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, 1996

[ ] 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  $31.1  million  as of March 17,  1997.  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 17, 1997, as reported on the NASDAQ National Market.

     As of March 17,  1997,  there  were  6,417,998  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  anticipated  to be held on May 15,  1997  are
incorporated by reference into Part III of this Form 10-K.



                                       1
<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
specialist physician services at hospitals and ambulatory surgical facilities in
the areas of anesthesia,  neonatology,  pediatrics,  and emergency  services and
owns and  operates,  or manages,  office-based  primary  care,  obstetrical  and
rheumatology  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   physician  groups,
consisting  of  both  hospital-based  and  office-based  physicians  in  various
complementary specialties,  that support the Company's hospital customers. As of
March 17, 1997, the Company employed, or managed the practices of, approximately
210 physicians  practicing under 42 specialty  service  contracts with 27 health
care facilities and at 21 office  locations.  The Company  currently  intends to
sell certain office-based practices consisting of nine office locations at which
the Company employs approximately 16 physicians.  See "Operations - Office-based
Physician Services" below for more information.

OPERATIONS

     HOSPITAL-BASED PHYSICIAN SERVICES.   The  Company  currently   provides  or
manages  hospital-based  physician  services at 22 hospitals and five ambulatory
surgery  facilities  located in  Florida,  New York,  Texas,  Virginia  and West
Virginia.  These services are provided by  approximately  160 physicians who are
employed by the Company or whose practices are managed by the Company,  of which
75 are  anesthesiologists,  45 are  neonatologists or pediatricians,  and 40 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.

     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.

                                       2
<PAGE>

     Since its inception,  and unlike many of its  competitors,  the Company has
directly  employed most of its  hospital-based  specialist  physicians and other
health care professionals.  The Company currently has 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
also employs 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.  In 1996, the Company
further expanded the scope of its hospital-based services to include neonatology
and  pediatrics.  Except for one  acquisition  in March  1996,  the  Company has
expanded its  hospital-based  services  business  entirely by being  awarded new
contracts for its services.  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.

     OFFICE-BASED PHYSICIAN SERVICES.  The Company currently employs, or manages
the practices of,  approximately  50  office-based  physicians,  of which 33 are
primary care physicians, 11 are obstetricians, and six are rheumatologists.  The
practices of these physicians are conducted at 21 office locations, all of which
are in Florida.  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.

     In November 1996, the Company announced that in connection with a change in
its strategic direction, it intends to sell non-strategic office-based physician
practices.  One of these non-strategic  office locations was sold by the Company
in  December  1996  and  another  one was sold in  February  1997.  The  Company
currently intends to sell the remaining non-strategic  practices,  which consist
of nine office locations, at which the Company currently employs 10 primary care
physicians and six rheumatologists.

     The Company's  primary focus in its  office-based  services  business is to
expand  its  obstetrical   practices  and  to  acquire  additional   obstetrical
practices.   Office-based   obstetrical   practices   complement  the  Company's
hospital-based  services  business  because a significant  number of obstetrical
patients require anesthesia and/or neonatology  physician services.  The Company
currently  employs,  or manages the practices of, 11 office-based  obstetricians
practicing in five office locations.

     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.  In  addition,  the Company  entered  into two  long-term
management  agreements in 1996,  under which it manages the practices of certain
office-based  physicians  in  exchange  for a  fee.  Substantially  all  of  the
Company's   office-based  revenue  has  been  derived  from  acquired  physician
practices and the two management agreements.

     The  Company  has  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.

                                        3
<PAGE>

     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.  In  connection  with a  management  agreement,  the Company
typically  purchases  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.

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  currently  intends to sell  certain of its  office-based  physician
practices.  The practices being 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  1996,
approximately   $18.2  million,  or  19.6%,  was  derived  from  anesthesia  and
neonatology  services  delivered  at three  hospitals  owned and operated by the
South Broward Hospital District.  In addition,  approximately  $17.1 million, or
18.4% of the Company's  total net revenue in 1996, was derived from  anesthesia,
neonatology,  pediatric and emergency  services  delivered at 12 hospitals owned
and operated by Columbia/HCA  Healthcare Corp. In addition,  approximately $11.0
million,  or 11.9% of the Company's  total net revenue in 1996, was derived from
anesthesia,  neonatology, pediatric, emergency and management services delivered
at 11  hospitals  owned and  operated by OrNda  Healthcorp,  which was  recently
acquired by Tenet Healthcare Corporation ("Tenet").  In addition,  approximately
$1.9 million,  or 2.0% of the Company's  total net revenue in 1996,  was derived
from anesthesia, neonatology and pediatric services delivered at three hospitals
owned and operated by Tenet.

