SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                                   (Mark One)

[ X ] Annual Report  pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934 For the fiscal year ended December 31, 1997

[   ] 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 0-26806

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

    Delaware                                                    04-3252967
(State or other jurisdiction of                        (IRS Employer ID Number)
 incorporation or organization)

               4651 Sheridan Street, Suite 400, Hollywood, Florida
                 33021 (Address of principal executive offices,
                               including zip code)

                                  954/987-5822
              (Registrant's telephone number, including area code)

           Securities registered under Section 12(b) of the Act: None

 Securities registered under Section 12(g) of the Act:
             COMMON STOCK, par value $ .01
                   (Title of Class)

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

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

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant was approximately $51.4 million as of March 16, 1998. For purposes of
this  determination,  shares held by  non-affiliates  includes  all  outstanding
shares except for shares of  non-voting  Class A common stock and shares held by
officers,  directors  and  shareholders  beneficially  owning 10% or more of the
Registrant's  outstanding  common stock. The aggregate market value was computed
based on the closing  sale price of the  Registrant's  common stock on March 16,
1998, as reported on the NASDAQ National Market.

As of March 16, 1998,  there were 6,508,752  shares of the  Registrant's  voting
Common Stock,  $.01 par value per share  outstanding  and 296,638  shares of the
Registrant's  non-voting  Class  A  Common  Stock,  $.01  par  value  per  share
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement relating to the Registrant's Annual
Meeting of Stockholders to be held on May 14, 1998 are incorporated by reference
into Part III of this Form 10-K.


<PAGE>


                                     PART I

     This Form 10-K contains  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange Act of 1934. The Company's actual results could differ  materially from
those set forth in the  forward-looking  statements.  Certain factors that might
cause such a difference are discussed in the section  entitled  "Certain Factors
Affecting Future Operating Results" under Item 7 of this Form 10-K.

ITEM 1.  BUSINESS
-------  --------

GENERAL

     The Company is a physician  practice  management company which provides and
manages practices which provide  specialist  physician services at hospitals and
ambulatory  surgical  facilities  in  the  areas  of  anesthesia,   neonatology,
pediatrics, obstetrics and emergency services and owns and operates, or manages,
office-based   obstetrical,   general   surgical,   gynecologic-oncology,   pain
management,  perinatology  and  primary  care  practices.  The  Company  derives
substantially  all of its  revenue  from the  medical  services  provided by the
physicians who are employed by the Company or whose practices are managed by the
Company. The Company generates revenue from its specialist physician services by
directly  billing  third-party  payors  or  patients  on  a  fee-for-service  or
discounted  fee-for-service  basis. In addition,  several hospitals at which the
Company provides  specialist  physician services pay subsidies to the Company to
supplement  revenue from billings to third-party  payors.  The Company generates
revenue from its  office-based  physician  services  pursuant to various payment
arrangements, including shared-risk capitation arrangements,  fee-for-service or
discounted fee-for-service arrangements and other capitation arrangements.

     The Company's  objective is to expand its business by increasing the number
of hospitals and other health care  facilities  at which it provides  specialist
physician services,  providing  physician services in additional  specialties to
existing hospital customers and acquiring additional physician practices. One of
the Company's key strategies is to create integrated  networks providing women's
and  children's  healthcare  services,  consisting  of both  hospital-based  and
office-based  physicians in various  complementary  specialties that support the
Company's  hospital  customers.  As of March 12, 1998, the Company employed,  or
managed the practices  of,  approximately  246  physicians  practicing  under 52
specialty  service  contracts  with 35 health care  facilities  and at 26 office
locations.

OPERATIONS

     HOSPITAL-BASED  PHYSICIAN  SERVICES.  The  Company  currently  provides  or
manages  hospital-based  physician  services at 24 hospitals  and 11  ambulatory
surgery facilities located in Florida, New York, Texas, Virginia, West Virginia,
Ohio  and  Pennsylvania.  These  services  are  provided  by  approximately  189
physicians who are employed by the Company or whose practices are managed by the
Company,   of  which  95  are   anesthesiologists,   49  are  neonatologists  or
pediatricians,  three  are  in-house  obstetricians  and 42 are  emergency  room
physicians. The Company also has entered into an agreement to provide management
services  relating to the operation of anesthesia  departments  at six hospitals
located in California.

     In  most  of  its  arrangements  with  hospitals  and  ambulatory   surgery
facilities,  the Company is responsible for recruiting and employing  physicians
and other  health care  professionals  who provide  health care  services at the
facility.  In addition,  the Company  provides a comprehensive  range of support
services,   including   contracting   with  third-party   payors,   billing  and
collections,  malpractice  risk  management,  quality  assurance,  and physician
recruiting and  credentialling.  By entering into a contract with the Company, a
hospital  substantially  reduces its responsibilities  related to the contracted
specialty,  and  eliminates  the  administrative  burdens  related to  providing
physician  coverage,  since the Company  provides the  contracted  services on a
24-hour a day, 365-day a year basis.


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<PAGE>

     For each hospital or ambulatory  surgery  facility,  the Company appoints a
supervising physician who assumes an on-site leadership role with respect to all
aspects of the  services  provided by the  Company.  In  addition  to  providing
physician  services,  this physician  supervises the other  physicians and other
health care  professionals  at the facility,  participates  in the  recruitment,
promotion and  compensation  of physicians  and other health care  professionals
employed  or managed by the  Company,  and serves as a  coordinator  between the
Company and other personnel at the facility.

     Since its inception,  and unlike many of its  competitors,  the Company and
its  managed  practices  have  directly  employed  most  of  its  hospital-based
specialist  physicians and other health care professionals.  The Company and the
practices  it manages  currently  have  employment  agreements  with most of its
hospital-based physicians,  which generally provide for terms of between one and
five years and include non-competition  provisions.  The Company and its managed
practices also employ advanced registered nurse  practitioners,  certified nurse
midwives  and  physician  assistants  who provide  services in  accordance  with
written  protocols.  The compensation  structure for physicians and other health
care professionals is intended to be competitive within the geographic market in
which they are employed.

     The  Company  and  its  predecessors   have  been  providing  and  managing
hospital-based  physician  services for more than 40 years. All of the Company's
specialist  physician  services were in the area of anesthesia  until 1994, when
the Company began to deliver emergency physician  services.  The Company further
expanded the scope of its  hospital-based  services to include  neonatology  and
pediatrics in 1996 and hospital obstetrics in 1997. The Company has expanded its
hospital-based services business by being awarded new contracts for its services
and through  the  acquisition  of  hospital-based  practices.  In March 1996 the
Company  acquired  a  43-physician  neonatology  and  pediatric  practice  which
delivered specialist physician services at 11 hospitals in Florida and Virginia.
This   acquisition   added   neonatology   and   pediatrics   to  the  Company's
hospital-based physician services. In December 1997 the Company further expanded
its involvement with the provision of neonatology services through the execution
of a long-term  management  agreement with a two-physician  neonatology practice
providing services at three hospitals in Ohio. In January and February 1998, the
Company executed long-term  management  agreements with two anesthesia practices
providing  specialist  physician  services to two hospitals and five  ambulatory
surgical  facilities  located  in  Florida.  These  two  practices  collectively
employed 19 physicians.

     OFFICE-BASED  PHYSICIAN SERVICES. The Company currently employs, or manages
the practices of,  approximately  57  office-based  physicians,  of which 22 are
obstetricians,  31 are primary care physicians,  two are perinatologists and two
are general  surgeons.  The  practices of these  physicians  are conducted at 26
office  locations,  all of which are in Florida  and  Texas.  The  Company  also
provides  primary care physician  services to hospitalized  members of a managed
care  organization  through a panel  services  agreement  with the managed  care
organization.  All of the physician  office  locations are leased by the Company
under long-term lease arrangements,  except for one location,  which is owned by
the Company.

     The Company's  primary focus in its office-based  services  division is the
development  of its owned and managed  obstetrical,  surgical  and  perinatology
practices and  acquisition or management of additional  practices  which provide
women's health services.  Office-based practices, with a focus on women's health
services, complement the Company's hospital-based services division by providing
opportunities  for  the  integration  of  neonatology  and  anesthesia  services
utilized by patients served by these practices.

     The  Company  commenced  its  office-based  services  business  in  1994 by
acquiring a four-location  primary care practice that employed nine  physicians.
The Company completed an additional eleven acquisitions of office-based  primary
care,  obstetrical and  rheumatology  practices  during the period from December
1994 to October  1996 and  entered  into two  long-term  management  agreements.
During the period from March 1997 to November 1997 the Company entered into five
long-term management agreements with four obstetrical practices and one surgical
practice that focused on women's health services. During February 1998 and March
1998 the Company  executed three  long-term  management  agreements  with a pain
management  practice,  a   gynecologic-oncology   practice  and  a  perinatology
practice. The pain management and gynecologic-oncology  practices are located in
Florida, the perinatology practice is located in Texas. Substantially all of the
Company's  office-based  revenue has been derived  from the  acquired  physician
practices and the ten management agreements.

                                       3
<PAGE>

     In November  1996, the Company  announced its intent to sell  non-strategic
office-based  physician  practices in connection  with a change in its strategic
direction.  The Company sold one primary care office  location in December  1996
and one in February 1997, four  rheumatology  office locations in April 1997 and
one primary care location in December 1997.  The remaining  practices to be sold
have been  consolidated  from five office locations into three office locations,
which employ five primary care physicians. In addition, the Company terminated a
long-term  management agreement with a primary care practice entered into during
1996 that included two office locations and one physician.

     The Company and the practices it manages have  employment  agreements  with
substantially  all of its office-based  physicians,  which generally provide for
terms of between one and five years and include non-competition  provisions. The
Company  also  employs  nurses,  other  clinical  personnel  and  administrative
personnel for its office-based operations.

     ACQUISITIONS. The Company typically acquires a physician practice by paying
the owners of the practice a multiple of the expected  post-acquisition earnings
of the practice,  and entering into  long-term  employment  agreements  with the
former physician owners of the practice.  These employment agreements range from
three to ten years in length and  typically  provide for base  compensation  and
employee  benefits and may contain  incentive  compensation  provisions based on
increases in productivity and efficiency.

     MANAGEMENT  AGREEMENTS.  In some cases,  as an  alternative  to acquiring a
physician  practice,  the Company enters into a long-term  management  agreement
with the practice.  Concurrent with the execution of a management  agreement the
Company may purchase the accounts  receivable,  furniture  and  equipment of the
practice and may pay for additional  intangible  rights,  including  restrictive
covenant agreements with the practice's affiliated physicians.  In addition, the
Company  may also  purchase an option to acquire  the  outstanding  stock of the
physician  practice  by paying the owner of the  practice a multiple of expected
earnings under the management agreement. The practice will typically be required
to enter  into  long  term  employment  agreements  with the  physicians  of the
practice which  typically  range from five to seven years and typically  provide
for  base   compensation  and  employee   benefits  and  may  contain  incentive
compensation provisions based on increases in productivity and efficiency.

MANAGED CARE

     A  substantial  majority of the  Company's  total  revenue is derived  from
third-party  payors under various managed care  arrangements.  Such arrangements
include  negotiated  discounted  fee-for-service  arrangements for the Company's
hospital-based and office-based  physician services,  and shared-risk capitation
and other  capitation  arrangements  with certain of the Company's  office-based
primary care practices.

     Approximately  90% of  the  Company's  shared-risk  capitation  revenue  is
derived from a single  third-party  payor,  Humana Medical Plan ("Humana").  The
Company  does not have a written  contract  with  Humana  with  respect to these
shared-risk  capitation  arrangements.  The revenue under these  arrangements is
generated by certain  primary care practices  which were acquired by the Company
between September 1994 and February 1995. Since the respective acquisition dates
of these practices,  the shared-risk capitation arrangements between the Company
and Humana have been patterned on the terms of the contracts that were in effect
prior to the Company's acquisition of these practices.

     As discussed above under "Operations -- Office-based  Physician  Services,"
the Company is in the process of selling certain of its  office-based  physician
practices.  The remaining practices to be sold include  substantially all of the
Company's shared-risk capitation business.

CONCENTRATION OF REVENUE

     A significant  portion of the Company's  revenue is derived from delivering
or managing  hospital-based  physician  services at multiple hospitals which are
under  common   ownership.   Of  the  Company's   total  net  revenue  in  1997,
approximately $21.8 million,  or 22.1%, was derived from anesthesia,  obstetrics
and neonatology  services delivered at three hospitals owned and operated by the
South Broward Hospital District.  In addition,  approximately  $21.8 million, or
22.2% of the Company's  total net revenue in 1997, was derived from  anesthesia,
neonatology,  pediatric and emergency services delivered at 11 hospitals and two
ambulatory  surgical  facilities  owned and operated by Columbia/HCA  Healthcare
Corp. In addition,  approximately $11.7 million, or 11.9% of the Company's total

                                       4
<PAGE>

net  revenue in 1997,  was  derived  from  anesthesia,  neonatology,  pediatric,
emergency  and  management  services  delivered  at seven  hospitals  owned  and
operated by Tenet Healthcare Corporation.

     A significant portion of the Company's revenue from both hospital-based and
office-based physician services is derived from various arrangements,  including
fee-for-service  and capitation  arrangements,  with Humana and its  affiliates.
During  1997,  the  Company  derived  total net revenue of  approximately  $14.1
million  from  Humana  and its  affiliates,  which  accounted  for  14.3% of the
Company's total net revenue.

INFORMATION SYSTEMS

     The Company has developed and continues to develop sophisticated management
information  systems to support  both its current  level of  operations  and its
growth  strategy.  The Company has physician  billing and collection  systems it
utilizes in connection with its hospital-based physician services. These billing
and collection systems, which have been tailored to the Company's  requirements,
enable the Company to accommodate numerous and diverse payment arrangements with
third-party payors.

     The Company is  currently  modifying  its internal  information  systems to
comply with the change to the year 2000.  The Company does not  anticipate  that
the future cost of modifying its  information  systems for  compliance  with the
year 2000  requirements  will have a material  adverse  financial  impact on the
Company.

     The  office-based  practices  owned  and  managed  by the  Company  utilize
information systems for billing and collections which vary depending on the size
and medical  specialty of the practice.  These  systems are primarily  supported
through contractual arrangements with third party vendors.

CONTRACTUAL ARRANGEMENTS

     The Company uses a variety of contractual  arrangements with respect to the
physicians which it employs,  manages, or with which it is otherwise affiliated.
The  particular  contractual  arrangement  used in each case is  influenced by a
number of factors  including the desires of physicians,  the type of practice in
which  the  physicians   are  engaged,   financial   considerations,   statutory
limitations on the corporate practice of medicine and other regulatory concerns,
and, with respect to newly-affiliated  practices,  the terms of any pre-existing
contracts.

     The Company has  structured  its  acquisitions  of, or  affiliations  with,
physician practices as asset purchases,  mergers, stock purchases and management
agreements. In connection with any of these transactions,  the Company typically
pays the owners of the practice a multiple of expected post-acquisition earnings
of the practice, or a multiple of expected earnings from a management agreement,
as applicable.  In the case of some management agreements,  the Company acquires
the accounts receivable,  furniture,  fixtures and equipment of the practice and
pays the owner of the practice the estimated  fair market value of these assets.
In  connection  with certain  management  agreements,  the Company  purchases an
option to acquire the practice being managed that may be exercised for a nominal
amount.

     In connection  with the  acquisition of a physician  practice,  the Company
typically enters into employment  agreements with the physician owners and other
key management personnel.  These agreements typically provide for a base salary,
incentive compensation,  terms of between one and ten years, and non-competition
provisions.  The  compensation  structure  for  physicians  is  intended  to  be
competitive  within the  geographic  market in which each physician is employed.
The Company also has employment agreements with nearly all of the hospital-based
and  office-based  physicians  which  it  employs  outside  the  context  of  an
acquisition of a practice.

     In connection with a management services  agreement,  the Company typically
manages  all  aspects  of the  practice  other  than the  provision  of  medical
services,  which is  controlled  by the  physician.  The  Company  typically  is
responsible   for  all  leases  for  office  space  and  equipment,   hires  all
non-clinical office personnel and provides  comprehensive  management  services,
including  physician  recruiting and  credentialling,  managed care contracting,
malpractice risk management,  utilization review,  billing and collections,  and
management  information  systems.  In exchange for these services,  the practice
pays the Company a management fee.

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<PAGE>

     The Company has management services  arrangements with three practices that
are affiliates of the Company,  Sheridan  Medical  Healthcorp,  P.C.  ("Sheridan
NY"),   Sheridan  Healthcare  of  Texas,  P.A.  ("Sheridan  TX"),  and  Sheridan
Children's  Healthcare  Services of Pennsylvania,  P.C. ("Sheridan PA"). Each of
these affiliates is owned by Gilbert Drozdow,  M.D., who is an executive officer
and a stockholder  of the Company.  The Company also has  management  agreements
with four  obstetrical  practices,  a general surgery practice and a neonatology
practice  entered into during 1997 and a pain  management  practice,  anesthesia
practice,  gynecologic-oncology  practice and perinatology practice entered into
during 1998.  Concurrent with the execution of these  management  agreements the
Company  also  purchased  an option to acquire  the  outstanding  stock of these
practices.  These  practices  pay the Company a management  fee that is based on
expenses  incurred by the  Company  plus  either a  percentage  fee based on net
revenues or net practice  earnings,  or a flat fee, depending upon local laws or
regulations,  subject to a  limitation  that the fee not exceed the amount  that
would be charged  for similar  services  by an  unaffiliated  third  party.  The
Company typically requires managed practices to enter into employment agreements
with  the  physician  owners  of the  practices  it  manages.  These  employment
agreements  provide  for  compensation  based on a  guaranteed  base  salary,  a
percentage of net practice revenue or a percentage of net practice earnings from
the  physician's  provision  of  professional  services.  These  agreements  are
typically for terms of five to seven years, contain  non-competition  provisions
and may provide for incentive  compensation.  Those practices  whose  management
agreements  include terms that demonstrate a controlling  financial  interest by
the Company for accounting  purposes are included in the Company's  consolidated
financial  statements,  and the related management fees are eliminated.  Factors
which  demonstrate a controlling  financial  interest include the fluctuation of
the Company's  management fee together with the  performance of the practice and
the  exercise  of control by the  Company  over the  administrative  operations,
recruitment  and physician  compensation  of the practice.  See Note 1(b) to the
Company's consolidated financial statements for more information.

