         |       |                    |       |           |      
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                      |                             | $                                                | 9,008                                                                   |       |                    | $     | 5,590     |      
|                                                                                |                             |                                                  |                                                                         |       |                    |       |           |      

See accompanying notes to consolidated financial statements.

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RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2002


NOTE 1  ORGANIZATION AND DESCRIPTION OF BUSINESS/BANKRUPTCY PROCEEDINGS

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 June 17, 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.

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. As of March 31, 2002, the Company was 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 as of March 31, 2002, such a committee had 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 Joint 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 and June 14, 2002 (collectively the Plan),
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 confirmed the Plan on June 14, 2002. Upon completion of the
liquidation of all the Companys assets and distribution of those proceeds in
accordance with the Plan, 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
confirmed by the Court and proceeds will be distributed pursuant to the Plan
during the third quarter of 2002.

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 three months ended March 31, 2002.

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 was
adjusted to the 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. The Company will adopt
Fresh-Start Reporting pursuant to SOP 90-7 on the effective date of the Plan,
which will be June 25, 2002 unless confirmation of the Plan is appealed or
otherwise stayed. Certain accounting and business practices have been adopted
that are applicable to companies that are operating under Chapter 11.

NOTE 2  BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required for complete financial statements by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended March 31,
2002 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2002. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Companys annual report on Form 10-K for the year ended December 31, 2001.

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
practice. Revenue recorded for these contracts represents the cost of
pharmaceuticals plus a fixed or percentage fee.

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

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The following table is a summary of net revenue by source for the respective
three-month periods ended March 31, 2002 and 2001.

|                                   |  |                    |        |      |  |   |        | 
|---------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|                                   |  | Three Months Ended
|                                   |  | March 31,         
|                                   |  |                   
|                                   |  | 2002               |        | 2001
|                                   |  |                    |        |     
|                                   |  | (In thousands)    
|Net patient services revenue       |  | $                  | 194    |      |  | $ | 2,189  | 
|Practice management service fees   |  |                    | 14,178 |      |  |   | 18,049 | 
|Pharmaceutical sales to physicians |  |                    | 8,418  |      |  |   | 11,196 | 
|Clinical research revenue          |  |                    |       |      |  |   | 118    | 
|                                   |  |                    |        |      |  |   |        | 
|                                   |  | $                  | 22,790 |      |  | $ | 31,552 | 
|                                   |  |                    |        |      |  |   |        | 

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

Net Loss Per Common Share:A reconciliation of the basic loss per share and
the diluted loss per share computation is presented below for the three month
periods ended March 31, 2002 and 2001.

|                                                                                     |  |                              |            |      |  |  |            |    
|------------------------------------------------------------------------------------ |  | ---------------------------- | ---------- | ---- |  |  | ---------- | ---
|                                                                                     |  | Three Months Ended          
|                                                                                     |  | March 31,                   
|                                                                                     |  |                             
|                                                                                     |  | 2002                         |            | 2001
|                                                                                     |  |                              |            |     
|                                                                                     |  | (Dollar amounts in thousands
|                                                                                     |  | except per share data)      
|Weighted average shares outstanding                                                  |  |                              | 12,279,555 |      |  |  | 12,290,764 |    
|Net effect of dilutive stock options and
warrants based on the treasury stock
method |  |                              |           | (A)  |  |  |           | (A)
|                                                                                     |  |                              |            |      |  |  |            |    
|Weighted average shares and common stock
equivalents                                 |  |                              | 12,279,555 |      |  |  | 12,290,764 |    
|                                                                                     |  |                              |            |      |  |  |            |    
|Net loss                                                                             |  |                              | ($915      | )    |  |  | ($1,220    | )  
|                                                                                     |  |                              |            |      |  |  |            |    
|Diluted per share amount                                                             |  |                              | ($0.07     | )    |  |  | ($0.10     | )  
|                                                                                     |  |                              |            |      |  |  |            |    

(A) Stock options and warrants are excluded from the weighted average number of
common shares due to their anti-dilutive effect.

NOTE 3  NOTES PAYABLE

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 originally bore 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 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,

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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. 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 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.

Pursuant to the Plan, the Lenders claims under the Credit Facility have been
liquidated and no future revisions to the Credit Facility will occur. 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 sheets as of March 31, 2002 and December 31,
2001. At March 31, 2002, $25.0 million aggregate principal was outstanding
under the Credit Facility with an interest rate of approximately 5.2%.