     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  1996,  the  Company  derived  total net revenue of  approximately  $19.3
million  from  Humana  and its  affiliates,  which  accounted  for  20.8% 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.

     During the period  from 1994 to 1996,  the  Company  collaborated  with IBM
Corporation  and its  affiliates  in an attempt to develop an  integrated,  open
architecture billing and collection,  referral management,  pharmacy management,
and electronic  medical  record  system.  This project was designed to produce a
comprehensive  information  system that would be used to effectively  manage the
Company's  shared-risk  capitation business.  As discussed above, the Company is
currently in the process of selling several primary care practices which include
substantially  all  of  the  Company's  shared-risk   capitation  business.  The
comprehensive information system has not been completed, and because the Company
intends to sell the operations  for which it was designed,  its completion is no
longer  being  pursued by the  Company.  As a result,  the cost of the  computer
software and certain computer  equipment  related to this project,  which was an
aggregate of approximately $800,000, was written off to expense during 1996, and
is included in the $17.4 million  write-down of office-based net assets recorded
during 1996. See Note 1(i) to the Company's  consolidated  financial  statements
for more information on the write-down.

                                       4

<PAGE>
     Although the comprehensive information system was not completely developed,
certain  components  of it were  completed  and  have  been  implemented  by the
Company.  The  Company  is  currently  utilizing  the  billing  and  collections
component  of this  system in  several  of its owned  and  managed  office-based
practices and the Company may implement this  component into other  office-based
practices  in the  future.  The  license  agreement  between the Company and IBM
Corporation  permits the Company to place these key elements of the system at an
unlimited  number of  practice  sites  owned or  managed  by the  Company  at no
additional license cost. Alternatively, the Company may replace this billing and
collection  system with an  alternative  system  that does not contain  features
designed to manage shared-risk capitation business, which are no longer relevant
to the Company's growth strategy.

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 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   three  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.

                                       5
<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 Arthritis and
Rheumatic Disease Specialties,  P.A. ("ARDS"). Each of these three affiliates is
owned by Gilbert Drozdow, M.D., who is an executive officer and a stockholder of
the Company.  These affiliates 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 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. These affiliated practices are included
in the Company's consolidated  financial statements,  and the related management
fees are eliminated in consolidation.

     The Company has  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
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 14.0% of the Company's total net revenue in
1996 was derived from the  assignment  of Medicare and Medicaid  benefits to the
Company  by  patients  of the  Company's  affiliated  physicians.  In  addition,
approximately  11.5% of the Company's total net revenue in 1996 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.

                                       6

<PAGE>
     The office-based physician practices which the Company currently intends to
sell include  substantially  all of the  Company's  revenue that is derived from
capitation payments from health maintenance  organizations for patients who have
assigned  their  Medicare  or  Medicaid  benefits  to  the  health   maintenance
organizations.

     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  ARDS 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 ARDS,  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.

     In July 1991 and November 1992, in part to address  concerns  regarding the
Anti-kickback Statute, the federal government 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.  A
proposed  regulation  establishing  additional  safe  harbors was  published  in
September 1993 that would offer new protections under the Anti-kickback  Statute
to eight activities,  including  referrals within group practices  consisting of
active  investors.  Final  regulations  have  not yet been  published.  Proposed
amendments to clarify these safe harbors were  published in July 1994 which,  if
adopted,  would cause substantive  retroactive  changes to the 1991 regulations.
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.
Effective January 1, 1995, 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."  The  Stark
legislation is broad and ambiguous and interpretative regulations clarifying the
provisions of Stark II have not been issued. While the Company believes it is in
compliance  with the Stark  legislation,  there can be no assurance  this is the
case.  Future  regulations  could  require the Company to modify the form of its
relationships with physician groups. 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 is  currently
evaluating these regulations to determine the effect, if any, of the regulations
on the Company's current operations, including its contractual arrangements with
its physicians  and prepaid  health plans.  There can be no assurance that these
new  regulations  will not  have a  material  adverse  effect  on the  Company's
business, financial condition or results of operations.

                                       8
<PAGE>

     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
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.

                                       9
<PAGE>

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."