     The Company and the practices it manages have contractual arrangements with
hospitals  and  ambulatory   surgery   centers  which  govern  its  delivery  of
hospital-based  physician services. The agreements governing such operations are
generally  for terms of between one and five years and  provide for  termination
upon 60 to 180 days  notice,  although  the Company  has a number of  agreements
which have terms of at least five years and are terminable only for cause. These
agreements  generally  grant the Company the exclusive  right to provide certain
physician  services at the  particular  health care  facility and directly  bill
third-party payors for its services, subject to a requirement that the Company's
fees be  approved  by the health  care  facility.  The  Company  has agreed with
certain  facilities  to charge  third-party  payors the same rates for  services
delivered at such facilities as the Company charges those third-party payors for
services  delivered at other facilities  within  designated  geographic areas. A
number of these  contractual  arrangements are not in writing,  were established
either  through a course of  conduct  or through  oral  understandings,  and are
terminable by either party at will.

     In addition to contracts  pursuant to which the Company is responsible  for
the provision of medical services,  the Company has a five-year  contract with a
hospital  company to provide  management  services  relating to the operation of
anesthesia departments at six hospitals located in California.

     The  Company  is  paid  for  its   hospital-based   physician  services  by
third-party  payors pursuant to a number of arrangements,  including  discounted
fee-for-service  and  global  fee or per diem  arrangements.  In  addition,  the
Company has arrangements with several hospitals under which the Company receives
a  contractual  subsidy or income  guarantee  from the  hospital  to  supplement
revenue from billings to third-party payors.

     Pursuant  to  a  panel  services   agreement  with  a  health   maintenance
organization,  the Company is responsible for providing inpatient physician care
to members of that organization who are admitted to certain  hospitals,  and for
managing the utilization of hospital services by those patients. In exchange for
its services,  the Company is paid a fixed monthly fee by the health maintenance
organization.

GOVERNMENT REGULATION

     Because  the Company is a  participant  in the health  care  industry,  its
operations and relationships are subject to extensive and increasing  regulation
by a number of governmental entities at the federal, state and local levels. The
Company  is  also  subject  to  laws  and   regulations   relating  to  business
corporations  in general.  The Company  believes its  operations are in material

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<PAGE>

compliance with applicable laws.  Nevertheless,  because the Company is involved
in many  aspects of the health care  industry,  much of the  Company's  business
operations   have  not  been  the   subject  of  state  or  federal   regulatory
interpretation  and there  can be no  assurance  that a review of the  Company's
business by courts or regulatory  authorities will not result in a determination
that could  adversely  affect the  operations  of the Company or that the health
care  regulatory  environment  will not change so as to restrict  the  Company's
existing operations or their expansion.

     A significant  portion of the Company's  revenue is derived from delivering
medical services to patients who are covered under various Medicare and Medicaid
health care programs.  Approximately 15.8% of the Company's total net revenue in
1997 was derived from the  assignment  of Medicare and Medicaid  benefits to the
Company  by  patients  of the  Company's  affiliated  physicians.  In  addition,
approximately  7.9% of the Company's  total net revenue in 1997 was derived from
capitation  payments from health maintenance  organizations for patients who had
assigned  their  Medicare  or  Medicaid  benefits  to  the  health   maintenance
organizations.  As a result, any change in reimbursement regulations,  policies,
practices,  interpretations or statutes could adversely affect the operations of
the Company.

     The federal Medicare program adopted a system of reimbursement of physician
services, known as the resource based relative value scale ("RBRVS"), which took
effect in 1992 and was  implemented  on December 31, 1996.  The Company  expects
that the RBRVS fee schedule and other future  changes in Medicare  reimbursement
will  result in some  cases in a  reduction  and in some  cases in an  increase,
compared  to  historical  levels,  in the  reimbursement  rates  received by the
Company for services rendered to Medicare beneficiaries.

     The laws of many states prohibit business  corporations such as the Company
from  practicing  medicine and  employing  physicians  to practice  medicine and
certain self-referral laws and regulations restrict the activities of physicians
who are  employed  by  entities  in which  they have  ownership  interests.  The
structure of the  Company's  operations  in certain  states is influenced by the
laws  prohibiting  business   corporations  from  practicing  medicine  and  the
structure of the Company's  arrangements with physicians,  who may be restricted
by  self-referral   laws,  is  influenced  by  those   self-referral   laws  and
regulations.

     Sheridan NY, Sheridan TX and Sheridan PA, are each  wholly-owned by Gilbert
Drozdow, M.D., who is an executive officer and a stockholder of the Company. The
Company has a management services arrangement with each of Sheridan NY, Sheridan
TX and Sheridan PA, under which each of those companies delegates to the Company
responsibility for the provision to them of all management services,  personnel,
bookkeeping and accounting services, and billing and collection services, to the
extent  permitted by law. In exchange,  the Company  receives a management  fee.
This  management  services  agreement is  terminable by a party (i) if the other
party fails to perform in any material  respect any material  obligation,  which
failure is not cured  within 60 days after  notice or (ii) upon the  application
for, or consent to, the appointment of a receiver,  trustee or liquidator of all
or a substantial  part of the other party's assets,  the filing of a petition in
bankruptcy  or consent to an  involuntary  petition in  bankruptcy  by the other
party and certain other events.

     Expansion of the  operations of the Company to certain other  jurisdictions
could require  additional  structural and  organizational  modifications  of the
Company's  form of  relationship  with hospitals or physician  practices.  Those
changes,  if any, could have an adverse effect on the Company.  The laws in most
states  regarding  the  corporate  practice of medicine and the laws relating to
self-referral   have  been   subject  to   limited   judicial   and   regulatory
interpretation and, therefore,  no assurances can be given that if the Company's
activities are challenged  that they will be found to be in compliance  with all
applicable laws and regulations.

     In addition  to  prohibiting  the  practice of  medicine,  numerous  states
prohibit  entities like the Company from engaging in certain health care related
activities such as fee-splitting with physicians. Florida, for instance, enacted
in April  1992 a  Patient  Self-Referral  Act that  severely  restricts  patient
referrals  for  certain  services,  prohibits  mark-ups  of certain  procedures,
requires  disclosure of ownership in  businesses to which  patients are referred
and places other regulations on health care providers. The Company believes that
its Florida practices fit within the group practice  exemption  contained in the
Patient  Self-Referral  Act. However,  investments or contractual  relationships
with businesses not  specifically  operated by the Company would, in some cases,
be  prohibited.  The Company  believes  that it is likely that other states will
adopt  similar  legislation.  Accordingly,  expansion of the  operations  of the
Company  to  certain   jurisdictions   may   require  it  to  comply  with  such
jurisdictions'  regulations  which could lead to structural  and  organizational
modifications of the Company's form of relationship  with hospitals or physician
practices in those states.  Those changes,  if any, could have an adverse effect
on the Company.


                                       7
<PAGE>

     Certain  provisions of the Social Security Act, commonly referred to as the
"Anti-kickback Statute," prohibit the offer, payment, solicitation or receipt of
any form of  remuneration in return for the referral of Medicare or state health
program  patients  or  patient  care   opportunities,   or  in  return  for  the
recommendation, arrangement, purchase, lease, or order of items or services that
are covered by Medicare or state health programs.  The Anti-kickback  Statute is
broad in scope and has been broadly interpreted by courts in many jurisdictions.
Read  literally,   the  statute  places  at  risk  many  business  arrangements,
potentially  subjecting such arrangements to lengthy,  expensive  investigations
and prosecutions  initiated by federal and state  governmental  officials.  Many
states have adopted similar  prohibitions  against  payments  intended to induce
referrals of Medicaid and other third-party payor patients. The Company believes
that  it  has  not  violated  the  Anti-kickback   Statute.   Violation  of  the
Anti-kickback  Statute  is a  felony,  punishable  by  fines up to  $25,000  per
violation and imprisonment for up to five years. In addition,  the Department of
Health and Human Services may impose civil  penalties  excluding  violators from
participation in Medicare or state health programs.

     The federal government has published  regulations that provide  exceptions,
or "safe  harbors,"  for  transactions  that will be deemed not to  violate  the
Anti-kickback  Statute.  Among the safe harbors included in the regulations were
provisions  relating  to the  sale of  practitioner  practices,  management  and
personal services agreements,  and employee relationships.  Although the Company
believes that it is not in violation of the Anti-kickback  Statute,  some of its
operations do not fit within any of the existing or proposed safe harbors,  and,
accordingly,  there can be no assurance that the Company's practices will not be
found to be in  violation  of the  statute,  and any such  finding  could have a
material adverse effect on the Company.

     Significant  prohibitions  against  physician  referrals  were  enacted  by
Congress in the Omnibus Budget  Reconciliation Act of 1993. These  prohibitions,
commonly known as "Stark II," amended prior physician self-referral  legislation
known as "Stark I" by  dramatically  enlarging the field of  physician-owned  or
physician-interested entities to which the referral prohibitions apply. Stark II
prohibits,  subject  to  certain  exemptions,  a  physician  or a member  of his
immediate  family from  referring  Medicare  or  Medicaid  patients to an entity
providing  "designated  health services" in which the physician has an ownership
or  investment  interest,  or  with  which  the  physician  has  entered  into a
compensation  arrangement  including the  physician's  own group  practice.  The
designated  health services  include  radiology and other  diagnostic  services,
radiation therapy services,  physical and occupational therapy services, durable
medical  equipment,  parenteral  and  enteral  nutrients,  equipment,  supplies,
prosthetics, orthotics, outpatient prescription drugs, home health services, and
inpatient and outpatient hospital services. The penalties for violating Stark II
include  a  prohibition  on  payment  by these  government  programs  and  civil
penalties  of as much as $15,000 for each  violative  referral  and $100,000 for
participation in a  "circumvention  scheme." While the Company believes it is in
compliance  with the Stark  legislation,  there can be no assurance  this is the
case.  Moreover,  the  violation of Stark I or II by the Company could result in
significant fines or penalties and exclusion from  participation in the Medicare
and Medicaid programs.  Such penalties or exclusion,  if applied to the Company,
could result in significant loss of  reimbursement  which would adversely affect
the Company.

     On March 27,  1996,  the  United  States  Department  of  Health  and Human
Services  promulgated  regulations  pursuant to the  requirements of the Omnibus
Budget  Reconciliation  Act of 1990 concerning  physician  incentive  plans. The
regulations  provide  that  physician  incentive  plans may  operate  only if no
specific  payment is made directly or indirectly under the plan as an inducement
to  reduce  or  limit  medically  necessary  services  furnished  to a  specific
enrollee. These regulations only apply to enrollees who are entitled to Medicare
or Medicaid  benefits  under a prepaid health plan. The Company does not believe
these  regulations  will  have  a  material  effect  on  the  Company's  current
operations,  including its  contractual  arrangements  with its  physicians  and
prepaid health plans.

     Because  the  Company  intends  to  maintain  certain  of the  health  care
practices  that it  acquires  as  separate  legal  entities,  they may be deemed
competitors subject to a range of antitrust laws which prohibit anti-competitive
conduct,  including  price  fixing,  concerted  refusals to deal and division of
market.  The Company  intends to comply with such state and federal  laws as may
affect  its  operations,  but  there  is no  assurance  that the  review  of the
Company's  business  by courts or  regulatory  authorities  will not result in a
determination that could adversely affect the operation of the Company.

     There are also  state and  federal  civil and  criminal  statutes  imposing
substantial penalties,  including civil and criminal fines and imprisonment,  on

                                       8
<PAGE>

health care providers  which  fraudulently  or wrongfully  bill  governmental or
other third-party  payors for health care services.  The federal law prohibiting
false  billings  allows a private  person to bring a civil action in the name of
the United  States  government  for  violations of its  provisions.  The Company
believes it is in material  compliance with such laws, but there is no assurance
that  the  Company's  activities  will  not  be  challenged  or  scrutinized  by
governmental authorities.  Moreover,  technical Medicare and other reimbursement
rules  affect the  structure  of  physician  billing  arrangements.  The Company
believes it is in material  compliance  with such  regulations,  but  regulatory
authorities  may  differ and in such  event the  Company  may have to modify its
physician  billing   arrangements.   Noncompliance  with  such  regulations  may
adversely  affect the  operation of the Company and subject it to penalties  and
additional costs.

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

COMPETITION

     The  provision of health care services and  physician  practice  management
services are both highly  competitive  businesses in which the Company  competes
for contracts with numerous  entities in the health care  industry.  The Company
also  competes with  traditional  providers and managers of health care services
for the recruitment of employed or managed physicians. In addition, the Company,
in pursuing its growth strategy, faces competitive pressures for the acquisition
of the  assets of, and the  provision  of  management  services  to,  additional
hospital-based and office-based  physician  practices.  Several companies,  both
publicly and privately  held, that have longer  operating  histories and greater
resources  than the  Company  are  pursuing  the  acquisition  of the  assets of
physician practices and management contracts with physician practices. There can
be no assurance that the Company will be able to continue to compete effectively
with such competitors, that additional competitors will not enter the market, or
that such  competition will not make it more difficult to acquire the assets of,
and provide management  services to, physician  practices on terms beneficial to
the Company.

CORPORATE LIABILITY AND INSURANCE

     The risk of physician  malpractice  liability is inherent in the  Company's
business.  In order to mitigate this risk,  the Company  maintains  professional
liability   insurance  on  a  claims-made  basis.  The  Company  has  a  primary
malpractice insurance policy which covers losses incurred by the Company up to a
limit of $1.0  million  per  individual  claim and a limit of $7.5  million  per
calendar year for all claims combined. In addition,  the Company has a secondary
malpractice insurance policy which covers losses in excess of the primary policy
limits,  up to a limit of $5.0 million per individual  claim and a limit of $5.0
million per calendar year for all claims combined. Under the primary policy, the
Company is required to pay a  self-insured  retention  amount equal to the first
$150,000  of  losses  for  each  individual  claim  up  to a  maximum  aggregate
self-insured  retention  amount of $900,000 for all claims in one calendar year.
Defense costs in excess of these self-insured  retention amounts are paid by the
Company's insurer. The Company also maintains directors' and officers' liability
insurance and general liability insurance on a claims-made basis.

TRADEMARKS

     The  Company  has rights to a trademark  and a service  mark for  "Sheridan
Healthcare,  Inc." and  "Sheridan  Healthcorp,  Inc."  registered  with the U.S.
Patent and Trademark  Office.  The Company also has a pending  application for a
trademark and a service mark for "Sheridan Children's Healthcare Services, Inc."


                                       9
<PAGE>

EMPLOYEES

     As of  March  12,  1998,  the  Company  had  approximately  770  employees,
substantially  all of whom were  full-time.  Of the total  number of  employees,
approximately  250 were  physicians  and  approximately  520 were  non-physician
clinical and administrative support personnel.

ITEM 2.  PROPERTIES
-------------------

     The Company  leases  substantially  all of the office space required by its
operations,  including its corporate headquarters in Hollywood,  Florida and its
physician  office   locations,   at  an  aggregate  monthly  rental  expense  of
approximately $180,000. The Company currently leases approximately 34,000 square
feet of office space for its corporate headquarters. This lease is for a term of
ten years,  which expires in 2005,  and provides for a monthly rental payment of
approximately  $53,000  (adjusted for certain operating  expenses).  The Company
also leases office space for its physician practices under leases with remaining
terms  which  expire at various  dates  from 1998 to 2007,  and  monthly  rental
payments ranging from $1,200 to $14,000.  In addition,  the Company owns a 3,000
square foot  one-story  building in Miami,  Florida.  The Company  considers its
facilities to be adequate and suitable for its current needs.

ITEM 3.  LEGAL PROCEEDINGS
--------------------------

     From  time to time,  the  Company  is party to  various  claims,  suits and
complaints. In October 1996, the Company and certain of its directors, officers,
stockholders  and legal  advisors were named as defendants in a lawsuit filed in
the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County,
Florida by certain former physician  stockholders of the Company's  predecessor,
which was formerly named Southeastern Anesthesia Management Associates, Inc. The
claim alleges that the defendants engaged in a conspiracy of fraud and deception
for personal gain in connection with inducing the plaintiffs to sell their stock
in the Predecessor to the Company,  as well as legal  malpractice and violations
of Florida  securities laws. The claim seeks damages of at least $10 million and
the imposition of a  constructive  trust and  disgorgement  of stock and options
held by certain members of the Company's  management.  The Company  believes the
lawsuit is without merit and continues to vigorously defend against it.

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

     None.

                                                      PART II

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

     The common  stock of the  Company is traded on the Nasdaq  National  Market
under the symbol SHCR. There is no established  trading market for the Company's
non-voting  Class A common stock. The high and low sales prices of the Company's
common stock each calendar  quarter,  as reported by the Nasdaq National Market,
were as follows:

<TABLE>
<CAPTION>

                                                 1998(1)                1997                   1996
                                          --------------------  --------------------  -------------------
                                             High        Low       High        Low      High        Low

         <S>                                 <C>        <C>       <C>         <C>        <C>       <C>
         First Quarter..................     15 1/2     12 3/4     10 1/16    5 5/8      13         8 1/4
         Second Quarter.................      ---        ---       11 1/4     7          11 3/4     7 3/8
         Third Quarter..................      ---        ---       13 5/8     10 1/8     10 1/4     8
         Fourth Quarter.................      ---        ---       16 1/2     12 1/4     8  3/4     4 5/8
<FN>
(1)  Through March 16, 1998.
</FN>
</TABLE>

                                       10
<PAGE>


     On March 16, 1998, the closing sale price of the Company's common stock was
$15.31. As of March 6, 1998, there were  approximately 964 holders of the common
stock of the  Company,  including  64 holders of record.  As of March 16,  1998,
there was one holder of non-voting Class A common stock. The approximate  number
of holders of the Company's  common stock was  determined  based on  information
obtained from certain  investment  brokerage firms and mailing  services used by
other investment  brokerage firms. The Company has not declared or paid any cash
dividends on its common stock. The Company's revolving credit facility prohibits
the payment of cash  dividends  prior to  repayment of the  outstanding  balance
under the credit facility in full.

     During the fourth quarter of 1997, the Company issued  approximately 14,000
shares of its Common Stock as partial  consideration  for the  acquisition of an
office-based  physician practice.  No underwriters or underwriting  discounts or
commissions were involved. There was no public offering in such transaction, and
the Company  believes  that this  transaction  was exempt from the  registration
requirements  of the  Securities  Act of 1933, as amended,  by reason of Section
4(2) thereof,  based on the private nature of the  transaction and the financial
sophistication  of  the  purchasers,   each  of  whom  had  access  to  complete
information  concerning  the Company and acquired the  securities for investment
and not with a view to the distribution thereof.



                                       11
<PAGE>



ITEM 6.  SELECTED FINANCIAL DATA
--------------------------------

     The following  selected  financial  data have been derived from the audited
financial  statements  of the  Company and its  Predecessor.  (See Note 1 to the
Company's   consolidated   financial   statements  for  an  explanation  of  the
Predecessor.) The financial statements of the Predecessor as of and for the year
ended December 1993 have been audited by Peed, Koross, Finkelstein & Crain, P.A.
The financial  statements of the Predecessor for the period from January 1, 1994
to November 28, 1994 and of the Company as of December 31, 1994,  1995, 1996 and
1997 and for the period from  November  29,  1994 to  December  31, 1994 and the
years  ended  December  31,  1995,  1996 and 1997  have been  audited  by Arthur
Andersen LLP. The combined  statement of  operations  data for 1994 combines the
audited  results of operations of the Predecessor for the period from January 1,
1994 to November  28, 1994 and of the Company for the period from  November  29,
1994 to December 31, 1994.  This  combined  information  is presented to provide
meaningful  period to period  comparisons.  The  financial  data set forth below
should be read in  conjunction  with  "Management's  Discussion  and Analysis of
Financial  Condition and Results of Operations" and the  consolidated  financial
statements of the Company and the  Predecessor  and the notes  thereto  included
elsewhere in this report.