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

The Company entered into a LIBOR-based interest rate 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 under which amounts
hedged accrued interest at the difference between 7.24% and the ninety-day
LIBOR rate and were settled quarterly (Swap Agreement). 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
physician practice management affiliation was $50,000 at March 31, 2002.

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NOTE 4  INCOME TAXES

Upon the consummation of the physician practice management affiliations, the
Company recognized deferred tax assets and liabilities for the future tax
consequences attributable to differences between the financial statement
carrying amounts of purchased assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.

NOTE 5  COMMITMENTS AND CONTINGENCIES

With respect to professional and general liability risks, the Company currently
maintains an insurance policy that provides coverage during the policy period
ending August 1, 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
and as of March 31, 2002 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 6  DUE FROM AFFILIATED PHYSICIANS

Due from affiliated physicians consists of management fees earned and due
pursuant to the management service agreements (Service Agreements). In
addition, the Company funds certain working capital needs of the affiliated
physicians from time to time.

NOTE 7  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.

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 segment performance based on profit or loss
from operations before income taxes and unallocated amounts.

|                                           |  |                 |       |            |  |                    |        |                 |  |   |     |  |  |   |        | 
|------------------------------------------ |  | --------------- | ----- | ---------- |  | ------------------ | ------ | --------------- |  | - | --- |  |  | - | ------ | 
|                                           |  |                 |       |            |  | Physician Practice |        | Cancer Research |  |   |     | 
|                                           |  | IMPACT Services |       | Management |  | Services           |        | Total          
|                                           |  |                 |       |            |  |                    |        |                
|                                           |  | (In thousands) 
|For the three months ended March 31, 2002: |  |                 |       |            |  |                    |        |                 |  |   |     |  |  |   |        | 
|Net revenue                                |  | $               | 8,612 |            |  | $                  | 14,178 |                 |  |   |    |  |  | $ | 22,790 | 
|Total operating expenses                   |  |                 | 8,486 |            |  |                    | 12,647 |                 |  |   |    |  |  |   | 21,133 | 
|                                           |  |                 |       |            |  |                    |        |                 |  |   |     |  |  |   |        | 
|Segment contribution                       |  |                 | 126   |            |  |                    | 1,531  |                 |  |   |    |  |  |   | 1,657  | 
|Depreciation and amortization              |  |                 | 19    |            |  |                    |       |                 |  |   |    |  |  |   | 19     | 
|                                           |  |                 |       |            |  |                    |        |                 |  |   |     |  |  |   |        | 
|Segment profit                             |  | $               | 107   |            |  | $                  | 1,531  |                 |  |   |    |  |  | $ | 1,638  | 
|                                           |  |                 |       |            |  |                    |        |                 |  |   |     |  |  |   |        | 
|Segment assets                             |  | $               | 5,589 |            |  | $                  | 10,461 |                 |  | $ | 102 |  |  | $ | 16,152 | 
|                                           |  |                 |       |            |  |                    |        |                 |  |   |     |  |  |   |        | 
|Capital expenditures                       |  | $               | 6     |            |  |                    |       |                 |  |   |    |  |  | $ | 6      | 
|                                           |  |                 |       |            |  |                    |        |                 |  |   |     |  |  |   |        | 

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|                                           |  |                 |        |            |  |                    |        |                 |  |   |     |  |  |   |        | 
|------------------------------------------ |  | --------------- | ------ | ---------- |  | ------------------ | ------ | --------------- |  | - | --- |  |  | - | ------ | 
|                                           |  |                 |        |            |  | Physician Practice |        | Cancer Research |  |   |     | 
|                                           |  | IMPACT Services |        | Management |  | Services           |        | Total          
|                                           |  |                 |        |            |  |                    |        |                
|For the three months ended March 31, 2001: |  |                 |        |            |  |                    |        |                 |  |   |     |  |  |   |        | 
|Net revenue                                |  | $               | 13,385 |            |  | $                  | 18,049 |                 |  | $ | 118 |  |  | $ | 31,552 | 
|Total operating expenses                   |  |                 | 13,485 |            |  |                    | 16,329 |                 |  |   | 87  |  |  |   | 29,901 | 
|                                           |  |                 |        |            |  |                    |        |                 |  |   |     |  |  |   |        | 
|Segment contribution (deficit)             |  |                 | (100   | )          |  |                    | 1,720  |                 |  |   | 31  |  |  |   | 1,651  | 
|Depreciation and amortization              |  |                 | 99     |            |  |                    | 822    |                 |  |   |    |  |  |   | 921    | 
|                                           |  |                 |        |            |  |                    |        |                 |  |   |     |  |  |   |        | 
|Segment profit (loss)                      |  |                 | ($199  | )          |  | $                  | 898    |                 |  | $ | 31  |  |  | $ | 730    | 
|                                           |  |                 |        |            |  |                    |        |                 |  |   |     |  |  |   |        | 
|Segment assets                             |  | $               | 14,129 |            |  | $                  | 62,080 |                 |  | $ | 809 |  |  | $ | 77,018 | 
|                                           |  |                 |        |            |  |                    |        |                 |  |   |     |  |  |   |        | 
|Capital expenditures                       |  |                 |       |            |  | $                  | 36     |                 |  |   |    |  |  | $ | 36     | 
|                                           |  |                 |        |            |  |                    |        |                 |  |   |     |  |  |   |        | 