EMPLOYEES

     As of  March  17,  1997,  the  Company  had  approximately  680  employees,
substantially  all of whom were  full-time.  Of the total  number of  employees,
approximately  200 were  physicians  and  approximately  480 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 $210,000. The Company currently leases approximately 45,000 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 $68,000 (adjusted for certain operating expenses).  In March 1997,
the Company notified the lessor of its corporate headquarters that it intends to
reduce the size of its office space by approximately 9,000 square feet, pursuant
to an option  contained  in the lease  agreement,  which will reduce the monthly
rental payment by approximately $12,000 beginning in July 1997. The Company also
leases  office space for its  physician  practices  under leases with  remaining
terms  which  expire at various  dates  from 1997 to 2007,  and  monthly  rental
payments ranging from $1,200 to $13,300.  In addition,  the Company owns a 3,000
square foot  one-story  building in Miami,  Florida,  which is used as a primary
care office.  The Company  considers its  facilities to be adequate and suitable
for its current needs.

                                       10
<PAGE>

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
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  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 intends 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>

                                                 1997(1)                1996                 1995 (2)
                                             ---------------       ---------------      ---------------
                                             HIGH        LOW       HIGH        LOW      HIGH        LOW
                                             ----        ---       ----        ---      ----        ---

         <S>                                <C>         <C>         <C>       <C>        <C>        <C>
         First Quarter..................    10 1/16      5 5/8      13         8 1/4     ---        ---
         Second Quarter.................      ---        ---       11 3/4      7 3/8     ---        ---
         Third Quarter..................      ---        ---       10 1/4       8        ---        ---
         Fourth Quarter.................      ---        ---       8 3/4       4 5/8    13 5/8      8 1/4
<FN>
(1)  Through March 17, 1997.
(2)  The Company's common stock was first traded publicly on October 31, 1995.
</FN>
</TABLE>

     On March 25, 1997, the closing sale price of the Company's common stock was
$8.125.  As of March 17, 1997,  there were  approximately  1,300  holders of the
common  stock of the Company,  including  54 holders of record.  As of March 17,
1997,  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.

                                       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
years  ended  December  31,  1992 and 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 and 1996 and for the period from  November 29, 1994 to
December  31,  1994 and the years  ended  December  31,  1995 and 1996 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
                                        YEAR ENDED                           NOVEMBER 29,    JANUARY 1,           YEAR ENDED
                                       DECEMBER 31,          YEAR ENDED        1994 TO        1994 TO             DECEMBER 31,
                               --------------------------    DECEMBER 31,    DECEMBER 31,   NOVEMBER 28,   ------------------------
                                   1996           1995          1994             1994          1994           1993         1992
                               -----------    -----------    -----------     ------------   -----------    -----------  -----------
<S>                            <C>          <C>              <C>             <C>            <C>            <C>          <C>
STATEMENT OF OPERATIONS
 DATA (IN THOUSANDS):
Net  revenue................   $    92,767  $    64,665      $    38,624     $     5,129    $    33,495    $    29,891  $    27,594
Operating expenses:
 Direct facility  expenses..        66,125       47,477           26,531           4,089         22,442         19,971       18,706
 Provision for bad debts....         3,605        2,324            1,909             159          1,750          1,742        1,642
 Salaries and benefits......         6,967        5,398            3,127             452          2,675          2,495        1,763
 General and administrative.         4,561        3,976            2,581             297          2,284          1,666        1,341
 Write-down of office-based
   net assets...............        17,360          ---              ---             ---            ---            ---          ---
 Physician stockholders'
   payroll in excess of
   base salary (1)..........           ---          ---            1,949             ---          1,949          3,644        5,706
 Loss on dissolution of
   subsidiary...............           ---          ---              ---             ---            ---            886          ---
 Transaction costs..........           ---          ---              372             372            ---            ---          ---
 Amortization...............         2,491        2,630              270             173             97            ---          ---
 Depreciation...............         1,023          559              177              65            112             44           46
                               -----------   ----------        ---------      ----------     ----------     ----------   ----------
 Operating income (loss)....        (9,365)       2,301            1,708            (478)         2,186           (557)      (1,610)
Interest expense, net.......         2,572        4,254              634             341            293            ---          ---
Other expense...............           ---          ---              ---             ---            ---            227          ---
                               -----------   ----------        ---------      ----------     ----------     ----------   ----------
Income (loss) before income
   taxes and extraordinary
   item.....................       (11,937)      (1,953)           1,074            (819)         1,893           (784)      (1,610)
Income tax expense (benefit)           189         (456)             460            (177)           637           (303)        (638)
                               -----------   ----------        ---------      ----------     ----------     ----------   ----------
Income (loss) before
   extraordinary item.......       (12,126)      (1,497)             614            (642)         1,256           (481)        (972)
Extraordinary item..........           ---       (2,184)             ---             ---            ---            ---          ---
                               -----------  -----------      -----------     -----------     ----------    -----------   ----------
 Net income (loss)..........   $   (12,126) $    (3,681)     $       614     $      (642)    $    1,256    $      (481)  $     (972)
                               ===========  ===========      ===========     ===========     ==========    ===========   ==========