<TABLE>
<CAPTION>

                                              Company               Combined      Company          Predecessor
                                     ---------------------------- ------------ ----------- ---------------------------
                                                                               Period from  Period from
                                                                               November 29,  January 1,      Year
                                              Year Ended           Year Ended    1994 to      1994 to       Ended
                                              December 31,
                                     ----------------------------  December 31, December 31,  November 28, December 31,
Statement of Operations                1997      1996      1995       1994        1994         1994          1993
                                     -------- --------- --------- -----------  ----------- -----------   -------------
   <S>                               <C>      <C>       <C>       <C>          <C>         <C>          <C>
   Data (in thousands):
Net revenue........................  $ 98,616 $  92,767 $  64,665 $    38,624  $     5,129 $    33,495   $      29,891
Operating expenses:
   Direct facility expenses........    68,919    66,125    47,477      26,531        4,089      22,442          19,971
   Provision for bad debts.........     4,066     3,605     2,324       1,909          159       1,750           1,742
   Salaries and benefits...........     7,424     6,967     5,398       3,127          452       2,675           2,495
   General and administrative......     4,900     4,561     3,976       2,581          297       2,284           1,666
   Write-down of office-based
      net assets                          ---    17,360       ---         ---          ---         ---             ---
   Physician stockholders' payroll in
     excess of base salary (1).....       ---       ---       ---       1,949          ---       1,949           3,644
   Loss on dissolution of subsidiary      ---       ---       ---          ---         ---         ---             886
   Transaction costs...............       ---       ---       ---         372          372         ---             ---
   Amortization....................     2,096     2,491     2,630         270          173          97             ---
   Depreciation....................       689     1,023       559         177           65         112              44
                                     -------- --------- --------- -----------  ----------- -----------  --------------
Operating income (loss)............    10,522    (9,365)    2,301       1,708        (478)       2,186            (557)
Interest expense, net..............     2,461     2,572     4,254         634          341         293             ---
Other expense......................       ---       ---       ---         ---          ---         ---             227
                                     -------- --------- --------- -----------  ----------- -----------  --------------
Income (loss) before income
   taxes and extraordinary item....     8,061   (11,937)  (1,953)       1,074        (819)       1,893            (784)
Income tax expense (benefit).......     2,894       189     (456)         460        (177)         637            (303)
                                     -------- --------- --------  -----------  ----------  -----------  --------------
Income (loss) before
   extraordinary item                   5,167   (12,126)  (1,497)         614        (642)       1,256            (481)
Extraordinary item.................       ---       ---   (2,184)         ---         ---          ---             ---
                                     -------- --------- --------  -----------  ----------  -----------  --------------
   Net income (loss)...............  $  5,167 $ (12,126)$ (3,681) $       614  $     (642) $     1,256  $         (481)
                                     ======== ========= ========  ===========  ==========  ===========  ==============

Income (loss) before extraordinary item
   per share.......................  $   0.77 $   (1.84)$  (1.05)              $     (.36)
Net income (loss) per share:
   Basic...........................      0.77     (1.84)   (1.86)                    (.36)
   Diluted.........................      0.73     (1.84)   (1.86)                    (.36)

                                                            Company                                        Predecssor
                                     -----------------------------------------------------              --------------
                                                         December 31,
                                     -----------------------------------------------------                December 31,
                                      1997      1996      1995                   1994                       1993
                                     -------- --------- ---------              -----------              --------------
Balance Sheet Data (in thousands):
Working capital ...................  $ 13,650 $   8,336 $   4,299              $     1,338              $        1,659
Total assets.......................    87,035    73,408    64,373                   54,127                       8,356
Long-term debt, net................    29,833    21,367    11,365                   30,581                         101
Stockholders' equity...............    41,350    35,958    42,669                   13,261                         130

<FN>
 (1) Physician stockholders' payroll in excess of base salary represents amounts paid to physician  stockholders
     of the Predecessor in excess of the market compensation rate for the physician services provided to the Predecessor by
     those stockholders.  Such payments ceased upon the Company's acquisition of  the Predecessor on November 28, 1994.
</FN>
</TABLE>

                                       12
<PAGE>

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

CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS

     This Form 10-K contains  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange Act of 1934. The Company's actual results could differ  materially from
those set forth in the  forward-looking  statements.  Certain factors that might
cause such a difference  include the  following:  fluctuations  in the volume of
services  delivered  by the  Company's  affiliated  physicians,  changes  in the
reimbursement rates for those services, uncertainty about the ability to collect
the  appropriate  fees for those services,  the loss of significant  hospital or
third-party  payor  relationships,  the ability to recruit and retain  qualified
physicians,  and changes in the number of patients using the Company's physician
services.

GENERAL

     The Company is a physician practice management company which provides,  and
manages practices which provide,  specialist physician services at hospitals and
ambulatory  surgical  facilities  in  the  areas  of  anesthesia,   neonatology,
obstetrics, pediatrics and emergency services and owns and operates, or manages,
office-based  obstetrical  and  primary  care  practices.  The  Company  derives
substantially  all of its  revenue  from the  medical  services  provided by the
physicians  who are  employed  by the  Company or the  practices  managed by the
Company. The Company generates revenue from its specialist physician services by
directly  billing  third-party  payors  or  patients  on  a  fee-for-service  or
discounted  fee-for-service  basis. In addition,  several hospitals at which the
Company provides  specialist  physician services pay subsidies to the Company to
supplement  revenue from billings to third-party  payors.  The Company generates
revenue from its  office-based  physician  services  pursuant to various payment
arrangements, including shared-risk capitation arrangements,  fee-for-service or
discounted fee-for-service arrangements, and other capitation arrangements.

     Prior to September  1994, the Company  generated  substantially  all of its
revenue from specialist physician services delivered at hospitals and ambulatory
surgical  facilities.  From September 1994 to November 1997, the Predecessor and
the Company  completed  several  transactions  with  practices  specializing  in
primary care,  obstetrics and rheumatology at an aggregate cost of $37.3 million
in cash and stock. These office-based  practices accounted for substantially all
of the Company's  office-based  revenue during the four years ended December 31,
1997. In March 1996,  the Company  completed the  acquisition  of a 43-physician
hospital-based  neonatology and pediatric  practice for $4.2 million in cash and
approximately  658,000 shares of the Company's  common stock.  In December 1997,
the  Company   entered  into  a   twenty-year   management   agreement   with  a
hospital-based  neonatology  practice at a cost of $435,000.  Transactions  with
acquired physician practices were accounted for as purchases.  Transactions with
managed  physician  practices whose  agreements with the Company have terms that
demonstrate a controlling  financial interest by the Company were also accounted
for as  purchases.  The  operations  of  acquired  and managed  practices  whose
transactions  are  accounted  for as  purchases  are  included in the  Company's
financial statements  beginning on each respective  transaction date. During the
year ended  December 31, 1997,  71.3% of the  Company's  net revenue was derived
from  specialist  physician  services  delivered  at  hospitals  and  ambulatory
surgical  facilities,  and the  remaining  28.7% was derived  from  office-based
physician practices.

     On November 28, 1994, the Company  acquired all of the  outstanding  common
stock of Sheridan  Healthcorp,  Inc. (the "Predecessor") for approximately $43.3
million (the "1994 Acquisition").  As a result of this transaction,  the Company
incurred  significant  interest  expense in 1995,  which was related to the debt
incurred to finance  the  transaction,  and has  incurred  significant  goodwill
amortization expense since November 28, 1994.

     On September 1, 1994, the Predecessor acquired a four-facility primary care
practice for  approximately  $8.7 million in cash and  deferred  payments.  From
December 1, 1994 to March 1, 1995, the Company  completed five  acquisitions  of
primary care and obstetrical  practices for an aggregate of  approximately  $4.5
million in cash and deferred  payments.  On June 5, 1995, the Company acquired a
three-facility  primary care practice for $3.0 million in cash. In a transaction
related to the June 1995 acquisition,  one of the principal physicians operating
the  acquired  practice  assigned  a  panel  services  agreement  with a  health
maintenance  organization to the Company for approximately  $1.3 million in cash
and deferred  payments and  approximately  35,000  shares of common stock of the
Company.  In  another  transaction  related  to the June 1995  acquisition,  the
Company agreed to make a deferred payment of $700,000 to a physician employed by
the acquired  practice,  which was paid during the fourth quarter of 1995.  This
payment was treated as a bonus for accounting  purposes,  and  accordingly,  was

                                       13
<PAGE>

charged to expense in its entirety  during 1995. From January 1, 1996 to October
4, 1996, the Company  completed five  acquisitions of primary care,  obstetrical
and rheumatology  practices for an aggregate cost of approximately  $8.2 million
in cash and  deferred  payments.  From  January 1, 1997 to  November 4, 1997 the
Company entered into long-term management agreements with, and purchased options
to acquire,  four obstetrical  practices and one general surgical practice at an
aggregate  cost of  approximately  $11 million in cash and stock.  The Company's
consolidated financial statements include the operations of these practices.

     On  November  4, 1996,  the  Company  announced  a change in its  strategic
direction,  which was to place more emphasis on its hospital-based  business and
to reduce its emphasis on the primary care  business,  and its intent to dispose
of  non-strategic  office-based  physician  practices.  Due to  this  change  in
strategic  direction,  the  Company  wrote down  certain  assets  related to its
office-based  operations  to their  estimated  realizable  values,  and  accrued
certain  liabilities for commitments  that no longer have value to the Company's
future  operations.  These  adjustments  resulted in a $17.4  million  charge to
earnings  in  1996.  See  Note  1(j)  to the  Company's  consolidated  financial
statements for more information.

     As discussed above under "Operations -- Office-based  Physician  Services,"
the Company sold two  office-based  primary care practice  locations in December
1996 and February 1997,  respectively,  and sold two rheumatology practices with
four locations in April 1997 and intends to sell three other practice locations.
The Company also terminated a management  agreement with an office-based primary
care  practice  with two  locations  in December  1997 that was entered  into in
November 1996. The  office-based  practices  which have been sold, and which the
Company currently intends to sell,  include the four-facility  practice acquired
on September 1, 1994,  two primary care  practices  acquired in February 1995, a
three-facility  primary care practice acquired in June 1995 and two rheumatology
practices acquired in 1996.

     Under   shared-risk   capitation   arrangements,    which   accounted   for
approximately  7.8% of the Company's net revenue in 1997, the Company receives a
fixed monthly amount from a managed care organization in exchange for providing,
or arranging  the provision  of,  substantially  all of the health care services
required  by members of the managed  care  organization.  The Company  generally
provides all of the primary care services required under such arrangements,  and
refers its patients to unaffiliated specialist physicians,  hospitals, and other
health care  providers  which deliver the remainder of the required  health care
services. The Company's  profitability under such arrangements is dependent upon
its ability to effectively manage the use of specialist physician,  hospital and
other health care services by its patients.

     In order to  effectively  manage  the  Company's  growth  generated  by the
acquisition of physician  practices the Company made significant  investments in
personnel, computer equipment, computer software and other infrastructure costs.
These  investments  resulted in significant  increases in salaries and benefits,
general and administrative  expenses,  and capital  expenditures during 1996 and
1995, compared to prior years.

     As a result of the 1994 Acquisition and several transactions with physician
practices completed by the Company and its Predecessor,  goodwill  constitutes a
substantial  percentage  of the total assets of the Company,  and the  Company's
results of operations include  substantial  expenses for goodwill  amortization.
Goodwill is the excess of the  purchase  price of acquired  businesses  over the
fair  value of the net  assets of those  acquired  businesses  (which net assets
include any separately identifiable intangible assets). As of December 31, 1997,
the  Company's  total  assets  were  approximately   $87.0  million,   of  which
approximately  $54.2 million,  or 62.2%, was goodwill.  Of the total goodwill at
December 31, 1997, $28.6 million is related to the 1994  Acquisition,  and $25.6
million is related to several  acquisitions of physician  practices completed by
the Predecessor and the Company.


                                       14
<PAGE>


     The goodwill related to the 1994  Acquisition  represents the going concern
value of the  Company,  which  consists of the  Company's  market  position  and
reputation,  its relationships with its customers and affiliated physicians, the
relationships  between its affiliated  physicians and their patients,  and other
similar  intangible  assets.  Since these  assets are believed by the Company to
have useful lives of an indefinite  length,  and the Company is not aware of any
facts or circumstances  that would limit the useful lives of these assets,  this
goodwill is being  amortized  over 40 years.  The Company  also  acquired  other
intangible  assets as part of the 1994  Acquisition,  including the value of the
Company's physician employee workforce,  management team, non-physician employee
workforce and computer  software.  These intangible assets have been capitalized
separately  from goodwill and are being  amortized over their  estimated  useful
lives, which range from five to seven years.

     The  goodwill  related to the  acquisitions  of  physician  practices  also
represents the going concern value of those practices.  However, since the going
concern  value  of  an  individual  physician  practice,  or a  small  group  of
practices, is subject to a higher degree of risk than the Company as a whole and
may be more  adversely  affected  by changes in the health care  industry,  this
goodwill is being amortized over shorter periods ranging from 10 to 20 years.

     The goodwill  related to the  acquisition  of options to acquire  physician
practices  and the  simultaneous  execution of  management  agreements  with the
practices  represents  the going concern value of those  management  agreements.
This goodwill is being  amortized  over the terms of the  management  agreements
which range from 20 to 40 years.

     The Company  continuously  evaluates  all  components of goodwill and other
intangible  assets to determine  whether  there has been any  impairment  of the
carrying  value of  goodwill  or such other  intangible  assets or their  useful
lives.  The Company is not aware of any such  impairment  at the  current  time,
except  for  the  impairment   included  in  the  $17.4  million  write-down  of
office-based net assets in 1996 discussed above,  which resulted  primarily from
the Company's change in strategic direction.

RESULTS OF OPERATIONS

     The following table shows certain statement of operations data expressed as
a percentage of net revenue:
<TABLE>
<CAPTION>

                                                                               Year Ended December 31,
                                                                      ---------------------------------------
                                                                         1997           1996          1995
                                                                      -----------   -----------   -----------

         <S>                                                                <C>           <C>           <C>
         Net revenue.............................................           100.0%        100.0%        100.0%
         Operating expenses:
            Direct facility expenses.............................            69.9          71.3          73.4
            Provision for bad debts..............................             4.1           3.9           3.6
            Salaries and benefits................................             7.5           7.5           8.3
            General and administrative...........................             5.0           4.9           6.1
            Write-down of office-based net assets................             ---          18.7           ---
            Amortization.........................................             2.1           2.7           4.1
            Depreciation.........................................              .7           1.1           0.9
                                                                      -----------   -----------   -----------
               Total operating expenses..........................            89.3         110.1          96.4
                                                                      -----------   -----------   -----------
         Operating income (loss).................................            10.7%        (10.1)%         3.6%
                                                                     ============  ============   ===========
</TABLE>

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

     Net revenue increased $5.8 million,  or 6.3%, from $92.8 million in 1996 to
$98.6 million in 1997. Net revenue from  hospital-based  services increased $6.6
million,  from $63.9 million in 1996 to $70.5 million in 1997. Of this increase,
$3.9 million was due to growth from  existing  contracts and the addition of new
contracts  for  hospital-based  services,  and  $2.7  million  was  due  to  the
acquisition  of a  hospital-based  neonatology  and pediatric  practice in March
1996,  as  described  in  Note  2 to  the  accompanying  consolidated  financial
statements.  Net revenue from office-based  services  decreased  $800,000,  from
$28.9  million in 1996 to $28.1  million in 1997.  This  decrease was due to the
sale of two primary care  practices and two  rheumatology  practices  during the
period from December 1996 to April 1997,  offset by acquisitions  which occurred
throughout  1997,  as  described  in  Note  2 to the  accompanying  consolidated
financial statements.


                                       15
<PAGE>

     Direct  facility  expenses  increased  $2.8  million,  or 4.2%,  from $66.1
million in 1996 to $68.9 million in 1997.  Direct facility  expenses include all
operating expenses that are incurred at the location of the physician  practice,
including  salaries,   employee  benefits,  referral  claims  (in  the  case  of
shared-risk capitation business),  office expenses, medical supplies,  insurance
and other expenses.  The increase in direct facility  expenses was primarily due
to the acquisition of a  hospital-based  neonatology and pediatrics  practice in
March  1996 and the  growth in new and  existing  contracts  for  hospital-based
services,  as discussed in the preceding paragraph offset by a decline in direct
facility  expenses  associated  with the practices  sold. As a percentage of net
revenue, direct facility expenses decreased from 71.3% in 1996 to 69.9% in 1997.
The decrease of the direct facility expense  percentage is due to a shift in the
Company's  revenue in its  office-based  services from shared risk capitation to
fee-for-service.   The  Company's   practices   that   generate   revenue  on  a
fee-for-service  basis have had lower direct facility  expenses  associated with
their operation.

     The provision for bad debts increased $461,000, or 12.8%, from $3.6 million
in 1996 to $4.1 million in 1997. This increase was due to a 6.3% increase in net
revenue,  as  discussed  above,  and  an  additional  allowance  for  bad  debts
associated  with  the  office-based  practices  sold  or  held  for  sale.  As a
percentage of net revenue,  the provision for bad debts increased  slightly from
3.9% in 1996 to 4.1% in 1997.

     Salaries and benefits  increased  $457,000,  or 6.6%,  from $7.0 million in
1996 to $7.4 million in 1997.  This increase was  attributable  to the Company's
hiring of  personnel  necessary  to support  the  growth  that  occurred  in the
Company's hospital-based services. As a percentage of net revenue,  salaries and
benefits was constant from 1996 to 1997 at 7.5%.

     General and administrative  expense increased $339,000,  or 7.4%, from $4.6
million  in  1996  to  $4.9  million  in  1997.  The  increase  in  general  and
administrative  expenses was  primarily  due to an increase in legal fees due to
the litigation  discussed in Note 7 to the accompanying  consolidated  financial
statements,  and increases in various office expenses to support the increase in
the number of employees indicated in the preceding paragraph. As a percentage of
net revenue,  general and administrative expense increased slightly from 4.9% in
1996 to 5.0% in 1997.