Reconciliation of profit:

|                         |                                                |   |                    |       |      |   |         |       | 
|------------------------ | ---------------------------------------------- | - | ------------------ | ----- | ---- | - | ------- | ----- | 
|                         |                                                |   | Three Months Ended
|                         |                                                |   | March 31,         
|                         |                                                |   |                   
|                         |                                                |   | 2002               |       | 2001
|                         |                                                |   |                    |       |     
|Segment profit           |                                                | $ | 1,638              |       |      | $ | 730     |      
|Unallocated amounts:     |                                                |   |                    |       |      |   |         |      
|                         | Corporate salaries, general and administrative |   |                    | 2,122 |      |   |         | 1,485 | 
|                         | Corporate depreciation and amortization        |   |                    | 108   |      |   |         | 65    | 
|                         | Corporate interest expense                     |   |                    | 323   |      |   |         | 1,001 | 
|                         |                                                |   |                    |       |      |   |         |      
|Loss before income taxes |                                                |   | ($915              | )     |      |   | ($1,821 | )    
|                         |                                                |   |                    |       |      |   |         |      

Reconciliation of consolidated assets:

|                     |                                   |   |                 |       |      |   |        |       | 
|-------------------- | --------------------------------- | - | --------------- | ----- | ---- | - | ------ | ----- | 
|                     |                                   |   | As of March 31,
|                     |                                   |   |                
|                     |                                   |   | 2002            |       | 2001
|                     |                                   |   |                 |       |     
|Segment assets       |                                   | $ | 16,152          |       |      | $ | 77,018 |      
|Unallocated amounts: |                                   |   |                 |       |      |   |        |      
|                     | Cash and cash equivalents         |   |                 | 9,008 |      |   |        | 5,590 | 
|                     | Prepaid expenses and other assets |   |                 | 919   |      |   |        | 3,152 | 
|                     | Property and equipment, net       |   |                 | 95    |      |   |        | 718   | 
|                     |                                   |   |                 |       |      |   |        |      
|Consolidated assets  |                                   | $ | 26,174          |       |      | $ | 86,478 |      
|                     |                                   |   |                 |       |      |   |        |      

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

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 the timing of completion of the liquidation of
the Company (as described 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
confirmed by the Court. 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.

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 June 17, 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. As of March 31, 2002, the Company was 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 Joint 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, and June 14, 2002 (collectively the Plan), 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 confirmed the Plan on June 14, 2002. Upon completion of the
liquidation of all the Companys assets and distribution of those proceeds in
accordance with the Plan, 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 confirmed by the Court and proceeds will be distributed pursuant to the
Plan during the third quarter of 2002.

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 quarter ended March 31, 2002.

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 was
adjusted to the 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. The Company will adopt
Fresh-Start Reporting pursuant to SOP 90-7 on the effective date of the Plan,
which will be June 25, 2002 unless confirmation of the Plan is appealed or
otherwise stayed. Certain accounting and business practices have been adopted
that are applicable to companies that are operating under Chapter 11.

Generally, 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 clincial trials assets and
related infrastructure were sold in April 2002.

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

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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 4 IMPACT Centers in
the first quarter of 2002, 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 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 liquidation of all of its assets, the
Company is no longer pursuing this strategy.

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The 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.

During 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 were 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. 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
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.

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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 that was recorded in the
year ended December 31, 2001. 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. On March 15, 2001, the Companys common stock was
delisted from the Nasdaq Stock Market. Following the delisting, quotations for
the Companys common stock were available on the OTC Bulletin Board.