Loss before extraordinary
 item per share.............   $     (1.84) $     (1.05)                     $      (.36)
Net loss per share..........         (1.84)       (1.86)                            (.36)
</TABLE>
<TABLE>
<CAPTION>
                                                        COMPANY                                                   PREDECESSOR
                               ---------------------------------------------------------                    -----------------------
                                                      DECEMBER 31,                                                DECEMBER 31,
                               ---------------------------------------------------------                    -----------------------
                                   1996         1995                             1994                           1993        1992
                               -----------  -----------                      -----------                    -----------  ----------
<S>                            <C>       <C>                                   <C>                              <C>       <C>
BALANCE SHEET DATA (IN THOUSANDS):
Working capital .............  $     8,336  $     4,299                      $     1,338                    $     1,659  $    1,431
Total assets.................       73,408       64,373                           54,127                          8,356       8,161
Long-term debt, net..........       21,367       11,365                           30,581                            101         303
Stockholders' equity.........       35,958       42,669                           13,361                            130         642

<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,   fluctuations  in  the  cost  and
utilization  rates of referral  services  used by  patients  that are subject to
shared-risk  capitation  arrangements,  the  loss  of  significant  hospital  or
third-party payor relationships, and changes in the number of patients using the
Company's physician services.

GENERAL

     The Company is a  physician  practice  management  company  which  provides
specialist physician services at hospitals and ambulatory surgical facilities in
the areas of anesthesia, neonatology, pediatrics and emergency services and owns
and  operates,   or  manages,   office-based   primary  care,   obstetrical  and
rheumatology  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.

     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 October 1996, the  Predecessor and
the  Company  completed  twelve  acquisitions  of  office-based   primary  care,
obstetrical and rheumatology  practices for an aggregate purchase price of $26.3
million,   as  described  below.   These  twelve   acquisitions   accounted  for
substantially all of the Company's  office-based  revenue during the three years
ended December 31, 1996. 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.
All of these acquisitions were accounted for as purchases, and accordingly,  the
Company's  financial  statements  include the operations of each of the acquired
practices  beginning on each  respective  date of  acquisition.  During the year
ended  December 31, 1996,  68.9% of the  Company's  net revenue was derived from
specialist  physician  services  delivered at hospitals and ambulatory  surgical
facilities,  and the  remaining  31.1% 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.  Prior to the 1994  Acquisition,
physician  stockholders of the  Predecessor  received  compensation  payments in
excess of the market  compensation  rate for the physician  services provided to
the Predecessor by those stockholders. Such payments ceased upon consummation of
the 1994 Acquisition. The period-to-period comparisons set forth below include a
comparison  of the 1995  results of the Company to the  combined  results of the
Predecessor  for the period from January 1, 1994 to November  28, 1994,  and the
Company for the period from November 29, 1994 to December 31, 1994.  The Company
believes that this full  year-to-full  year comparison is more meaningful than a
partial year comparison would be.

     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

                                       13
<PAGE>

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
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 of  approximately  $8.2 million in
cash and deferred payments.

     As discussed above under  "Operations - Office-based  Physician  Services,"
the Company sold one  office-based  practice  location in December 1996,  sold a
second  office-based  location in February 1997,  and currently  intends to sell
several other practices.  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 and two rheumatology practices acquired in 1996.

     Under   shared-risk   capitation   arrangements,    which   accounted   for
approximately 15.4% of the Company's net revenue in 1996, 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.