     Due to a change in the Company's  strategic  direction,  as discussed above
under   "General,"  the  Company  wrote  down  certain  assets  related  to  its
office-based  operations  to their  estimated  realizable  values,  and  accrued
certain  liabilities for commitments  that no longer have value to the Company's
future  operations.  These  adjustments  resulted in a $17.4  million  charge to
earnings  in 1996.  See Note  1(j) to the  accompanying  consolidated  financial
statements for more information.

     Amortization  expense  decreased  $395,000,  or 15.9%, from $2.5 million in
1996  to  $2.1  million  in  1997.  This  decrease  was  due  to a  decrease  in
amortization expense related to goodwill and intangible assets that were written
down to their estimated realizable values during the fourth quarter of 1996, and
the sale of four office-based practices during 1997, partially offset by several
acquisitions of physician practices during 1997.

     Operating  income  increased from an operating loss of $9.4 million in 1996
to operating  income of $10.5 million in 1997. The increase was primarily due to
the  $17.4  million  write-down  discussed  above.  Excluding  this  write-down,
operating  income  increased from $8.0 million in 1996 to $10.5 million in 1997,
an increase of $2.5 million or 31.3%.  This increase in operating  income is due
to the acquisition of a  hospital-based  neonatology and pediatrics  practice in
March 1996 as discussed above,  improved operating  performance in 1997 from the
Company's  office-based  practices and a decrease in  amortization  expense,  as
discussed above.

     Interest  expense  decreased  from $2.6  million in 1996 to $2.5 million in
1997.  This decrease was primarily due to a lower interest rate on the revolving
credit  facility  established  in March 1997 as compared to the previous  credit
facility.


                                       16
<PAGE>

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

     Net revenue  increased $28.1 million,  or 43.5%, from $64.7 million in 1995
to $92.8 million in 1996.  Net revenue from  hospital-based  services  increased
$20.1  million,  from $43.8  million in 1995 to $63.9  million in 1996.  Of this
increase,  $10.0  million was due to the addition of several new  contracts  for
hospital-based  services,  and  $9.7  million  was due to the  acquisition  of a
hospital-based neonatology and pediatric practice in March 1996, as described in
Note 2 to the accompanying  consolidated financial statements.  Net revenue from
office-based  services  increased  $8.1  million,  from $20.8 million in 1995 to
$28.9 million in 1996.  This increase was primarily due to several  acquisitions
of  office-based  physician  practices  from  February  1995 to October 1996, as
described in Note 2 to the accompanying consolidated financial statements, which
were  partially  offset by a decline  in the  number of  patients  served  under
shared-risk capitation arrangements.

     Direct  facility  expenses  increased $18.6 million,  or 39.3%,  from $47.5
million in 1995 to $66.1 million in 1996.  Direct facility  expenses include all
operating expenses that are incurred at the location of the physician  practice,
including  salaries,   employee  benefits,  referral  claims  (in  the  case  of
shared-risk capitation business),  office expenses, medical supplies,  insurance
and other expenses.  The increase in direct facility  expenses was primarily due
to several  acquisitions  of physician  practices  and several new contracts for
hospital-based   services,  as  discussed  in  the  preceding  paragraph.  As  a
percentage of net revenue, direct facility expenses decreased from 73.4% in 1995
to 71.3% in 1996. The direct  facility  expense  percentage  for  hospital-based
services  decreased  from  64.7% in 1995 to 61.0% in  1996.  This  decrease  was
primarily  due to a decrease  in payroll  and  employee  benefits  for  clinical
personnel,  and a decrease in malpractice  expense,  both as a percentage of net
revenue,  in  same-store  contracts  for  hospital-based  services.  The  direct
facility expense  percentage for office-based  services  increased from 91.7% in
1995 to 94.0% in 1996. This increase was primarily due to increased  utilization
of  referral   specialists  and  hospital  services  by  patients  served  under
shared-risk capitation arrangements.

     The provision for bad debts  increased  $1.3 million,  or 55.1%,  from $2.3
million in 1995 to $3.6 million in 1996.  This  increase was  primarily due to a
43.5%  increase in net revenue,  as  discussed  above.  As a  percentage  of net
revenue,  the  provision for bad debts  increased  slightly from 3.6% in 1995 to
3.9% in 1996.

     Salaries and benefits  increased $1.6 million,  or 29.1%, from $5.4 million
in 1995 to  $7.0  million  in  1996.  This  increase  was  primarily  due to the
acquisition  of a  hospital-based  neonatology  and pediatric  practice in March
1996,  as  discussed  above,  an increase  in the  Company's  general  corporate
organization  to  support  growth of the  Company,  and the  development  of the
Company's primary care management  infrastructure,  which occurred  primarily in
the second and third quarters of 1995. As a percentage of net revenue,  salaries
and  benefits  decreased  from 8.3% in 1995 to 7.5% in 1996  primarily  due to a
43.5% increase in net revenue, as discussed above.

     General and administrative  expense increased $585,000, or 14.7%, from $4.0
million in 1995 to $4.6 million in 1996.  This increase was primarily due to the
acquisition  of a  hospital-based  neonatology  and pediatric  practice in March
1996, as discussed above, an expansion of the corporate office, and increases in
various  office  expenses  to support the  increase  in the number of  employees
indicated in the preceding  paragraph.  As a percentage of net revenue,  general
and administrative expense decreased from 6.1% in 1995 to 4.9% in 1996 primarily
due to a 43.5% increase in net revenue, as discussed above.

     Due to a change in the Company's  strategic  direction,  as discussed above
under   "General,"  the  Company  wrote  down  certain  assets  related  to  its
office-based  operations  to their  estimated  realizable  values,  and  accrued
certain  liabilities for commitments  that no longer have value to the Company's
future  operations.  These  adjustments  resulted in a $17.4  million  charge to
earnings  in 1996.  See Note  1(i) to the  accompanying  consolidated  financial
statements for more information.

     Amortization expense decreased $139,000, or 5.3%, from $2.6 million in 1995
to $2.5 million in 1996.  This decrease was  primarily  due to a $700,000  bonus
paid to a  physician  employed  by a practice  acquired  by the Company in 1995,
which was included in amortization expense during 1995, as discussed above under
"General," which was partially offset by amortization of the goodwill related to
several  acquisitions of physician practices from February 1995 to October 1996,
as discussed in Note 2 to the accompanying consolidated financial statements.


                                       17
<PAGE>

     Operating  income  decreased $11.7 million,  from operating  income of $2.3
million in 1995 to an operating loss of $9.4 million in 1996.  This decrease was
primarily due to the $17.4 million  write-down  discussed above.  Excluding this
write-down,  operating income increased $5.7 million,  from $2.3 million in 1995
to $8.0 million in 1996. Operating income from hospital-based services increased
by $6.4 million,  from $9.3 million in 1995 to $15.7 million in 1996,  primarily
due to the addition of several new contracts for  hospital-based  services,  the
acquisition  of a  hospital-based  neonatology  and pediatric  practice in March
1996,  and cost  reductions  implemented in same-store  contracts,  as discussed
above. The operating loss from office-based  services increased  $471,000,  from
$1.5 million in 1995 to $2.0 million in 1996.  The decline in operating  results
was primarily due to increased  utilization of referral specialists and hospital
services by patients served under shared-risk capitation arrangements, which was
partially  offset by the  $700,000  bonus paid to an  office-based  physician in
1995, as discussed above.

     Interest expense decreased $1.7 million,  from $4.3 million in 1995 to $2.6
million in 1996.  This  decrease  was  primarily  due to the  repayment of $26.1
million of long-term  debt with the  proceeds of the  Company's  initial  public
offering  in  November  1995,  which was  partially  offset by  additional  debt
incurred during 1996 to finance acquisitions of physician practices.

LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 1997 the Company had $13.7 million in working  capital,  up
from $8.3 million as of December 31,  1996.  At December 31, 1997,  net accounts
receivable of $21.6 million amounted to 80 days of net revenue compared to $18.7
million and 74 days at December  31,  1996.  This  increase is  attributable  to
growth in fee-for  service  revenue  and a decline in revenue  from  shared-risk
capitation which has no associated accounts receivable.

     On March 12,  1997,  the Company  established  a new $35 million  revolving
credit facility with NationsBank,  National Association  ("NationsBank"),  which
was used to repay the outstanding balance under the previous facility, which was
$25.2 million.  On December 17, 1997, the Company amended its existing revolving
credit facility with  NationsBank,  which  increased the total revolving  credit
commitment  from $35 million to $50 million.  The credit facility bears interest
at the London interbank  offered rate plus an applicable margin which is subject
to  quarterly  adjustment  based  on a  leverage  ratio  defined  in the  credit
agreement. As of March 12, 1998, the applicable margin was 1.88%. The Company is
also required to pay a commitment  fee on a quarterly  basis based on the unused
portion  of the total  commitment.  The fee  ranges  from  0.25% to 0.50% and is
subject to quarterly adjustments based on a leverage ratio defined in the credit
agreement.  There are no principal  payments  due under the new credit  facility
until the maturity date of December 16, 2000.

     The amount that can be borrowed under the credit  facility is restricted by
a leverage ratio defined in the credit agreement.  The outstanding balance under
the credit facilities increased from $20.0 million at December 31, 1996 to $29.0
million at December 31, 1997, primarily due to several acquisitions of physician
practices  completed during 1997. The outstanding  balance  increased from $29.0
million at December  31,  1997 to $47.5  million at March 12,  1998,  due to the
acquisition of four physician  practices from January through March 1998.  Based
on the  value of the  leverage  ratio as of March  12,  1998,  the  Company  had
additional  borrowing  availability of $2.4 million.  Certain conditions must be
met,  including the  maintenance  of certain  financial  ratios,  and in certain
circumstances, the approval of NationsBank must be obtained, in order to use the
credit facility to finance acquisitions of physician practices.  There can be no
assurance  that the Company will be able to satisfy such  conditions in order to
use its credit facility to finance any future acquisitions.

     The  Company's  principal  uses of cash during the year ended  December 31,
1997 were to finance  acquisitions of physician  practices ($11.0  million),  to
make  payments on long-term  debt ($1.1  million),  and to finance  increases in
accounts  receivable  ($3.9  million).  The $3.9  million  increase  in accounts
receivable was due to new contracts for hospital-based services added during the
year ended December 31, 1997 and an increase in accounts  receivable  associated
with the Company's shift from shared risk capitation  revenue to fee-for-service
revenue in its  office-based  practices.  The Company met its cash needs  during
this period  primarily  through  borrowings  under its revolving credit facility
with  NationsBank  ($8.9  million)  proceeds  from the sale of two primary  care
practices  and two  rheumatology  practices  ($3.4  million) and its net income,
excluding non-cash expenses (amortization and depreciation) ($7.9 million).

                                       18
<PAGE>

    In March 1996,  the Company  issued  approximately  658,000 shares of common
stock as partial consideration for an acquisition of a hospital-based  physician
practice  completed in March 1996,  as  discussed in Note 2 to the  accompanying
consolidated  financial  statements.   In  November  1997,  the  Company  issued
approximately  14,000  shares of common  stock as partial  consideration  for an
acquisition  of an  office-based  physician  practice.  During the  period  from
January  1998  through  March 1998 the Company  issued  approximately  1,384,000
shares of common  stock as partial  consideration  for the  acquisition  of four
practices.

    In order to provide  funds  necessary  for the  Company's  future  expansion
strategies,  it will be necessary  for the Company to incur,  from time to time,
additional   long-term  bank  indebtedness   and/or  to  issue  equity  or  debt
securities,  depending on market and other conditions.  The Company is currently
negotiating  with a syndicate of banks lead by NationsBank to increase the total
revolving  credit  commitment  from $50 million to $65 million.  There can be no
assurance that such additional  financing will be available on terms  acceptable
to the Company.

     Net cash provided by operating activities was $5.3 million in 1996 compared
to $1.1 million of cash provided by operating  activities in 1997.  The decrease
in cash  provided by operating  activities is due to an increase in amounts paid
for income taxes during 1997, an increase in accounts  receivable  related to an
increase in fee-for-service revenue and an increase in other current assets.

    Net cash used by investing  activities  decreased from $14.8 million in 1996
to $8.5 million in 1997, primarily due to an decrease in cash used for physician
practice  acquisitions  from $13.7  million in 1996 to $11.0 million in 1997 and
the  cash  generated  from  the  sale  of two  primary  care  practices  and two
rheumatology  practices.  Cash used for capital expenditures decreased from $1.2
million to $934,000  primarily due to the  termination  in 1996 of the Company's
development of an integrated management  information system for its office-based
operations.

    Net cash  provided by financing  activities  decreased  from $9.6 million in
1996 to $7.8 million in 1997.  Net  borrowings on long-term  debt decreased from
$14.0  million in 1996 to $8.9  million in 1997.  The net  borrowings  were used
primarily to finance acquisitions in 1997.

NEW ACCOUNTING PRONOUNCEMENTS

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial  Accounting  Standards No. 129,  "Disclosures of Information  about
Capital Structure",  ("SFAS No. 129") which is effective for fiscal years ending
after December 15, 1997. SFAS No. 129 requires  disclosing  information about an
entity's  capital  structure.  The impact of  adopting  SFAS No. 129 in 1997 was
immaterial.

     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income", ("SFAS
No.  130"),  which is  required  to be adopted in fiscal  1998.  This  statement
established  standards to reporting and display of comprehensive  income and its
components in a full set of general-purpose financial statements. This statement
requires that an enterprise (a) classify items of other comprehensive  income by
their nature in financial  statements and (b) display the accumulated balance of
other  comprehensive  income  separately  from retained  earnings and additional
paid-in  capital in the equity  section of  statements  of  financial  position.
Comprehensive  income is defined as the  change in equity  during the  financial
reporting period of a business enterprise  resulting from non-owner sources. The
Company  currently does not have other  comprehensive  income and therefore does
not believe the adoption of SFAS No. 130 will have a  significant  impact on its
financial statement presentation.

     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise and Related  Information",  ("SFAS No. 131"), which is required to be
adopted  in  fiscal  1998.  This  statement  requires  that  a  public  business
enterprise  report  financial and descriptive  information  about its reportable
operating segments including, among other things, a measure of segment profit or
loss,  certain  specific  revenue and expense  items,  and segment  assets.  The
Company  does not believe the  adoption of SFAS No. 131 will have a  significant
impact on its financial statement presentation.



                                       19
<PAGE>


Item 8.  Financial Statements and Supplementary Data

<TABLE>

                                    Index to Financial Statements
<CAPTION>

                                                                                               Page
         <S>                                                                                    <C>
         Report of Independent Certified Public Accountants.............................        21
         Consolidated Balance Sheets as of December 31, 1997 and 1996...................        22
         Consolidated Statements of Operations for the Years ended December 31,
           1997, 1996 and 1995..........................................................        23
         Consolidated Statements of Stockholders' Equity for the Years ended
           December 31, 1997, 1996 and 1995.............................................        24
         Consolidated Statements of Cash Flows for the Years ended December 31,
           1997, 1996 and 1995..........................................................        25
         Notes to Consolidated Financial Statements.....................................       26-40

</TABLE>



                                       20
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Stockholders of
  Sheridan Healthcare, Inc.:


We have  audited  the  accompanying  consolidated  balance  sheets  of  Sheridan
Healthcare,  Inc. (a Delaware  corporation)  and subsidiaries as of December 31,
1997  and  1996,  and  the  related   consolidated   statements  of  operations,
stockholders'  equity  and  cash flow for each of the   three   years  ended
December 31, 1997. These financial  statements are the responsibility  of the
Company's management. Our  responsibility  is to express  an  opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Sheridan Healthcare
Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.




ARTHUR ANDERSEN LLP



Miami, Florida,
  February  23, 1998  (except the matter  discussed  in Note 10, as to which the
  date is March 12, 1998).



                                       21
<PAGE>


<TABLE>


                                             SHERIDAN HEALTHCARE, INC.
                                            CONSOLIDATED BALANCE SHEETS
                                       (in thousands, except per share data)
<CAPTION>


                                                                                                 December 31,
                                                                                           ------------------------
                                                                                              1997         1996
                                                                                           ----------   -----------

                                                      ASSETS
Current assets:
   <S>                                                                                     <C>          <C>
   Cash and cash equivalents..........................................................     $      427   $       ---
   Accounts receivable, less allowances of $1,828 and $1,277..........................         21,588        18,717
   Income tax refunds receivable......................................................          1,280           570
   Deferred income taxes..............................................................          1,417         1,154
   Other current assets...............................................................          2,814         1,845
                                                                                           ----------   -----------
     Total current assets.............................................................         27,526        22,286
Property and equipment, net of accumulated depreciation of $2,950 and $2,637..........          3,538         3,730
Goodwill, net of accumulated amortization of $15,798 and $17,756......................         54,168        46,111
Other intangible assets, net of accumulated amortization of $1,712 and $1,942.........          1,803         1,281
                                                                                           ----------   -----------
     Total assets.....................................................................     $   87,035   $    73,408
                                                                                           ==========   ===========

                                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable...................................................................     $      591   $       222
   Amounts due for acquisitions.......................................................            527           558
   Accrued salaries and benefits......................................................          2,686         2,798
   Self-insurance accruals............................................................          3,973         3,170
   Refunds payable....................................................................          2,674         1,952
   Accrued lease obligations..........................................................            338           971
   Accrued physician incentives.......................................................            744           659
   Other accrued expenses.............................................................          1,897         2,431
   Current portion of long-term debt..................................................            446         1,189
                                                                                           ----------   -----------
     Total current liabilities........................................................         13,876        13,950
Long-term debt, net of current portion................................................         29,833        21,367
Amounts due for acquisitions..........................................................          1,976         2,133
Commitments and contingencies (Note 7)
Stockholders' equity:
   Preferred stock, par value $.01; 5,000 shares authorized; none issued..............            ---           ---
   Common stock, par value $.01; 21,000 shares authorized in 1997,
     31,000 shares authorized in 1996:
     Voting; 6,509 and 6,418 shares issued and outstanding............................             66            64
     Class A non-voting; 297 shares issued and outstanding............................              3             3
   Additional paid-in capital.........................................................         61,352        61,129
   Excess purchase price distributed to management stockholders.......................         (7,541)       (7,541)
   Accumulated deficit................................................................        (12,530)      (17,697)
                                                                                           ----------   -----------
     Total stockholders' equity ......................................................         41,350        35,958
                                                                                           ----------   -----------
     Total liabilities and stockholders' equity.......................................     $   87,035   $    73,408
                                                                                           ==========   ===========
</TABLE>







                                              See accompanying notes.