Results of Operations

Net revenue decreased 28% to $22.8 million for the quarter ended March 31,
2002, compared to $31.6 million for the quarter ended March 31, 2001. Practice
management service fees were $14.2 million for the first quarter of 2002
compared to $18.0 million for the same period in 2001 for a 21% decrease. This
decrease is primarily due to the termination and sale of related assets of two
Service Agreements effective February 1, 2001 and December 31, 2001,
respectively. This decrease was partially offset by a 2% increase in practice
management fees on the remaining practice groups. Pharmaceutical sales to
physicians decreased $2.8 million, or 25%, from $11.2 million for the first
three months of 2001 to $8.4 million in 2002. This decrease is primarily due
to the terminations of two pharmaceutical sales agreements with physician
practices effective April 1, 2001 and February 1, 2002, but was partially
offset by the addition of one pharmacy management contract effective January 1,
2002. Additionally, net patient service revenues from IMPACT services
decreased $2.0 million, or 91%, from $2.2 million in the first quarter of 2001
to $.2 million in the first quarter of 2002. This decrease in high dose chemotherapy revenues 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

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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.

Salaries and benefits costs decreased $2.1 million, or 45%, from $4.7 million
for the first quarter of 2001 to $2.6 million in 2002. The decrease is
primarily due to the termination of certain Service Agreements, the closing of
various IMPACT Centers and a significant reduction in corporate staffing.
Salaries and benefits expense as a percentage of net revenue was 11% and 15%
for the quarters ended March 31, 2002 and 2001, respectively.

Supplies and pharmaceuticals expense decreased $4.6 million, or 20%, from the
first quarter of 2001 to the first quarter of 2002. The decrease is primarily
related to the termination of a pharmacy management contract with two physician
practices effective April 1, 2001 and February 1, 2002, as well as the
termination and sale of two Service Agreements effective February 1, 2001 and
December 31, 2001. A decrease in patient volumes in the IMPACT Centers also
contributed to the decrease. Supplies and pharmaceuticals expense as a
percentage of net revenue was 80% and 72% for the quarters ended March 31, 2002
and 2001, respectively. The increase as a percentage of net revenue is
primarily due to general price increases in pharmaceuticals used in the
pharmaceutical sales and practice management divisions.

General and administrative expenses decreased $.6 million, or 33%, from $1.8
million in the first quarter of 2001 to $1.2 million in the first quarter of
2002. 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 bankruptcy filing.

Other operating expenses decreased $1.2 million, or 67%, from $1.8 million in
2001 to $.6 million in 2002. 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 is
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 first quarter of 2001.

For the three months ended March 31, 2002, all operating and general expenses
other than those related to pharmaceuticals and supplies were reduced by $3.9
million, or 47%, as compared with those for the three months ended March 31,
2001. These reductions reflect cost reduction and containment steps put in
place in the first quarter of 2000, the closure of 17 IMPACT Centers since the
first quarter of 2001, lower patient volumes, lower corporate overhead expenses
and the termination of Service Agreements in February and December 2001,
partially offset by increased expenses for professional services, principally
legal and consulting fees, related to the Companys restructuring efforts prior
to the bankruptcy filing.

Depreciation and amortization decreased $.9 million from $1.0 million for the
first quarter of 2001 to $.1 million for the first quarter of 2002. This
decrease is primarily due to the write-off of the Companys Service Agreements
in 2001, resulting in lower amortization in 2002.

Reorganization costs of $.7 million for the quarter ended March 31, 2002,
consist of expenses for professional services, principally legal and consulting
fees, that were incurred by the Company in 2002 as a result of the bankruptcy
filing.

EBITDA (earnings (loss) before interest, taxes, depreciation and amortization)
decreased $.6 million to ($.4) million for the quarter ended March 31, 2002 in
comparison to $.2 million for the quarter ended March 31, 2001. EBITDA from
the IMPACT services segment increased $.2 million for the quarter ended March
31, 2002 as compared to the quarter ended March 31, 2001. The increase is
primarily due to certain bad debt recoveries in the first quarter of 2002.
EBITDA from the physician practice management division decreased $.2 million
primarily due to increases in pharmaceutical and supply costs, increases in
contractual adjustments, and the termination and modification of certain
Service Agreements. Corporate general and administrative expenses,
principally reorganization costs, increased $.6 million in the first quarter
of 2002 as compared to the first quarter of 2001, thereby accounting for the
overall net decrease in EBITDA. 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

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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.