     Commencing in 1994, the Company made significant  investments in personnel,
computer equipment, computer software and other infrastructure costs in order to
effectively manage all of the acquired physician  practices,  particularly those
practices which derive a majority of their revenue from  shared-risk  capitation
arrangements.  These investments  resulted in significant  increases in salaries
and benefits,  general and  administrative  expenses,  and capital  expenditures
during  1995 and 1996,  compared  to prior  years.  The  Company's  office-based
physician practices generated net revenues of $28.9 million and $20.8 million in
1996 and 1995, and incurred operating losses of $2.0 million and $1.5 million in
1996 and 1995. The $1.5 million operating loss in 1995 includes a $700,000 bonus
paid to a physician employed by a practice acquired by the Company in June 1995,
as discussed above. Due to the Company's  decision to sell certain  office-based
practices,  as discussed  above, it has  discontinued its investment in computer
software and equipment that was designed to support its  shared-risk  capitation
business.

     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(i)  to the  Company's  consolidated  financial
statements for more information.

     The accompanying  consolidated  financial  statements include disclosure of
net revenue and operating  income for each of the Company's two  divisions,  the
hospital-based  services division and the office-based services division.  Under
the Company's new strategic  direction,  as discussed above, the Company intends
to integrate its hospital-based and office-based  operations together by forming
multi-specialty  physician  networks  that support its hospital  customers.  The
Company  expects  that  it will  make  investments  and  incur  expenses  in its
office-based  operations  that are designed to increase  the  earnings  from its
hospital-based  operations.  Therefore,  the  Company  believes  that it will no
longer  be  meaningful  to  report  operating  income  separately  for these two
divisions.  In addition,  the Company  currently  intends to sell several of its
office-based  practices,  as discussed above. The Company anticipates that after
such practices are sold, its  office-based  operations  will be less material to
its consolidated  financial statements than they are currently.  Therefore,  the
Company  does not expect to report  operating  income  separately  for these two
divisions in the future.

                                       14
<PAGE>

     As a result of the 1994  Acquisition and several  acquisitions of physician
practices  made 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, 1996,
the  Company's  total  assets  were  approximately   $73.4  million,   of  which
approximately  $46.1 million,  or 62.8%, was goodwill.  Of the total goodwill at
December 31, 1996, $29.3 million is related to the 1994  Acquisition,  and $16.8
million is related to several  acquisitions of physician  practices completed by
the Predecessor and the Company, as described above.

     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 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  discussed  above,  which  resulted  primarily from the
Company's change in strategic direction.


                                       15
<PAGE>

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,
                                                                        -------------------------------------
                                                                          1996          1995          1994(1)
                                                                        -------       --------        -------

<S>                                                                       <C>           <C>             <C>
         Net revenue.............................................         100.0%        100.0%          100.0%
         Operating expenses:
            Direct facility expenses.............................          71.3          73.4            68.7
            Provision for bad debts..............................           3.9           3.6             4.9
            Salaries and benefits................................           7.5           8.3             8.1
            General and administrative...........................           4.9           6.1             6.7
            Write-down of office-based net assets................          18.7           ---             ---
            Physician stockholders' payroll in
               excess of base salary.............................           ---           ---             5.0
            Transaction costs....................................           ---           ---             1.0
            Amortization.........................................           2.7           4.1             0.7
            Depreciation.........................................           1.1           0.9             0.5
                                                                          -----         -----           -----
               Total operating expenses..........................         110.1          96.4            95.6
                                                                          -----         -----           -----
         Operating income (loss).................................         (10.1)%         3.6%            4.4%
                                                                          =====         =====           =====
<FN>
     (1) Represents combined data of the Predecessor for the period from January 1, 1994 to November 28, 1994,
         the date of the 1994  Acquisition,  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.
</FN>
</TABLE>

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.

                                       16
<PAGE>

     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.

     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.

Year Ended December 31, 1995 Compared To Year Ended December 31, 1994

     Net revenue  increased $26.0 million,  or 67.4%, from $38.6 million in 1994
to $64.7 million in 1995. Net revenue from  office-based  services  increased by
$15.9 million, from $4.9 million in 1994 to $20.8 million in 1995. This increase
was primarily due to the fact that the Company entered the office-based services
business on  September 1, 1994,  resulting  in only four months of  office-based
revenue in 1994. In addition,  the Company made six acquisitions of office-based
practices from December 1994 to June 1995,  which resulted in increased  revenue
in 1995. See Note 2 to the Company's  consolidated financial statements for more
information on acquisitions.  Net revenue from hospital-based services increased
by $10.1 million, from $33.7 million in 1994 to $43.8 million in 1995, primarily
due to the addition of several new contracts for hospital-based  services during
both 1994 and 1995.