                                       22
<PAGE>

<TABLE>

                                             SHERIDAN HEALTHCARE, INC.
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                       (in thousands, except per share data)
<CAPTION>





                                                                                     Year Ended December 31,
                                                                             --------------------------------------
                                                                                 1997         1996         1995
                                                                             -----------  -----------   -----------

<S>                                                                          <C>          <C>           <C>
Net revenue..............................................................    $    98,616  $    92,767   $    64,665
Operating expenses:
   Direct facility expenses..............................................         68,919       66,125        47,477
   Provision for bad debts...............................................          4,066        3,605         2,324
   Salaries and benefits.................................................          7,424        6,967         5,398
   General and administrative............................................          4,900        4,561         3,976
   Write-down of office-based net assets.................................            ---       17,360           ---
   Amortization..........................................................          2,096        2,491         2,630
   Depreciation..........................................................            689        1,023           559
                                                                             -----------  -----------   -----------
     Total operating expenses............................................         88,094      102,132        62,364
                                                                             -----------  -----------   -----------
Operating income (loss)..................................................         10,522       (9,365)        2,301
Interest expense, net....................................................          2,461        2,572         4,254
                                                                             -----------  -----------   -----------
Income (loss) before income taxes and extraordinary item.................          8,061      (11,937)       (1,953)
Income tax expense (benefit).............................................          2,894           189         (456)
                                                                             -----------  ------------  -----------
Income (loss) before extraordinary item..................................          5,167      (12,126)       (1,497)
Extraordinary item (Note 1(k))...........................................            ---          ---        (2,184)
                                                                             -----------  -----------   -----------
Net income (loss)........................................................    $     5,167  $   (12,126)  $    (3,681)
                                                                             ===========  ===========   ===========

Dividends on convertible preferred stock.................................                                     1,363
                                                                                                        -----------
Net loss attributable to common stockholders.............................                               $    (5,044)
                                                                                                        ===========

Income (loss) before extraordinary item per share........................
     Basic...............................................................           0.77        (1.84)        (1.05)
     Diluted.............................................................           0.73        (1.84)        (1.05)
Net income (loss) per share
     Basic...............................................................           0.77        (1.84)        (1.86)
     Diluted.............................................................           0.73        (1.84)        (1.86)
Weighted average shares of common stock
   and common stock equivalents outstanding
     Basic...............................................................          6,722        6,587         2,713
     Diluted.............................................................          7,035        6,587         2,713


</TABLE>













                                              See accompanying notes.




                                       23
<PAGE>

<TABLE>

                                                              SHERIDAN HEALTHCARE, INC.
                                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                                     (in thousands)
<CAPTION>

                                                                                                        Excess
                                                                                                       Purchase
                                                   Convertible Preferred Stock                           Price
                       Voting         Class A    -------------------------------                       Distributed
                    Common Stock   Common Stock       Class A        Class B     Additional               to
                    ------------- -------------- --------------- ---------------  Paid-in Subscriptions ManagementAccumulated
                    Shares Amount Shares  Amount Shares   Amount Shares   Amount  Capital Receivable Stockholders  Deficit   Total
                    ------ ------ ------  ------ ------ -------- ------  ------- -------- ---------- ------------ --------- -------

<S>                    <C> <C>        <C> <C>       <C>   <C>       <C> <C>      <C>      <C>      <C>          <C>        <C>
Balance,
  January 1, 1995      410 $    4     --- $  ---    350 $ 17,500     79 $  3,929 $    234 $   (238)$   (7,541)    $  (527) $ 13,361
Issuance of common
  stock in initial
  public offering    3,825     38     ---    ---    ---      ---    ---      ---   44,802      ---        ---         ---    44,840
Conversion of
  convertible
  preferred stock
  to common
  stock and
  redeemable
  preferred stock
  and
  redemption of
  redeemable
  preferred stock... 1,321      13     297       3   (350)(17,500)    (79) (3,929)   5,342      ---        ---        ---   (16,071)
Conversion of
  convertible note
  to common stock....  182       2     ---     ---    ---     ---     ---     ---    4,882      ---        ---        ---     4,884
Issuance of common
  stock in acquisition. 35       1     ---     ---    ---     ---     ---     ---      460      ---        ---        ---       461
Collection of
  subscriptions
  receivable........   ---     ---     ---     ---    ---     ---     ---     ---      ---      238        ---        ---       238
Dividends on
  convertible
  preferred stock...   ---     ---     ---     ---    ---     ---     ---     ---      ---      ---        ---     (1,363)   (1,363)
Net loss............   ---     ---     ---     ---    ---     ---     ---     ---      ---      ---        ---     (3,681)   (3,681)
                   ------- ------- ------- -------- ----- ------- ------- -------  -------  -------    -------  ---------  --------
Balance,
  December 31, 1995  5,773      58     297        3   ---     ---     ---     ---   55,720      ---     (7,541)    (5,571)   42,669
Issuance of common
  stock in
  acquisition.......   658       6     ---      ---   ---     ---     ---     ---    5,417      ---        ---        ---     5,423
Treasury shares
  purchased and
  retired...........   (13)    ---     ---     ---    ---     ---     ---     ---       (8)      ---       ---        ---        (8)
Net loss............   ---     ---     ---     ---    ---     ---     ---     ---      ---       ---       ---    (12,126)  (12,126)
                    ------ ------- ------- ------- ------ ------- -------  ------  -------   -------   -------   --------  --------
Balance,
  December 31, 1996  6,418      64     297      3     ---     ---     ---     ---   61,129       ---    (7,541)   (17,697)   35,958
Issuance of common
  stock upon exercise
  of employee stock
  options ..........   77       1     ---     ---    ---     ---     ---      ---       53       ---       ---        ---        54
Issuance of common
  stock in
  acquisition .        14       1     ---     ---    ---     ---     ---      ---      170       ---       ---        ---       171
Net income.. ...      ---     ---     ---     ---    ---     ---     ---      ---      ---       ---       ---      5,167     5,167
                  ------- ------- ------- -------  ----- ------- -------  -------  -------   -------   -------  ---------  --------
Balance,
  December 31,
  1997             6,509 $    66     297 $    3     --- $   ---     ---  $    ---  $61,352   $   ---  $ (7,541) $ (12,530) $ 41,350
                  ====== ======= ======= ====== ======= ======= =======  ========  =======   =======  ========  =========  ========




</TABLE>
















                                                       See accompanying notes.



                                       24
<PAGE>

<TABLE>


                                                          SHERIDAN HEALTHCARE, INC.
                                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                               (in thousands)
<CAPTION>



                                                                                     Year Ended December 31,
                                                                             -------------------------------------
                                                                                 1997         1996         1995
                                                                             -----------  -----------   ----------
<S>                                                                          <C>          <C>           <C>
Cash flows from operating activities:
   Net income (loss).......................................................  $     5,167  $   (12,126)  $   (3,681)
   Adjustments to reconcile net income (loss) to
     net cash provided (used) by operating activities:
     Write-down of office-based net assets.................................          ---       17,360           ---
     Amortization..........................................................        2,096        2,491         2,630
     Depreciation..........................................................          689        1,023           559
     Provision for bad debts...............................................        4,066        3,605         2,324
     Net interest amortization on subordinated debt........................          ---          ---           425
     Deferred income taxes.................................................         (263)      (1,154)         (167)
   Changes in operating assets and liabilities:
     Accounts receivable...................................................       (7,997)      (7,076)       (5,214)
     Income tax refunds receivable.........................................         (710)         190          (760)
     Other current assets..................................................       (1,125)        (486)           17
     Other assets..........................................................         (655)         207           ---
     Accounts payable and accrued expenses.................................         (215)       1,229           349
                                                                             -----------  -----------   -----------
     Net cash provided (used) by operating activities......................        1,053        5,263        (3,518)
Cash flows from investing activities:
   Acquisitions of physician practices.....................................      (10,867)     (12,517)       (7,419)
   Investments in management agreements....................................          (62)      (1,245)          ---
   Sale of physician practices.............................................        3,388          193           ---
   Capital expenditures....................................................         (934)      (1,245)         (471)
                                                                             -----------  ------------   ----------
     Net cash used by investing activities.................................       (8,475)     (14,814)       (7,890)
Cash flows from financing activities:
   Borrowings on long-term debt............................................        9,005       13,997        15,465
   Issuance of convertible promissory note.................................          ---          ---         5,000
   Payments on long-term debt..............................................       (1,210)      (4,438)      (39,282)
   Issuance of common stock in public offering.............................          ---          ---        44,840
   Redemption of redeemable preferred stock................................          ---          ---       (16,071)
   Dividends on convertible preferred stock................................          ---          ---        (1,363)
   Collection of subscriptions receivable..................................          ---          ---           238
   Exercise of employee stock options......................................           54          ---           ---
   Treasury shares purchased and retired...................................          ---           (8)          ---
                                                                             -----------  -----------   -----------
     Net cash provided by financing activities.............................        7,849        9,551         8,827
                                                                             -----------  -----------   -----------
Increase (decrease) in cash and cash equivalents...........................          427          ---        (2,581)
Cash and cash equivalents, beginning of period.............................          ---          ---         2,581
                                                                             -----------  -----------   -----------
Cash and cash equivalents, end of period...................................  $       427  $       ---   $       ---
                                                                             ===========  ===========   ===========

Supplemental disclosures of cash flow information:
Cash paid for interest.....................................................  $     2,338  $     2,588   $     3,779
Cash paid for income taxes.................................................        3,867        2,110         1,971
Capital leases entered into................................................          ---          ---         1,887



</TABLE>





                                                       See accompanying notes.



                                       25
<PAGE>



                            SHERIDAN HEALTHCARE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)  SIGNIFICANT ACCOUNTING POLICIES

(a) Organization

     Sheridan Healthcare,  Inc. (the "Company") was established in November 1994
concurrently with its purchase of the common stock of Sheridan Healthcorp,  Inc.
(formerly,   Southeastern   Anesthesia   Management   Associates,   Inc.)   (the
"Predecessor")   (the  "1994  Acquisition")  for  $43.3  million  in  cash.  The
acquisition was accounted for as a purchase, and accordingly, the purchase price
was allocated to the net assets  acquired  based on their  estimated fair market
values at the date of acquisition.  The management group of the Predecessor held
approximately  20% of its outstanding  common stock prior to the acquisition and
became the management  group of the Company,  holding  approximately  18% of its
outstanding common stock and equivalents after the acquisition. Accordingly, 18%
of the purchase price was considered a distribution  to management  stockholders
in excess  of their  basis in the  common  stock of the  Predecessor,  which was
approximately  $249,000.  Such excess is  reflected  as "Excess  purchase  price
distributed to management  stockholders" in the accompanying  balance sheets and
was not  allocated to the net assets  acquired.  As a result of the  allocation,
$31.2 million of the purchase price was allocated to goodwill.

(b) Principles of Consolidation

     The consolidated  financial  statements include the accounts of the Company
and its majority owned  subsidiaries and other entities in which the Company has
more than 50% ownership interest or a controlling financial interest.

     In  November  1997,  the  Emerging  Issues  Task Force  ("EITF")  reached a
consensus  on  when  a  physician   practice   management  company  ("PPM")  has
established a controlling  financial  interest in a physician practice through a
contractual  management  service  agreement  ("MSA").  A  controlling  financial
interest  must  exist in order for a PPM to  consolidate  the  operations  of an
affiliated  physician  practice.  The consensus is addressed in EITF Issue 97-2,
"Application of Physician Practice Entities".

     A controlling  financial  interest  exists  between a PPM and an affiliated
physician practice if all of the following six requirements are met; (i) the MSA
has a term that is either  the  entire  remaining  legal  life of the  physician
practice  entity or a period of 10 years or more; (ii) the MSA is not terminable
by the physician practice except in the case of gross negligence, fraud or other
illegal acts by the PPM or  bankruptcy  of the PPM;  (iii) the PPM has exclusive
authority  over all  decision  making  relating  to  ongoing  major  or  central
operations  of the  physician  practice,  except for the  dispensing  of medical
services;  (iv) the PPM has exclusive authority over all decision making related
to total practice  compensation of the licensed medical professionals as well as
the ability to establish and implement guidelines for the selection,  hiring and
firing of them; (v) the PPM must have a significant  financial  interest that is
unilaterally  salable or  transferable  by the PPM; and (vi) the PPM must have a
significant  financial  interest  that  provides  it with the  right to  receive
income,  both as on-going  fees and as proceeds from the sale of its interest in
the physician practice, in an amount that fluctuates based on the performance of
the operations (a net profit interest) of the physician  practice and the change
in the fair value thereof.

     The  Company  is  following  the  above  controlling   financial   interest
provisions of EITF Issue 97-2 in its  determination of whether the operations of
an affiliated physician practice qualify for consolidation.



                                       26
<PAGE>


                            SHERIDAN HEALTHCARE, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


(c) Accounting Estimates

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

(d) Accounts Receivable and Net Revenue

     The  Company  derives  substantially  all  of  its  revenues  from  various
third-party payors including Medicare and Medicaid programs,  health maintenance
organizations,  commercial  insurers and others. The amount of payments received
from such  third-party  payors is dependent  upon mandated  payment rates in the
case of the Medicare and Medicaid programs,  and negotiated payment rates in the
case of other  third-party  payors, as well as the specific benefits included in
each patient's applicable health care coverage. The Company records its revenues
net of an allowance for contractual  adjustments which represents the difference
between  billed  charges  and  expected  collections  from  third-party  payors.
Accordingly,   net  revenue  and  accounts   receivable  are  reflected  in  the
consolidated financial statements net of contractual allowances.

     The  Company  receives a portion of its  revenue  pursuant  to  shared-risk
capitation  arrangements with certain health  maintenance  organizations.  Under
these arrangements,  the Company generally agrees to provide certain health care
services to enrollees of the health  maintenance  organization in exchange for a
fixed amount per enrollee per month. The Company directly  provides primary care
services to the enrollees and subcontracts with specialist physicians, hospitals
and other  health care  providers  to provide the  remainder  of the health care
services to the enrollees. In order for such shared-risk capitation arrangements
to be  profitable  for  the  Company,  the  Company  must  properly  manage  the
utilization  of health  care  services by its  patients  who are subject to such
arrangements. There can be no assurance that the revenue received by the Company
under such  arrangements  will be  adequate to cover the cost of the health care
services it is required to provide.

(e) Charity Care

     The Company has agreed with certain  hospitals  to provide  charity care to
patients who are unable to pay. Such patients are identified  based on financial
information obtained from the patients and subsequent analysis. Since management
does not expect payment for such charity care, the estimated  charges related to
such patients are included in the  provision  for bad debts in the  accompanying
financial statements.

(f) Goodwill

     Approximately  $28.6  million  of the  total  amount  of  goodwill,  net of
accumulated  amortization,  at  December  31,  1997,  is  related  to  the  1994
Acquisition.   Such  goodwill  represents  the  Company's  market  position  and
reputation,  its relationships with its customers and affiliated physicians, the
relationships  between its affiliated  physicians and their patients,  and other
similar  intangible  assets.  Management  believes  that such assets have useful
lives of indefinite length, and accordingly, such goodwill is being amortized on
a straight-line basis over 40 years.



                                       27
<PAGE>



                            SHERIDAN HEALTHCARE, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


     Approximately  $14.7  million  of the  total  amount  of  goodwill,  net of
accumulated   amortization,   at  December  31,  1997,  is  related  to  several
acquisitions  of  physician  practices  by  the  Company  and  its  Predecessor.
Approximately $10.9 million of the total amount of goodwill,  net of accumulated
amortization  at December 31, 1997 is related to several  management  agreements
entered into by the Company which have been  accounted  for as  purchases.  Such
goodwill  represents the general  reputation of the practices in the communities
they serve,  the collective  experience of the management and other employees of
the  practices  in managing  health care  services  delivered  under  capitation
arrangements,  contracts with health  maintenance  organizations,  relationships
between the physicians  and their  patients,  patient  lists,  and other similar
intangible  assets. The Company evaluates the underlying facts and circumstances
related  to each  acquisition  including  the  term of the  management  services
agreement and  establishes  an appropriate  amortization  period for the related
goodwill. The goodwill related to these physician practice acquisitions is being
amortized on a straight-line basis over periods ranging from 10 to 40 years.

     The  Company  continuously   evaluates  whether  events  have  occurred  or
circumstances  exist which impact the  recoverability  of the carrying  value of
goodwill,  pursuant to  Statement  of Financial  Accounting  Standards  No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." See Note (j) below for a description of an adjustment to reduce
the carrying  values of certain  components of goodwill to their net  realizable
values during 1996.

     Separately  identifiable  intangible assets related to the 1994 Acquisition
and the  physician  practice  acquisitions  are included in  intangible  assets,
separate from goodwill, and are discussed in Note (g) below.

(g) Intangible Assets

     Intangible  assets consist primarily of the physician  employee  workforce,
non-physician employee workforce, management team and computer software acquired
in the 1994 Acquisition,  deferred  acquisition  costs,  deferred loan costs and
non-compete  covenants related to certain  acquisitions of physician  practices.
These  intangible  assets are being  amortized  over the lives of the underlying
assets or agreements,  which range from five to seven years.  See Note (j) below
for a  description  of an  adjustment  to reduce the carrying  values of certain
intangible assets to their net realizable values during 1996.

(h) Amounts Due for Acquisitions

     Amounts  due  for   acquisitions   includes   obligations   to  the  former
stockholders  of certain  physician  practices  acquired by the  Company.  These
payments are being made over the terms of the employment  agreements between the
Company and the former  stockholders,  which range from three to five years.  It
also includes  termination  benefits  payable to the former  stockholders  of an
acquired  practice,  which are payable  beginning in 2001 or upon termination of
their employment by the Company, whichever is later.

(i) Fair Value of Financial Instruments

     Statement of Financial  Accounting  Standards No. 107,  "Disclosures  About
Fair Value of Financial  Instruments,"  requires disclosure of the fair value of
certain  financial  instruments.  Accounts  receivable,  other  current  assets,
accounts  payable,  accrued  expenses and  long-term  debt are  reflected in the
accompanying financial statements at cost which approximates fair value.

                                       28
<PAGE>

                            SHERIDAN HEALTHCARE, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


(j) Write-down of Office-based Net Assets

     On  November  4, 1996,  the  Company  announced  a change in its  strategic
direction,  which was to place more emphasis on its hospital-based  business and
to reduce its emphasis on the primary care  business,  and its intent to dispose
of  non-strategic  office-based  physician  practices.  Due to  this  change  in
strategic  direction,  the  Company  wrote down  certain  assets  related to its
office-based  operations  to their  estimated  realizable  values,  and  accrued
certain  liabilities for commitments  that no longer have value to the Company's
future  operations.  These  adjustments  resulted in a $17.4  million  charge to
earnings in 1996,  which is comprised of adjustments to the following assets and
liabilities (in thousands):

<TABLE>
<CAPTION>


         <S>                                                                                   <C>
         Goodwill............................................................................  $    13,878
         Property and equipment..............................................................        1,045
         Intangible assets...................................................................          430
         Accrued expenses....................................................................        2,007
                                                                                               -----------
            Total write-down.................................................................  $    17,360
                                                                                               ===========
</TABLE>

(k) Extraordinary Item

     In  November  1995,  the  Company   incurred   extraordinary   expenses  of
approximately  $2,184,000 in connection  with the early  repayment of its senior
subordinated  note and the outstanding  balance under its senior credit facility
with the proceeds of the initial public offering,  see Note 8. The extraordinary
expenses  consist of the write-off of an unamortized  original issue discount on
the senior  subordinated note  ($1,224,000),  a prepayment penalty on the senior
subordinated  note  ($300,000),  and the write-off of unamortized  deferred loan
costs related to the senior  credit  facility and the senior  subordinated  note
($660,000).