Liquidity and Capital Resources

At March 31, 2002, the Companys working capital totaled $23.9 million, with
current assets of $25.8 million and current liabilities of $1.9 million
(excluding liabilities subject to settlement under reorganization proceedings
of $42.7 million). Cash and cash equivalents represented $9.0 million of the
Companys current assets. Approximately $1.1 of the Companys cash and cash
equivalents as of March 31, 2002 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 $2.4 million in the first quarter of
2002 compared to cash provided by operating activities of $3.7 million for the
same period in 2001. This decrease is largely attributable to a reduction in
amounts due from affiliated physician groups in the first quarter of 2001
resulting from the sale proceeds and recovery of working capital associated
with the asset sale and concurrent termination of a Service Agreement in the
first quarter of 2001 and the payment of bankruptcy related professional fees.
In addition, this decrease was partially offset by an increase in cash
generated from accounts receivable due to the termination of certain pharmacy
management agreements and the closure of various IMPACT Centers.

Cash provided by investing activities was $19,000 for the quarter ended March
31, 2002. Cash used in investing activities was $20,000 for the quarter ended
March 31, 2001. The increase is primarily attributable to a reduction in
capital expenditures in the first quarter of 2002 as compared to the first
quarter of 2001.

Cash used in financing activities was $1.4 million for the first quarter of
2002 and $5.4 million for the same period in 2001. The decrease in cash used
in financing activities is primarily attributable to additional payments on
notes payable due to the remittances of the sale proceeds discussed above and
distributions to joint venture partners in the first quarter of 2001 as
compared to the first quarter of 2002.

Under the terms of the Companys Bankruptcy case, liabilities in the
approximate amount of $42.7 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 which provides a mechanism for the allowance of claims and distribution on
account of such claims. The precise treatment of such claims is 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 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 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 Plan, 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.

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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 March 31, 2002, approximately $1.1 million in ERP
funds is reflected in cash and cash and equivalents. The aggregate contingent
liability of the ERP, including certain employment agreements, was
approximately $1.7 million as of March 31, 2002. Approximately $1.1 million
was paid out to certain employees and officers from April 1, 2002, through May
31, 2002, and such amounts were not accrued in the consolidated financial
statements as of and for the quarter ended March 31, 2002 because the triggers
for payment of such obligations occurred subsequent to quarter-end.

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 originally bore 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 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.

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Pursuant to the Plan, the Lenders claims under the Credit Facility have been
liquidated and no future revisions to the Credit Facility will occur.
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 sheets as
of March 31, 2002 and December 31, 2001. At March 31, 2002, $25.0 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 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 Under which amounts
hedged accrued interest at the difference
between 7.24% and the ninety-day LIBOR rate and were settled quarterly (Swap
Agreement). 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 March 31, 2002.

The Company is committed to future minimum lease payments under operating
leases of $93,000 for administrative and operational facilities through June
30, 2002. As of June 30, 2002, the Company will cease operations at its
headquarters in Memphis, Tennessee.

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 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.

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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.

As of the date of adoption, the Company had no unamortized identifiable
intangible assets that were subject to the transitional provisions of
Statements 141 and 142. Amortization expense related to identifiable
intangible assets was $.6 million for the quarter ended March 31, 2001. There
was no amortization expense related to identifiable intangible assets for the
quarter ended March 31, 2002.

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.

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The Company has adopted Statement 144 for the quarter ended March 31, 2002.
Such adoption of Statement 144 for long-lived assets held for use did not 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 has 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. Notes 1 and 2 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. The Company will
adopt Fresh- Start Reporting pursuant to SOP 90-7 on the effective date of
the Plan, which will likely be June 25, 2002. Certain accounting and business
practices have been adopted that are applicable to companies that are operating
under Chapter 11.




ITEM 3. 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 traunches 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 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,
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 (Swap Agreement). 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 March 31, 2002, $25.0 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.

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PART II  OTHER INFORMATION




ITEM 1. 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, Note 1 of the Notes to
Consolidated Financial Statements, Part I Item 2, and Part II Item 5 of this
Form 10-Q. 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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable.




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.




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.




ITEM 5. OTHER INFORMATION

Bankruptcy or Receivership

As previously reported, 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 has operated its business as a
debtor-in-possession since the filing date.

A hearing on the confirmation of the Companys Second Amended Joint Plan
(the Plan) was held on June 14, 2002, and the Plan was confirmed by the Court
pursuant to an Order Confirming Plan (the Confirmation Order). A copy of the
Confirmation Order is attached hereto as Exhibit 99.1 and is incorporated
herein by reference. A copy of the Plan is attached hereto as Exhibit 2.1 and
is incorporated herein by reference. The Confirmation Order will become a
Final Order on June 25, 2002, unless an objection is filed (the Effective
Date). All capitalized terms not defined herein shall have the meanings as
set forth in the Plan.