(l) Cash and Equivalents

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

(m) Net Income (Loss) Per Share

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial  Accounting  Standards No. 128,  "Earnings  Per Share",  ("SFAS No.
128"). SFAS No. 128 simplifies the current standards for computing  earnings per
share ("EPS") under  Accounting  Principles  Board Opinion No. 15, "Earnings per
Share" by  replacing  the existing  calculation  of primary EPS with a basic EPS
calculation.  It requires a dual presentation for complex capital  structures of
basic  and  diluted  EPS on the face of the  income  statement  and  requires  a
reconciliation  of basic EPS  factors  to  diluted  EPS  factors.  The impact of
adopting SFAS No. 128 in 1997 was immaterial.  Common stock  equivalents,  which
consist of stock options issued to employees and directors,  are not included in
the determination of the net loss per fully diluted share in 1996 and 1995 since
they would have the effect of reducing the net loss per share.


                                       29
<PAGE>



                            SHERIDAN HEALTHCARE, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

<TABLE>
<CAPTION>

         RECONCILIATION OF BASIC EPS FACTORS TO DILUTED EPS FACTORS:

                                                                        1997         1996         1995
                                                                     -----------  -----------  -----------

            <S>                                                            <C>          <C>          <C>
            Weighted average common shares outstanding
              for basic earnings per share......................           6,722        6,587        2,713
            Impact of dilutive employee stock options...........             313          ---          ---
                                                                     -----------  -----------  -----------
            Weighted average of shares of
              common stock equivalents for
              diluted earnings per share........................           7,035        6,587        2,713
                                                                     ===========  ===========  ===========
</TABLE>

(n) New Accounting Standards

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial  Accounting  Standards No. 129,  "Disclosures of Information  about
Capital Structure",  ("SFAS No. 129") which is effective for fiscal years ending
after December 15, 1997. SFAS No. 129 requires  disclosing  information about an
entity's  capital  structure.  The impact of  adopting  SFAS No. 129 in 1997 was
immaterial.

     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income", ("SFAS
No.  130"),  which is  required  to be adopted in fiscal  1998.  This  statement
established  standards to reporting and display of comprehensive  income and its
components in a full set of general-purpose financial statements. This statement
requires that an enterprise (a) classify items of other comprehensive  income by
their nature in financial  statements and (b) display the accumulated balance of
other  comprehensive  income  separately  from retained  earnings and additional
paid-in  capital in the equity  section of  statements  of  financial  position.
Comprehensive  income is defined as the  change in equity  during the  financial
reporting period of a business enterprise  resulting from non-owner sources. The
Company  currently does not have other  comprehensive  income and therefore does
not believe the adoption of SFAS No. 130 will have a  significant  impact on its
financial statement presentation.

     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise and Related  Information",  ("SFAS No. 131"), which is required to be
adopted  in  fiscal  1998.  This  statement  requires  that  a  public  business
enterprise  report  financial and descriptive  information  about its reportable
operating segments including, among other things, a measure of segment profit or
loss,  certain  specific  revenue and expense  items,  and segment  assets.  The
Company  does not believe the  adoption of SFAS No. 131 will have a  significant
impact on its financial statement presentation.

(2)  ACQUISITIONS
     ------------

     In September  1994, the Predecessor  acquired a four-facility  primary care
practice  for  cash  and  notes  and  the   assumption  of  certain   contingent
obligations. The aggregate purchase price was $8.7 million, including the effect
of  certain  adjustments  to the  purchase  price  recorded  in  1995  based  on
subsequent  information.  The acquisition  was accounted for as a purchase,  and
accordingly,  the purchase price was allocated to the net assets  acquired based
on their  estimated fair market  values.  As a result of this  allocation,  $8.2
million of the purchase price was allocated to goodwill.

     In December  1994, the Company  acquired an  obstetrical  practice for $1.4
million in cash and deferred  payments.  The  acquisition was accounted for as a
purchase,  and  accordingly,  the purchase price was allocated to the net assets
acquired  based on their  estimated  fair  market  values.  As a result  of this
allocation, $841,000 of the purchase price was allocated to goodwill.

                                       30
<PAGE>


                            SHERIDAN HEALTHCARE, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


     During  the  period  from  February  to June 1995,  the  Company  made five
acquisitions  of  office-based  physician  practices  for an  aggregate  of $6.1
million in cash and deferred payments.  In a transaction related to one of those
acquisitions,  one of the principal  physicians operating the acquired practices
assigned a panel services  agreement with a health  maintenance  organization to
the  Company  for  $400,000  in cash plus  deferred  payments  of  $935,000  and
approximately 35,000 shares of common stock of the Company.  These acquisitions,
including the assignment of the panel services agreement,  were accounted for as
purchases, and accordingly, the purchase prices were allocated to the net assets
acquired  based on their fair market values.  As a result of these  allocations,
$7.3 million of the aggregate purchase price was allocated to goodwill.

     In addition to the purchase prices  described  above, the Company agreed to
make a deferred  payment  of  $700,000  to a  physician  employed  by one of the
acquired  practices,  which was paid  during  the fourth  quarter of 1995.  This
payment was treated as a bonus for  accounting  purposes and,  accordingly,  was
charged to expense in its entirety during 1995.

     In March 1996, the Company acquired a hospital-based physician practice for
$4.2 million in cash and  approximately  658,000 shares of the Company's  common
stock.  The acquisition was accounted for as a purchase,  and  accordingly,  the
purchase  price was  allocated  to the net assets  acquired  based on their fair
market  values.  As a result of this  allocation,  $9.8  million of the purchase
price was allocated to goodwill.

     During the period  from  January to October  1996,  the  Company  made five
acquisitions  of  office-based  physician  practices  for an  aggregate  of $8.2
million in cash and deferred payments.  These acquisitions were accounted for as
purchases, and accordingly, the purchase price of each acquisition was allocated
to the net assets  acquired based on their  estimated  fair market values.  As a
result of these  allocations,  $6.8 million of the aggregate  purchase price was
allocated to goodwill.

     In connection  with the change in the  Company's  strategic  direction,  as
discussed  in Note 1(j),  the Company has sold a facility  acquired in September
1994, three facilities which  constituted the practice acquired in June 1995 and
two rheumatology practices acquired during 1996. The Company intends to sell the
remaining  three  facilities  acquired in  September  1994 and two primary  care
practices acquired in February 1995.

     During the period from March 1997 to December 1997,  the Company  purchased
options to acquire five office-based  physician practices and one hospital-based
physician  practice for an aggregate of $10.8 million in cash and  approximately
14,000 shares of the Company's common stock. Concurrent with each acquisition of
an option the Company  entered into a long-term  management  agreement with each
practice.  These transactions were accounted for as purchases,  and accordingly,
the purchase price of each option was allocated to the net assets acquired based
on their estimated fair market values. As a result of these  allocations,  $11.0
million of the aggregate purchase price was allocated to goodwill.

<TABLE>
<CAPTION>

         <S>                                                                                   <C>
         Aggregate purchase price...........................................................   $    11,012
         Net assets acquired:
           Working capital..................................................................          (357)
           Property and equipment...........................................................           218
           Intangible assets................................................................           111
                                                                                               -----------
              Net assets acquired...........................................................            28
                                                                                               -----------
         Goodwill related to the acquisitions...............................................   $    11,040
                                                                                               ===========

</TABLE>

     All of  the  above  transactions  were  accounted  for  as  purchases,  and
accordingly,  the  operations  of the  acquired  practices  are  included in the
Company's consolidated financial statements beginning on each respective date of
acquisition.

                                       31
<PAGE>


                            SHERIDAN HEALTHCARE, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


     The  following  table  summarizes  the pro forma  consolidated  results  of
operations  of the Company as though the  acquisitions  of  physician  practices
discussed above had occurred at the beginning of the period  presented.  The pro
forma  consolidated  results  of  operations  shown  below  do  not  necessarily
represent what the consolidated  results of operations of the Company would have
been if these  acquisitions had actually occurred at the beginning of the period
presented,  nor do they  represent  a forecast  of the  consolidated  results of
operations of the Company for any future period.

<TABLE>
<CAPTION>
                                                                                   Year Ended December 31,
                                                                                  --------------------------
                                                                                     1997           1996
                                                                                  ------------  ------------
                                                                                        (in thousands, except
                                                                                                per share data)
         <S>                                                                      <C>          <C>
         Pro Forma Results of Operations:
         Net revenue..........................................................    $   103,024  $     106,654
         Income (loss) before income taxes....................................          8,553        (10,770)
         Net income (loss)....................................................          5,413        (11,594)
         Net income (loss) per share - basic..................................           0.81          (1.76)
         Net income (loss) per share - diluted................................           0.77          (1.76)

</TABLE>

(3)  PROPERTY AND EQUIPMENT
     ----------------------

     Property and equipment is stated at cost less accumulated depreciation, and
is depreciated using  straight-line  and accelerated  methods over the estimated
useful lives of the assets.  Maintenance and repairs are charged to expense when
incurred  and  improvements  are  capitalized.  Upon the sale or  retirement  of
assets, the cost and accumulated depreciation are removed from the balance sheet
and any gain or loss is recognized currently.

     Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                                  ------------------------
                                                                                     1997          1996
                                                                                  -----------  -----------

         <S>                                                                      <C>          <C>
         Equipment............................................................    $     2,643  $     2,355
         Furniture and fixtures...............................................          1,919        2,259
         Computer software....................................................            843          806
         Building and improvements............................................          1,083          947
                                                                                  -----------  -----------
           Total..............................................................          6,488        6,367
         Accumulated depreciation and amortization............................         (2,950)       (2,637)
                                                                                  -----------   -----------
           Property and equipment, net........................................    $     3,538  $     3,730
                                                                                  ===========  ===========

</TABLE>

     At December 31, 1997, the net book value of property and equipment  related
to capital lease obligations was $922,900. See Note l(j) for a description of an
adjustment to reduce the carrying  values of certain  components of property and
equipment to their net realizable values during 1996.


                                       32
<PAGE>



                            SHERIDAN HEALTHCARE, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


(4)  LONG-TERM DEBT
     --------------

     Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                                  ------------------------
                                                                                     1997         1996
                                                                                  -----------  -----------

         <S>                                                                       <C>          <C>
         Revolving credit facility,  maturing in December 2000, at Libor plus an
            applicable margin (7.79% at December 31, 1997),
            secured by substantially all assets of the Company ...............    $    29,000  $       ---
         Revolving credit facility, maturing in February 1997,
            at prime plus .25% interest (8.5% at December 31, 1996),
            secured by substantially all assets of the Company ...............            ---       19,982
         Capital lease obligations, payable in aggregate monthly installments
            of $45 as of December 31, 1997,  including  interest ranging from 4%
            to 10%, maturing at various dates through 2001, secured by
            property and equipment............................................          1,279        1,809
         Note payable, interest at 8%, maturing in January 1997...............            ---          765
                                                                                  -----------  -----------
            Total debt........................................................         30,279       22,556
         Less - Current portion...............................................           (446)      (1,189)
                                                                                  ----------   -----------
            Total long-term debt..............................................    $    29,833  $    21,367
                                                                                  ===========  ===========
</TABLE>


     Annual  maturities of long-term debt as of December 31, 1997 are as follows
(in thousands):

<TABLE>
<CAPTION>

         <S>                                                                                   <C>
         1998...............................................................................   $       446
         1999...............................................................................           482
         2000...............................................................................        29,351
                                                                                               -----------
           Total............................................................................   $    30,279
                                                                                               ===========

</TABLE>

     The  outstanding   balance  under  the  previous  credit  facility  was
originally due on February 28, 1997. During February 1997, the maturity date was
extended to March 17, 1997. On March 12, 1997, the Company established a new $35
million  revolving  credit  facility,  which was used to repay  the  outstanding
balance under the previous credit facility.  Since the outstanding balance under
the  previous  facility  was  refinanced  on March 12, 1997 using the new credit
facility,  and  there  were no  principal  payments  due in 1997  under  the new
facility,  the balance is  classified  as  long-term at December 31, 1996 on the
accompanying  consolidated  balance  sheet.  On  December  17,  1997 the Company
amended its  existing  revolving  credit  facility  which  increased  the amount
available from $35 million to $50 million. No payments are due under the amended
credit facility until December 2000.

     The Company was not in compliance with certain covenants under the previous
credit agreement as of December 31, 1996, due to the $17.4 million write-down of
office-based net assets,  which is discussed in Note 1(j). However, as discussed
above,  the  outstanding  balance under the previous credit facility was paid in
full in March  1997,  and the  Company  would have been in  compliance  with all
covenants in the new credit agreement as of December 31, 1996, if the new credit
agreement had been in effect at that date.


                                       33
<PAGE>
                            SHERIDAN HEALTHCARE, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


(5)  401(K) PROFIT SHARING PLANS
     ---------------------------

     The Company maintains 401(k) Profit Sharing Plans (the "Plans"),  which are
defined contribution plans covering substantially all employees who meet certain
age and service  requirements.  For the three years ended December 31, 1997, the
Company made matching contributions to the Plans equal to varying percentages of
the  employees'  contributions,  and made other  employer  contributions  to the
Plans,  all at the discretion of the Company's Board of Directors.  There was no
expense  related to the Plans for the years  ended  December  31, 1997 and 1996.
Aggregate  expense related to the Plans was $501,000 for the year ended December
31, 1995.

(6)  INCOME TAXES
     ------------

     Current  income tax  expense  (benefit)  represents  the income tax payable
(refund  receivable)  for the  period.  Deferred  income tax  expense  (benefit)
represents the change in the balance of deferred income taxes during the period.
In  accordance  with  Statement  of  Financial  Accounting  Standards  No.  109,
"Accounting for Income Taxes," the Company recognizes  deferred income taxes for
the tax  consequences  in future years of differences  between the tax basis and
the financial  reporting basis of assets and liabilities  based on the tax rates
expected to be applicable to the future  periods in which such tax  consequences
will occur.

     The  provision  (benefit)  for income taxes  consists of the  following (in
thousands):

<TABLE>
<CAPTION>

                                                                            Year Ended December 31,
                                                                     ------------------------------------
                                                                        1997         1996         1995
                                                                     -----------  -----------  ----------
         <S>                                                         <C>          <C>          <C>
         Current................................................     $     3,157  $     1,343  $      (289)
         Deferred...............................................            (263)     (1,154)         (167)
                                                                     -----------  ----------   -----------
            Total...............................................     $     2,894  $       189  $      (456)
                                                                     ===========  ===========  ===========

         Federal................................................     $     2,454  $      (27)  $      (349)
         State..................................................             440          216         (107)
                                                                     -----------  -----------  -----------
           Total................................................     $     2,894  $       189  $      (456)
                                                                     ===========  ===========  ===========

</TABLE>

     None of the income tax  benefit  for the year ended  December  31, 1995 has
been  allocated  to  the   extraordinary   item,  since  the  existence  of  the
extraordinary  item did not  affect the  amount of the  income  tax  benefit.  A
reconciliation  of the tax provision  (benefit) at the statutory federal rate of
34% to the actual income tax expense (benefit) is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                                                     -------------------------------------
                                                                        1997         1996         1995
                                                                     -----------  -----------  -----------
         <S>                                                         <C>          <C>          <C>

         Tax provision (benefit) at the
            federal statutory rate..............................     $     2,741  $   (3,721)  $      (664)
         State income taxes.....................................             319        (433)          (71)
         Increase (decrease) in valuation allowance for
            deferred tax assets.................................           (828)        2,122          ---
         Non-deductible portion of write-down
            of office-based net assets..........................             ---        1,279          ---
         Non-deductible goodwill amortization...................             621          516          ---
         Income of affiliates that cannot be
            offset against net operating
            losses of the Company...............................             ---          296          279
         Other, net.............................................              41          130          ---
                                                                     -----------  -----------  -----------
            Total...............................................     $     2,894  $       189  $      (456)
                                                                     ===========  ===========  ============
</TABLE>

                                       34
<PAGE>


                            SHERIDAN HEALTHCARE, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


     Deferred income taxes were related to the following  timing  differences at
December 31, 1997 and 1996 (in thousands):

<TABLE>
<CAPTION>


                                                                                         December 31,
                                                                                  ------------------------
                                                                                     1997           1996
                                                                                  -----------  -----------

         <S>                                                                      <C>          <C>
         Goodwill and intangible assets......................................     $     2,378  $     4,211
         Accrual basis income of cash basis affiliates.......................           (327)       (1,272)
         Self-insurance accruals.............................................           1,420          933
         Conversion from cash to accrual basis...............................           (388)         (398)
         Bad debt reserve....................................................           (300)          ---
         Amounts due for acquisitions........................................             ---         (342)
         Other, net..........................................................            (72)          144
                                                                                  ----------   -----------
            Total............................................................           2,711        3,276
         Valuation allowance.................................................         (1,294)       (2,122)
                                                                                  ----------   -----------
            Net deferred income taxes........................................     $     1,417  $     1,154
                                                                                  ===========  ===========
</TABLE>

     The Company  records a valuation  allowance to reflect net deferred  income
taxes at their estimated realizable value.

(7)  COMMITMENTS AND CONTINGENCIES
     -----------------------------

(a) Major Customers

     A significant  portion of the Company's  revenue is derived from delivering
or managing  hospital-based  physician  services at multiple hospitals which are
under  common   ownership.   Of  the  Company's   total  net  revenue  in  1997,
approximately $21.8 million,  or 22.1%, was derived from anesthesia,  obstetrics
and neonatology  services delivered at three hospitals owned and operated by the
South Broward Hospital District.  In addition,  approximately  $21.8 million, or
22.2% of the Company's  total net revenue in 1997, was derived from  anesthesia,
neonatology,  pediatric and emergency services delivered at 11 hospitals and two
ambulatory  surgical  facilities  owned and operated by Columbia/HCA  Healthcare
Corp. In addition,  approximately $11.7 million, or 11.9% of the Company's total
net  revenue in 1997,  was  derived  from  anesthesia,  neonatology,  pediatric,
emergency  and  management  services  delivered  at seven  hospitals  owned  and
operated by Tenet Healthcare Corporation.

     A significant  portion of the Company's  revenue is derived from delivering
medical services to patients who are covered under various Medicare and Medicaid
health care programs.  Approximately 15.8% of the Company's total net revenue in
1997 was derived from the  assignment  of Medicare and Medicaid  benefits to the
Company  by  patients  of the  Company's  affiliated  physicians.  In  addition,
approximately  7.9% of the Company's  total net revenue in 1997 was derived from
capitation  payments from health maintenance  organizations for patients who had
assigned  their  Medicare  or  Medicaid  benefits  to  the  health   maintenance
organizations.

     In addition,  the Company  derived 14.3%,  20.8% and 29.5% of its total net
revenue in 1997, 1996 and 1995,  respectively,  from a single third-party payor.
No other  third-party  payor or other customer  accounted for 10% or more of the
Company's net revenue.



                                       35
<PAGE>



                            SHERIDAN HEALTHCARE, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


(b) Employment Agreements

     The Company and its  affiliates  have  employment  contracts  with  certain
executives,  physicians and other clinical and administrative employees.  Future
annual minimum payments under such employment agreements as of December 31, 1997
are as follows (in thousands):

<TABLE>
<CAPTION>


         <S>                                                                                   <C>
         1998...............................................................................   $    10,610
         1999...............................................................................         8,460
         2000...............................................................................         7,501
         2001...............................................................................         4,839
         2002...............................................................................         3,442
         Thereafter.........................................................................         5,575
                                                                                               -----------
           Total  ..........................................................................   $    40,427
                                                                                               ===========
</TABLE>


(c) Self-insurance

     Due to the  nature of its  business,  the  Company  becomes  involved  as a
defendant in medical malpractice lawsuits,  some of which are currently ongoing,
and is subject to the attendant risk of substantial  damage awards.  The Company
maintains professional and general liability insurance on a claims-made basis in
amounts deemed  appropriate by management,  based upon historical claims and the
nature and risks of its business.  There can be no assurance,  however,  that an
existing  or future  claim or claims  will not exceed  the  limits of  available
insurance  coverage,  that any insurer will remain  solvent and able to meet its
obligations  to  provide  coverage  for any such  claim or  claims  or that such
coverage  will  continue  to  be  available  with  sufficient  limits  and  at a
reasonable cost to adequately and economically  insure the Company's  operations
in the future.  A judgment  against the Company in excess of such coverage could
have a material adverse effect on the Company.

     The  liability  for  self-insurance  accruals in the  accompanying  balance
sheets includes  estimates of the ultimate costs related to both reported claims
and claims  incurred but not reported.  The estimate of claims  incurred but not
reported  was   $2,522,000  and  $2,095,000  at  December  31,  1997  and  1996,
respectively.  An  analysis  of the  self-insurance  accrual is as  follows  (in
thousands):

<TABLE>
<CAPTION>

                                                                            Year Ended December 31,
                                                                     ------------------------------------
                                                                        1997         1996         1995
                                                                     -----------  -----------  ----------

<S>                                                                  <C>          <C>          <C>
         Balance, beginning of year..............................    $     3,170  $     1,615  $     1,188
         Provision for self-insurance............................            378        1,252          634
         Self-insurance accruals related to
            acquired physician practices.........................            626          439          317
         Payments made for claims................................           (201)        (136)        (124)
         Transfer, to and paid as, professional fee accruals.....    $       ---  $       ---  $      (400)
                                                                     -----------  -----------  -----------
              Balance, end of year...............................    $     3,973  $     3,170  $     1,615
                                                                     ===========  ===========  ===========
</TABLE>


                                       36
<PAGE>


                            SHERIDAN HEALTHCARE, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


(d) Litigation

     In October  1996,  the Company and certain of its  directors,  officers and
legal  advisors were named as defendants in a lawsuit filed in the Circuit Court
of the  Seventeenth  Judicial  Circuit  in and for  Broward  County,  Florida by
certain former physician  stockholders of the Company's  Predecessor.  The claim
alleges that the  defendants  engaged in a conspiracy of fraud and deception for
personal gain in connection  with inducing the plaintiffs to sell their stock in
the Predecessor to the Company,  as well as legal  malpractice and violations of
Florida securities laws. The claim seeks damages of at least $10 million and the
imposition of a constructive trust and disgorgement of stock and options held by
certain members of the Company's management. The Company believes the lawsuit is
without merit and continues to  vigorously  defend  against it and also believes
the lawsuit's ultimate resolution will not have a material adverse impact on the
financial position of the Company.

(e) Lease Commitments

     The  Company  leases  office  space and  furniture  and  equipment  for its
physician   practice   locations   and   administrative   office  under  various
non-cancellable  operating  leases.  Rent  expense  under  operating  leases was
$2,475,000,  $2,399,000  and  $1,716,000 in 1997,  1996 and 1995,  respectively.
Future annual minimum  payments  under  non-cancellable  operating  leases as of
December 31, 1997 are as follows (in thousands):

<TABLE>
<CAPTION>

         <S>                                                                                   <C>
         1998..............................................................................    $     2,408
         1999..............................................................................          2,126
         2000..............................................................................          1,814
         2001..............................................................................          1,279
         2002..............................................................................          1,135
         Thereafter........................................................................          2,545
                                                                                               -----------
            Total..........................................................................    $    11,307
                                                                                               ===========

</TABLE>


(f) Government Regulation

     The healthcare  industry is highly  regulated and there can be no assurance
that the regulatory  environment  in which the Company  operates will not change
significantly and adversely in the future. In general,  regulation of healthcare
providers and companies is increasing.

     Federal and state laws regulate the healthcare  industry,  the relationship
between practice  management  companies such as the Company and physicians,  and
the relationship among physicians and other providers of healthcare services.

     Several laws, including  fee-splitting,  anti-kickback laws and prohibition
of the  corporate  practice of medicine,  have civil and criminal  penalties and
have been subject to limited  judicial and regulatory  interpretation.  They are
enforced by regulatory agencies vested with broad discretion  interpreting them.
The  Company's  agreements  and proposed  activities  have not been  examined by
federal or state  authorities  under these laws and  regulations.  Although  the
Company  believes that its  operations are conducted so as to comply with all of
the  applicable  laws,  there can be no assurance  such  operations  will not be
challenged as in violation of one or more of such laws. In addition,  these laws
and their  interpretation vary from state to state. The regulatory  framework at
certain  jurisdictions  may limit the  Company's  expansion  into or  ability to
continue  operations  within such  jurisdictions,  if the Company's is unable to
modify its operational  structure to conform to such regulatory  framework.  Any
limitation  on the Company's  ability to expand could have an adverse  effect on
the Company.

                                       37
<PAGE>

                            SHERIDAN HEALTHCARE, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


     There have been  numerous  initiatives  at the federal and state levels for
comprehensive   reforms   affecting  the   availability  of,  and  payment  for,
healthcare.  The Company believes that such initiatives will continue during the
foreseeable future.  Certain reforms previously proposed could, if adopted, have
a material effect on the Company.

     On August 5,  1997,  the  President  signed  into law a number of  Medicare
provisions  as part of the  Balanced  Budget  Act of 1997.  When  compared  with
projected  Medicare  levels  under  current law,  the  legislation  could reduce
Medicare  spending  by $115  billion  over 5 years.  The vast  majority of these
savings  would come from  reductions  in payments  for  services  of  healthcare
facilities,  practitioners  and other providers.  The legislation will eliminate
disparities  in payment  rates for similar  services by  physicians in different
specialties effective January 1, 1998. Payment rates for physician services will
no longer be  necessarily  updated for inflation.  Beginning in 1998,  inflation
increases  will be adjusted  based on a  "sustainable  growth rate" defined with
reference  to the change in (i) the number of Medicare  beneficiaries,  (ii) the
gross  domestic  product per  capita,  and (iii) the level of  expenditures  for
physician  services.  The  legislation  will also revise  Medicare  payments for
practice  expense  costs and  change  payments  to  managed  care plans from the
current  rate of 95% of  fee-for-service  rates  in the  area,  to a  nationwide
average per capita fee for service spending, with an adjustment factor for local
area wage  rates.  Any  reductions  in payment for the  services  offered by the
Company could have an adverse effect on the Company's  results of operations and
financial condition.

(8)   STOCKHOLDERS' EQUITY
      --------------------

      At  January  1,  1995 the  issued  and  outstanding  stock of the  Company
consisted of 409,900 shares of the Company's Class A voting common stock held by
management  of the Company and 350,000 and 78,572  shares of Class A and Class B
Convertible  Preferred  Stock,  respectively.  Each share of Class A and Class B
Convertible  Preferred Stock was convertible,  at the option of the holder, into
one-fourth  of a share of Class A voting and Class B  non-voting  common  stock,
respectively,  and  three-fourths of a share of Redeemable  Preferred Stock. The
Class  A  and  Class  B  Convertible  Preferred  Stock  accrued  dividends  on a
cumulative  basis  at 7.5% per  annum,  and had a  liquidation  value of $50 per
share.

      In June 1995,  the Company issued a convertible  promissory  note for $5.0
million,  which  was  convertible  into  181,671  shares of  common  stock.  The
noteholder also received a warrant to purchase up to an additional 45,410 shares
of the  Company's  common  stock at an  exercise  price of $0.58 per share which
becomes exercisable in three installments if, through the substantial efforts of
the noteholder,  the Company  consummates  transactions with physician practices
(generally  either by acquiring  such  practices or entering into  agreements to
manage such practices)  which  collectively  result in certain  increases in the
Company's  earnings  during certain  measurement  periods.  The first and second
installments,  which  consisted of 15,146 shares each,  expired  unexercised  in
December 1996 and 1997, respectively. The remaining installment of 15,132 shares
will either become exercisable or will expire unexercised in June 1998.

      The Company  completed an initial  public  offering of its common stock on
November 3, 1995, in which it issued 3,825,000 shares of common stock at a price
of $13.00 per share.  In  connection  with the public  offering  (i) the Company
increased  the amount of  authorized  preferred  stock to  5,000,000  shares and
increased the amount of authorized common stock to 31,000,000  shares,  (ii) all
of the outstanding Class A and Class B Convertible Preferred Stock was converted
into 1,321,377 shares of Class A Common Stock,  296,638 shares of Class B Common
Stock,  and  321,429  shares of  Redeemable  Preferred  Stock,  (iii) all of the
Redeemable  Preferred Stock was redeemed by the Company for an aggregate  amount
of $16.1  million,  (iv) the Class A voting  common  stock was  redesignated  as
"Common  Stock" and the Class B  non-voting  common  stock was  redesignated  as
"Class A Common  Stock," and (v) a  15.10-to-one  stock split was  effected as a
stock dividend. The 15.10-to-one stock split has been retroactively reflected in
the accompanying consolidated financial statements.



                                       38
<PAGE>

                            SHERIDAN HEALTHCARE, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

      The initial public offering generated net proceeds to the Company of $44.8
million.  Of the total proceeds,  $16.1 million was used to redeem the Company's
redeemable preferred stock, $26.1 million was used to repay long-term debt, $1.5
million was used to pay accrued  dividends on convertible  preferred  stock, and
$1.1 million was used to pay certain  deferred  payments in connection  with the
acquisition of a physician practice in June 1995.

      In March 1996,  the Company  issued  approximately  658,000  shares of its
common stock as partial  consideration  for an acquisition  of a  hospital-based
physician practice, as discussed in Note 2.

      In May 1997,  the Company  reduced the amount of  authorized  common stock
from  31,000,000  shares to 21,000,000  shares.  In November  1997,  the Company
issued approximately 14,000 shares of its common stock as partial  consideration
for an  acquisition  of an  office-based  physician  practice.  Employees of the
Company exercised options to acquire 77,190 shares of the Company's common stock
during 1997.

(9)   STOCK OPTIONS
      -------------

      The Company adopted Statement of Financial  Accounting  Standards No. 123,
"Accounting  for  Stock-Based  Compensation,"  ("SFAS  No.  123")  in  1996.  As
permitted  under  SFAS  No.  123 the  Company  has  elected  to  continue  using
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees," in accounting for employee stock options. Each employee stock option
has an  exercise  price  equal to the  market  price  on the date of grant  and,
accordingly,  no  compensation  expense has been  recorded  for any stock option
grants to employees.

      In 1995 the  Company  adopted  the 1995 Stock  Option  Plan,  under  which
750,000  shares of common stock were reserved for issuance.  An amendment to the
plan in 1997  increased  the shares of common  stock  reserved  for  issuance to
1,350,000.  Options granted under the 1995 Stock Option Plan become  exercisable
either over time, or upon the attainment of defined  operating  goals. All stock
options granted expire ten years after the date of grant.  Stock option activity
has been as follows:

<TABLE>
<CAPTION>


                                                  1997                  1996                      1995
                                          --------------------  ------------------------  ---------------------
                                                      Weighted                  Weighted              Weighted
                                                       Average                  Average               Average
                                            Number    Exercise     Number       Exercise   Number     Exercise
                                           of Shares   Price      of Shares      Price    of Shares     Price
                                          ----------  --------  -----------     --------  ---------  ---------

         <S>                                <C>       <C>          <C>          <C>                  <C>
         Balance, beginning of year.....    553,911   $   5.73     321,461      $   8.82        ---  $     ---
         Granted during year............    471,500       9.27     608,071          7.17    382,382      10.01
         Terminated during year.........        ---        ---    (335,071)        10.51    (53,421)     16.84
         Exercised......................    (77,190)      0.58         ---           ---        ---        ---
         Forfeited during year..........    (11,137)      6.65     (40,550)        12.32     (7,500)     12.50
                                          ---------              ---------                ---------
            Balance, end of year........    937,084   $   7.91     553,911      $   5.73    321,461  $    8.82
                                          =========              =========                =========

         Exercisable at end of year.....    151,716   $   6.25     131,283      $   3.38     64,604  $    2.63

</TABLE>

                                       39
<PAGE>

                            SHERIDAN HEALTHCARE, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


      The  weighted  average fair value per share as of the grant date was $6.11
for stock options  granted in 1997,  $4.15 for stock options granted in 1996 and
$6.82 for stock options granted in 1995. The  determination of the fair value of
all stock  options  granted  in 1997,  1996 and 1995 was based on (i)  risk-free
interest  rates of 6.2% to 6.5%,  depending on the expected life of each option,
(ii) expected option lives of 3 to 6 years,  depending on the vesting provisions
of each option,  (iii) expected  volatility in the market price of the Company's
common stock from 75% to 78%, and (iv) no expected  dividends on the  underlying
common stock.  Stock options  outstanding  at December 31, 1997 consisted of the
following:

<TABLE>
<CAPTION>

                                                    Total Outstanding                   Exercisable
                                         -----------------------------------------------------------------

                                                             Weighted Average                    Weighted
                           Range of          Number      -----------------------    Number       Average
                           Exercise            of        Exercise     Remaining       of        Exercise
                            Prices           Shares        Price        Life        Shares        Price
                        ---------------    ----------  -----------    ----------  -----------  -----------

<S>                          <C>               <C>     <C>             <C>             <C>     <C>
                             $.58              32,350  $       .58     7.9 years       21,565  $       .58
                        $5.75 to $8.13        353,051         6.39     8.1 years       90,046         5.79
                        $8.75 to $13.00       551,683         9.31     9.2 years       40,105        10.31
                                          -----------                             -----------
                             Total            937,084  $      7.91     8.7 years      151,716  $      6.25
                                          ===========                             ===========

</TABLE>

         The following table  summarizes the pro forma  consolidated  results of
operations  of the Company as though the fair value based  accounting  method in
SFAS No. 123 had been used in accounting for stock options.

<TABLE>
<CAPTION>

                                                                                   Year Ended December 31,
                                                                                  ----------------------------
                                                                                       1997           1996
                                                                                  ------------    ------------
                                                                                     (in thousands, except
                                                                                          per share data)
<S>                                                                               <C>             <C>
         As reported results of operations:
         Net income (loss)....................................................    $     5,167     $    (12,126)
         Net income (loss) per share - basic..................................    $      0.77     $      (1.84)
         Net income (loss) per share - diluted................................    $      0.73     $      (1.84)

         Pro forma results of operations:
         Net income (loss)....................................................    $     3,495     $    (13,047)
         Net income (loss) per share - basic..................................    $      0.52     $      (1.98)
         Net income (loss) per share - diluted................................    $      0.50     $      (1.98)

</TABLE>

(10)  SUBSEQUENT EVENT
      ----------------

      During the period from  January  1998 to March 1998 the Company  completed
four  transactions  with  physician  practices  for aggregate  consideration  of
approximately  $37.3  million of which  approximately  $17.2 million was paid in
cash  and  approximately   $20.1  million  was  paid  through  the  issuance  of
approximately  1,384,000  shares of the Company's  common stock.  As a result of
these transactions, the outstanding balance under the Company's revolving credit
facility has increased  from $29.0 million at December 31, 1997 to $47.5 million
at March 12, 1998.





                                       40
<PAGE>








         REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE



To the Stockholders of
   Sheridan Healthcare, Inc.:

We have audited in accordance with generally  accepted auditing  standards,  the
financial statements of Sheridan  Healthcare,  Inc. and subsidiaries for each of
the three years in the period ended  December  31,  1997,  included in this Form
10-K,  and have issued our report  thereon dated  February 23, 1998.  Our audits
were  made  for the  purpose  of  forming  an  opinion  on the  basic  financial
statements taken as a whole. The accompanying  Schedule II is the responsibility
of the Company's  management and is presented for purposes of complying with the
Securities  and  Exchange  Commission's  rules  and is  not  part  of the  basic
financial  statements.   This  schedule  has  been  subjected  to  the  auditing
procedures  applied in the audits of the basic financial  statements and, in our
opinion, fairly states, in all material respects, the financial data required to
be set forth therein in relation to the basic  financial  statements  taken as a
whole.




ARTHUR ANDERSEN LLP



Miami, Florida,
  February 23, 1998. (except for the matter discussed in
  Note 10, as to which the date is March 12, 1998).




                                       41
<PAGE>

<TABLE>
<CAPTION>




                            SHERIDAN HEALTHCARE, INC.

                                   SCHEDULE II

                        VALUATION AND QUALIFYING ACCOUNTS

              For the Years Ended December 31, 1997, 1996 and 1995
                                 (in thousands)





                                                        Balance at    Charged to                Balance at
                                                       Beginning of   Costs and                  End of
                                                          Period       Expenses    Deductions     Period
Accounts receivable allowances:

   <S>                                                 <C>           <C>          <C>           <C>
   Year ended December 31, 1997....................    $     1,277   $     4,066  $     3,515  $     1,828
                                                       ===========   ===========  ===========  ===========

   Year ended December 31, 1996....................    $       737   $     3,605        3,065  $     1,277
                                                       ===========   ===========  ===========  ===========

   Year ended December 31, 1995....................    $       463   $     2,324  $     2,050  $       737
                                                       ===========   ===========  ===========  ===========

</TABLE>



                                       42
<PAGE>


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
          --------------------------------------------------

    The Proxy  Statement for the Company's  Annual Meeting of Stockholders to be
held on May 14, 1998,  which Proxy  Statement is to be filed with the Securities
and Exchange Commission  pursuant to Rule 14a-6(b),  contains under the captions
"Proposal One:  Election of Directors" and "Compliance with Section 16(a) of the
Exchange Act"  information  required by Item 10 of Form 10-K as to directors and
certain  executive  officers  of the  Company  and  is  incorporated  herein  by
reference.