The Plan constitutes a liquidating plan, whereby all of the Companys
assets have been or will be liquidated, and net proceeds will be distributed to
the Companys creditors. The Plan designates four classes of creditor claims
and one class of claims of shareholders. These classes take into account the
differing nature and priority under the Code.

Holders of Allowed Claims in Class 1 will be paid in full. Holders of
Allowed Claims in Class 2 will receive all amounts collected through the
liquidation of the Companys assets except those amounts paid to other Classes.
Holders of Class 3 Allowed Claims, to the extent they exist, will be satisfied at
the election of the Lenders by tendering the

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collateral for such secured claim
or by paying from the Assets the value of such collateral to any such claimant.
In full satisfaction of all Allowed Claims in Class 4, Allowed Claims will
receive a pro rata portion of $250,000 from the Creditors Trust. Class 5
claimants will receive nothing under the Plan, and all stock, options,
warrants, and ROI Interests shall be deemed cancelled on the Effective Date.

The following table briefly summarizes the classification and treatment of
Claims and equity interests under the Plan. The recoveries set forth below are
estimates based upon various assumptions. The following summary is qualified
in its entirety by reference to the Confirmation Order and the Plan, which are
attached as Exhibits 99.1 and 2.1, respectively.

|      |  |                                                                                            |  |                                                                                                                  |  |           |     |  
|----- |  | ------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------- |  | --------- | --- | -
|      |  | Type of Claim or                                                                           |  |                                                                                                                  |  | Estimated
|Class |  | Equity Interest                                                                            |  | Treatment                                                                                                        |  | Recovery 
|      |  |                                                                                            |  |                                                                                                                  |  |          
|1     |  | Administrative Claims                                                                      |  | Unimpaired; Allowed Claims paid in full, in cash                                                                 |  |           | 100 | %
|2     |  | Secured Claim of Lenders
($29.6 million)                                                   |  | Impaired; will receive all amounts collected
through the liquidation except those amounts
paid to other Classes. |  |           | 80  | %
|3     |  | Claims of Other Secured Creditors
(Estimated at $0)                                        |  | Unimpaired; Allowed Claims satisfied by
tendering collateral for such Claims.                                    |  |           | 100 | %
|4     |  | Unsecured Non-Priority Claims
(Estimated at $6.5 million after
allowances and settlements) |  | Impaired; Allowed Claims to be paid pro rata
share of $250,000.                                                  |  |           | 4   | %
|5     |  | Claims of Shareholders                                                                     |  | Impaired; no distribution                                                                                        |  |           | 0   | %

Prior to the Effective Date of the Plan, the Company had 12,279,555 shares
of common stock issued and outstanding and 16,631 shares of preferred stock
issued and outstanding. As of May 31, 2002, the latest practicable date that
such information is available, and before giving effect to the consummation of
the Plan, the Company estimated that it had consolidated assets with a book
value of approximately $7.2 million and liabilities with a book value of
approximately $29.6 million (of which approximately $27.6 million are
liabilities subject to settlement under reorganization proceedings). The
Company will adopt Fresh-Start Reporting pursuant to SOP 90-7 on the
Effective Date of the Plan. Furthermore, the Company intends to take the steps
necessary to cease being subject to the periodic reporting requirements of the
federal securities laws.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A)  EXHIBITS

|     |  |                                                                                                               
|---- |  | --------------------------------------------------------------------------------------------------------------
|2.1  |  | Second Amended Joint Plan filed by Registrant
and AmSouth Bank, as Agent for the Lenders, filed June 14, 2002.
|99.1 |  | Order Confirming Plan entered by Court on June 14, 2002.                                                      

(B)  REPORTS ON FORM 8-K



| | The Company filed a Current Report on Form 8-K on February 13,
2002, disclosing the approval of the order establishing bidding
procedures providing for the sale of all of the operating assets
of the Company.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SIGNATURES

Pursuant to the requirements 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. SweetCharles E. Sweet
President and Chief Executive
Officer and Director           
|
| |  |                         |  | Date:  June 25, 2002                                                                              
|
| |  | By:                     |  | /s/ Peter A. StarkPeter A. Stark
Executive Vice President and
Chief Financial Officer and Director
|
| |  |                         |  | Date:  June 25, 2002                                                                              

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