ITEM 11.  EXECUTIVE COMPENSATION
          ----------------------

    The Proxy  Statement for the Company's  Annual Meeting of Stockholders to be
held on May 14, 1998,  which Proxy  Statement is to be filed with the Securities
and Exchange  Commission  pursuant to Rule 14a-6(b),  contains under the caption
"Compensation of Directors and Executive Officers"  information required by Item
11 of Form 10-K and is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          --------------------------------------------------------------

    The Proxy  Statement for the Company's  Annual Meeting of Stockholders to be
held on May 14, 1998,  which Proxy  Statement is to be filed with the Securities
and Exchange  Commission  pursuant to Rule 14a-6(b),  contains under the caption
"Security  Ownership of Management and Certain  Beneficial  Owners"  information
required by Item 12 of Form 10-K and is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

    The Proxy  Statement for the Company's  Annual Meeting of Stockholders to be
held on May 14, 1998,  which Proxy  Statement is to be filed with the Securities
and Exchange  Commission  pursuant to Rule 14a-6(b),  contains under the caption
"Certain  Transactions"  information  required  by Item 13 of Form  10-K  and is
incorporated herein by reference.

                                     PART IV

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

(a) 1.  Financial Statements:  See Item 8.

    2.  Financial Statement Schedules:  See Item 8.



                                       43
<PAGE>

3.  Exhibits:

   Exhibit
    Number                             Description
    -------                            -----------

      3.1         Third Amended and Restated  Certificate of  Incorporation,  as
                  amended  effective  May  27,  1997  (incorporated   herein  by
                  reference to such exhibit filed as an exhibit to the Company's
                  Quarterly  Report on Form 10-Q for the quarter  ended June 30,
                  1997) .

      3.2         Amended and Restated By-laws (incorporated herein by reference
                  to such exhibit filed as an exhibit to the Company's Quarterly
                  Report on Form 10-Q for the quarter ended September 30, 1995).

      4.1         Specimen certificate for shares of Common Stock of the Company
                  (incorporated  herein by reference to such exhibit filed as an
                  exhibit to the  Company's  Registration  Statement on Form S-1
                  (File No.  33-93290)  filed on June 8, 1995,  as amended  (the
                  "Registration Statement").

      4.2         Amended and Restated Stockholders' Agreement by and among SAMA
                  Holdings,  Inc. and the TA Investors,  as defined therein, the
                  NationsBank  Investors,  as defined  therein,  Summit Hospital
                  Corporation  and the  additional  parties listed on Schedule B
                  thereto,  amended  and  restated  as  of  June  5,  1995,  and
                  effective  as of  November  28, 1994  (incorporated  herein by
                  reference  to  such  exhibit   filed  as  an  exhibit  to  the
                  Registration Statement).

      4.3         Amendment  to  Stockholders'   Agreement  by  and  among  SAMA
                  Holdings,  Inc. and the TA Investors,  as defined therein, the
                  NationsBank  Investors,  as defined  therein,  Summit Hospital
                  Corporation  and the  additional  parties listed in Schedule B
                  thereto,  as amended  and  restated  as of June 5,  1995,  and
                  effective  as of November  28,  1994,  dated as of October 27,
                  1995  (incorporated  herein by reference to such exhibit filed
                  as an exhibit to the Company's  Quarterly  Report on Form 10-Q
                  for the quarter ended September 30, 1995).

     10.1         Class A Voting  Common  Stock  Purchase  Warrant  between SAMA
                  Holdings,  Inc. and Summit  Hospital  Corporation  dated as of
                  June 1, 1995 (incorporated herein by reference to such exhibit
                  filed as an exhibit to the Registration Statement).

     10.2         Service  Agreement  by and  between  SAMA  Holdings, Inc.  and
                  Summit  Hospital  Corporation  dated  as     of June  5,  1995
                  (incorporated herein by reference to such exhibit filed as an
                  exhibit to the Registration Statement).

     10.3         Stockholder's  Agreement by and among SAMA Holdings,  Inc. and
                  the Investors  listed on the signature page thereto,  dated as
                  of June 5,  1995  (incorporated  herein by  reference  to such
                  exhibit filed as an exhibit to the Registration Statement).

     10.4         Executive Physician  Employment  Agreement dated as of June 5,
                  1995 by and  between  Sheridan  Healthcorp,  Inc.  and Valerio
                  Toyos, M.D.  (incorporated herein by reference to such exhibit
                  filed as an exhibit to the Registration Statement).

     10.5         Employment  Agreement  of Lewis  Gold,  M.D.  effective  as of
                  November   28,  1994  by  and  among  SAMA   Holdings,   Inc.,
                  Southeastern Anesthesia Management Associates,  Inc. and Lewis
                  Gold  (incorporated  herein by reference to such exhibit filed
                  as an exhibit to the Registration Statement).


                                       44
<PAGE>

    3.  Exhibits (cont'd):

    Exhibit
    Number                                Description
    -------                               -----------

     10.6         Employment Agreement of Mitchell Eisenberg,  M.D. effective as
                  of  November  28,  1994  by and  among  SAMA  Holdings,  Inc.,
                  Southeastern   Anesthesia  Management  Associates,   Inc.  and
                  Mitchell Eisenberg  (incorporated  herein by reference to such
                  exhibit filed as an exhibit to the Registration Statement).

     10.7         Executive  Employment  Agreement of Jay Martus effective as of
                  January 1, 1995 by and among SAMA Holdings, Inc., Southeastern
                  Anesthesia   Management   Associates,   Inc.  and  Jay  Martus
                  (incorporated  herein by reference to such exhibit filed as an
                  exhibit to the Registration Statement).

     10.8         Executive   Employment  Agreement  of  Gilbert  Drozdow  dated
                  January 1, 1995 by and among SAMA Holdings, Inc., Southeastern
                  Anesthesia  Management  Associates,  Inc. and Gilbert  Drozdow
                  (incorporated  herein by reference to such exhibit filed as an
                  exhibit to the Registration Statement).

     10.9         Letter Agreement dated as of June 23, 1995 from the Company to
                  Dennis L. Gates regarding  employment  (incorporated herein by
                  reference  to  such  exhibit   filed  as  an  exhibit  to  the
                  Registration Statement).

     10.10        Non-Competition and  Non-Disclosure  Agreement  dated  as of
                  June  23, 1995 between the Company and Dennis L. Gates
                  (incorporated  herein by  reference  to such  exhibit  filed
                  as an  exhibit  to the  Registration Statement).

     10.11        Agreement and License of Packaged  Software  dated
                  April 10,  1989,  as amended, by and between Medical Software
                  Specialties, Inc. and Southeastern   Anesthesia  Management
                  Associates,   P.A., as amended  (incorporated  herein by
                  reference  to such  exhibit filed as an exhibit to the
                  Registration Statement).

     10.12        Participation  Agreement by and between Health  Options,  Inc.
                  and Southeastern Anesthesia Management Associates, dated as of
                  February 8, 1995, as amended,  including the attached schedule
                  of  participating  physicians  who have  signed the  agreement
                  (form of  agreement  incorporated  herein by reference to such
                  exhibit filed as an exhibit to the Registration Statement).

     10.13        Participation  Agreement by and between Health Options,  Inc.
                  and Southeastern  Anesthesia Management Associates P.A. dated
                  as of  September  30, 1991 (incorporated  herein by  reference
                  to such  exhibit filed as an exhibit to the  Registration
                  Statement).

     10.14        Form of Health Options Participation  Agreement by and between
                  Health Options, Inc. and Individual  Physician,  including the
                  attached schedule of participating  physicians who have signed
                  the  Agreement,  and including a  reimbursement  change letter
                  (form of  agreement  incorporated  herein by reference to such
                  exhibit filed as an exhibit to the Registration Statement).

     10.15        Provider  Participation  Agreement  by and  between PCA Health
                  Plans of Florida, Inc. and Southeastern  Anesthesia Management
                  Associates,  P.A.,  dated  as of  July 1,  1994  (incorporated
                  herein by reference  to such  exhibit  filed as and exhibit to
                  the Registration Statement).

     10.16        Referral Services Agreement by and between Family Health Plan,
                  Inc. and Southeastern Anesthesia Management Associates,  P.A.,
                  dated as of July 1, 1994 (incorporated  herein by reference to
                  such  exhibit   filed  as  an  exhibit  to  the   Registration
                  Statement).

                                       45
<PAGE>


    3.  Exhibits (cont'd):

    Exhibit
    Number                                    Description
    -------                                   -----------

     10.17        Agreement   by  and  between   CAC-Ramsay   and   Southeastern
                  Anesthesia Management  Associates,  Inc., dated as of February
                  1, 1995  (incorporated  herein by  reference  to such  exhibit
                  filed as an exhibit to the Registration Statement).

     10.18        Physician  Agreement  dated April 1, 1990 by and between
                  Pavilack,  Karch, Lipton Barran & Ast, P.A.  d/b/a  Anesthesia
                  Associates  of Hollywood  and Humana  Medical  Plan,  Inc. and
                  Humana Plan of Florida,  Inc.  and Humana  Health  Insurance
                  Company of Florida,  Inc.  (incorporated  herein by  reference
                  to such  exhibit  filed as and exhibit to the  Registration
                  Statement).

     10.19        Preferred Patient Care Agreement by and between Blue Cross and
                  Blue Shield of Florida, Inc. and Individual  Physicians,  with
                  attached schedule of physicians who have signed the agreement,
                  and including a reimbursement change letter (form of agreement
                  incorporated  herein by reference to such exhibit  filed as an
                  exhibit to the Registration Statement).

     10.20        Form of Blue  Cross  and Blue  Shield of  Florida  Traditional
                  Program  Participating  Physician  Agreement,   with  attached
                  schedule of signatories,  and including a reimbursement change
                  letter (form of agreement  incorporated herein by reference to
                  such  exhibit   filed  as  an  exhibit  to  the   Registration
                  Statement).

     10.21        Physician  Agreement  by and  between  AMSA,  Inc.  and Humana
                  Medical  Plan,  Inc.,  Humana  Health Plan,  Inc.,  and Humana
                  Insurance  Company  (incorporated  herein by reference to such
                  exhibit filed as and exhibit to the Registration Statement).

     10.22        Form of Letter  of  Agreement  for  Specialty  Service  by and
                  between  Primedica   Healthcare,   Inc.  and  each  Individual
                  Specialty  Provider,  with attached  schedule of participating
                  specialty  providers  who have signed the  agreement  (form of
                  agreement  incorporated  herein by  reference  to such exhibit
                  filed as an exhibit to the Registration Statement).

     10.23        Form of Memorandum of Agreement for Specialty  Services by and
                  between  Primedica   Healthcare,   Inc.  and  each  Individual
                  Specialty  Provider,  with attached  schedule of participating
                  specialty  providers  who have signed the  agreement  (form of
                  agreement  incorporated  herein by  reference  to such exhibit
                  filed as and exhibit to the Registration Statement).

     10.24        Management Services Agreement,  dated as of November 28, 1994,
                  between    AMSA,    Inc.,   a   Florida    corporation,    and
                  Anesthesiologists' Management Services Associates, P.C., a New
                  York   professional   corporation   (incorporated   herein  by
                  reference  to  such  exhibit   filed  as  an  exhibit  to  the
                  Registration Statement).

     10.25        Amendment No. 1, dated as of July 28, 1995, to the  Employment
                  Agreement  effective as of November 28, 1994 by and among SAMA
                  Holdings, Inc., Southeastern Anesthesia Management Associates,
                  Inc. and Lewis Gold (incorporated  herein by reference to such
                  exhibit filed as an exhibit to the Registration Statement).

     10.26        Amendment No. 1, dated as of July 28, 1995, to the  Employment
                  Agreement  effective as of November 28, 1994 by and among SAMA
                  Holdings, Inc., Southeastern Anesthesia Management Associates,
                  Inc. and Mitchell Eisenberg  (incorporated herein by reference
                  to  such  exhibit  filed  as an  exhibit  to the  Registration
                  Statement).

                                       46
<PAGE>


    3.  Exhibits (cont'd):

    Exhibit
    Number                                      Description
    -------                                     -----------

     10.27        Amendment  No. 1, dated as of August 1, 1995, to the Executive
                  Employment  Agreement dated as of January 1, 1995 by and among
                  SAMA  Holding,   Inc.,   Southeastern   Anesthesia  Management
                  Associates,  Inc.  and  Jay  Martus  (incorporated  herein  by
                  reference  to  such  exhibit   filed  as  an  exhibit  to  the
                  Registration Statement).

     10.28        Amendment  No.1,  dated as of August 1, 1995, to the Executive
                  Employment  Agreement dated as of January 1, 1995 by and among
                  SAMA  Holdings,   Inc.,   Southeastern  Anesthesia  Management
                  Associates,  Inc. and Gilbert Drozdow  (incorporated herein by
                  reference  to  such  exhibit   filed  as  an  exhibit  to  the
                  Registration Statement).

     10.29        Master  Equipment Lease Agreement dated as of June 12, 1995 by
                  and between  NationsBanc  Leasing  Corporation and the Company
                  (incorporated  herein by reference to such exhibit filed as an
                  exhibit to the Registration Statement).

     10.30        First Addendum to Management Services  Agreement,  dated as of
                  September 1, 1995, by and among between AMSA,  Inc.,  Sheridan
                  Medical  Healthcorp,   P.C.,  and  Sheridan  Healthcorp,  Inc.
                  (incorporated  herein by reference to such exhibit filed as an
                  exhibit to the  Company's  Annual  Report on Form 10-K for the
                  year ended December 31, 1996).

     10.31        Agreement   and  Plan  of  Merger,   by  and  among   Sheridan
                  Healthcare,    Inc.,   Sheridan   Acquisition   Corp.,   Inc.,
                  Neonatology Certified, Inc., and the additional parties listed
                  on  Exhibit C  attached  thereto,  dated as of March 14,  1996
                  (incorporated  herein by reference to such exhibit filed as an
                  exhibit to the Company's  Report on Form 8-K filed as of March
                  14, 1996).

     10.32        Stock Purchase  Agreement,  by and among Sheridan  Healthcare,
                  Inc.,  Children's  Hospital  Services,  Inc.,  and the parties
                  listed on  Exhibit C attached  thereto,  dated as of March 14,
                  1996  (incorporated  herein by reference to such exhibit filed
                  as an exhibit to the Company's  Report on Form 8-K filed as of
                  March 14, 1996).

     10.33        Investment and Stockholders' Agreement, by and among Sheridan
                  Healthcare,Inc., and the parties listed on Schedule A attached
                  thereto,  dated as of March 14, 1996  (incorporated  herein by
                  reference to such exhibit filed as an exhibit to the Company's
                  Report on Form 8-K filed as of March 14, 1996).

     10.34        Executive Employment Agreement, dated as of  August  9,  1996,
                  by and between Sheridan Healthcorp, Inc., Sheridan Healthcare,
                  Inc. and Michael F. Schundler (incorporated herein by
                  reference to such  exhibit filed as an exhibit to theCompany's
                  Annual Report on Form 10-K for the year ended
                  December 31, 1996).

     10.35        Anesthesiology Agreement by and between South Broward Hospital
                  District, a special taxing district doing business as Memorial
                  Healthcare System and Sheridan  Healthcorp,  Inc., a Florida
                  corporation, dated as of January 1, 1997 (incorporated  herein
                  by reference to such exhibit filed as an exhibit to the
                  Company's Quarterly Report on Form 10-Q for the quarter ended
                  March 31, 1997).



                                       47
<PAGE>



    3.  Exhibits (cont'd):

    Exhibit
    Number                                      Description
    -------                                     -----------

     10.36        Real Property Lease Agreement, by and among ACP Venture I
                  Limited Partnership,  a Delaware  limited  partnership,  and
                  Sheridan Healthcorp,  Inc., a Florida corporation,  dated as
                  of January 11, 1997  (incorporated  herein by  reference  to
                  such exhibit filed as an exhibit to the Company's  Quarterly
                  Report on Form 10-Q for the first quarter ended
                  March 31,1997).

     10.37        Amended and Restated Credit Agreement by and between
                  NationsBank, N.A. (South) as Agent and Lender and the Company,
                  as  Borrower, dated as of March 12, 1997 (incorporated  herein
                  by reference to such exhibit filed as an exhibit to the
                  Company's Quarterly Report on Form 10-Q for the quarter ended
                  March 31, 1997).

      10.38       Sheridan Healthcare, Inc. Second Amended and Restated 1995
                  Stock Option Plan, effective as of April 27, 1995, amended and
                  restated as of July 27, 1995 and further amended as of
                  February  26, 1997 and as of May 15, 1997 (incorporated herein
                  by referenced to such  exhibits  filed as exhibits to the
                  Company's  Quarterly Reports on Form 10-Q for the quarters
                  ended March 31, 1997 and  June 30, 1997).

       10.39      Investment and Stockholders' Agreement, by and between the
                  Company and Frederick N. Herman, M.D., dated as of
                  November 3, 1997.

       10.40      First Amendment to Amended and  Restated  Credit  Agreement,
                  by and among   NationsBank, N.A.,  (as   successor  by  merger
                  to NationsBank,  N.A.  (South))  as  Agent  and  Lender,  and
                  the Company, as Borrower, dated as of December 17, 1997.

       21.1       Schedule of Subsidiaries.

       27         Financial Data Schedule.



                                       48
<PAGE>



                                   SIGNATURES



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


                                                  Sheridan Healthcare, Inc.
                                                          (Registrant)



Date:  March 30, 1998                             By:  /s/  Michael F. Schundler
                                                       -------------------------
                                                       Michael F. Schundler
                                                       Chief Financial Officer
                                                   (principal financial officer)

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


         Signature                           Title                     Date

/s/ Mitchell Eisenberg, M.D.      Chairman of the Board,          March 30, 1998
----------------------------      President, Chief Executive
Mitchell Eisenberg, M.D.          Officer (Principal Executive
                                  Officer)


/s/ Lewis D. Gold, M.D.           Executive Vice President,       March 30, 1998
----------------------------      Director
Lewis D. Gold, M.D.

/s/ Henry E. Golembesky, M.D.     Director                        March 30, 1998
-----------------------------
Henry E. Golembesky, M.D.

/s/ Jamie Hopping                 Director                        March 30, 1998
-----------------------------
Jamie Hopping

/s/ Neil A. Natkow, D.O.          Director                        March 30, 1998
-----------------------------
Neil A. Natkow, D.O.

/s/ Michael F. Schundler          Chief Financial Officer         March 30, 1998
-------------------------         (Principal Financial and
Michael F. Schundler               Accounting Officer)



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<PAGE>