                                       17
<PAGE>

     Direct  facility  expenses  increased $21.0 million,  or 78.9%,  from $26.5
million in 1994 to $47.5 million in 1995,  primarily due to the  acquisitions of
office-based  practices  and the addition of new  hospital-based  contracts,  as
discussed  above.  As a percentage  of net  revenue,  direct  facility  expenses
increased  from 68.7% in 1994 to 73.4% in 1995,  primarily  due to the  acquired
office-based  practices.  The acquired office-based practices have higher direct
facility   expenses  as  a  percentage   of  net  revenue  than  the   Company's
hospital-based  services business  primarily because revenues received under the
shared-risk  capitation  arrangements  under  which  certain  of such  practices
operate  include  amounts  which  must,  in  turn,  be paid by the  Company  for
specialist physician services and inpatient hospital services that are delivered
by unaffiliated health care providers with which the Company subcontracts.

     The provision for bad debts increased $415,000, or 21.7%, from $1.9 million
in 1994 to $2.3 million in 1995. As a percentage  of net revenue,  the provision
for bad debts decreased from 4.9% in 1994 to 3.6% in 1995,  primarily due to the
fact that the acquired  office-based  practices have relatively  little bad debt
expense as the  majority of the net  revenue  from these  practices  consists of
capitation payments, which are typically paid currently.

     Salaries and benefits  increased $2.3 million,  or 72.6%, from $3.1 million
in 1994 to  $5.4  million  in  1995.  This  increase  was  primarily  due to the
development  of the Company's  primary care  management  infrastructure,  and an
increase in its general  corporate  organization to support future growth of the
Company.  As a percentage of net revenue,  salaries and benefits  increased from
8.1% in 1994 to 8.3% in 1995.

     General and administrative  expense increased $1.4 million,  or 54.0%, from
$2.6 million in 1994 to $4.0 million in 1995. This increase was due to 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 6.7% in 1994 to 6.1% in 1995 due to a
64.7% increase in net revenue, as discussed above.

     Physician  stockholders'  payroll in excess of base salary  decreased  from
$1.9 million in 1994 to zero in 1995, as such excess  payroll  ceased being paid
upon consummation of the 1994 Acquisition.

     Amortization expense increased $2.4 million,  from $270,000 in 1994 to $2.6
million  in 1995,  primarily  due to  amortization  of the  goodwill  and  other
intangible  assets  related to the 1994  Acquisition,  and  amortization  of the
goodwill  and  other  intangible  assets  related  to  the  acquired   physician
practices.

     Interest  expense  increased  $3.6  million,  from $634,000 in 1994 to $4.3
million in 1995,  primarily due to interest on the long-term debt related to the
1994  Acquisition  and  long-term  debt incurred to finance the  acquisition  of
physician practices from September 1994 to June 1995.

     Income tax expense decreased $916,000,  from income tax expense of $460,000
in 1994 to an  income  tax  benefit  of  $456,000  in 1995.  This  decrease  was
primarily  due to a loss before  income tax of $2.0 million in 1995  compared to
income before income tax of $1.1 million in 1994.

     The Company incurred  extraordinary expenses of $2.2 million in 1995 due to
the early repayment of a senior  subordinated  note and the outstanding  balance
under the existing  senior  credit  facility  with the proceeds of the Company's
initial public offering.  See Note 1(j) to the Company's  consolidated financial
statements for more information on extraordinary expenses.

LIQUIDITY AND CAPITAL RESOURCES

     On March 12,  1997,  the Company  established  a new $35 million  revolving
credit facility with NationsBank,  National Association (South) ("NationsBank"),
which was used to repay the  outstanding  balance  under the previous  facility,
which was $25.2  million.  The new 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 17, 1997, the applicable margin was 1.63%. There are no principal payments
due under the new credit facility until the maturity date of March 11, 2000. See
Note 12 to the Company's  consolidated financial statements for more information
on the new credit facility.

                                       18
<PAGE>

     The amount that can be borrowed under the new credit facility is restricted
by a leverage ratio defined in the credit  agreement.  The  outstanding  balance
under the new credit facility was $25.7 million at March 17, 1997.  Based on the
value of the  leverage  ratio as of March 17, 1997,  the Company had  additional
borrowing  availability  of  $9.3  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 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,  as  discussed  above under  "General."  However,  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.

     The  Company's  principal  uses of cash during the year ended  December 31,
1996 were to finance  acquisitions of physician  practices ($13.8  million),  to
make  payments on long-term  debt ($4.4  million),  and to finance  increases in
accounts  receivable  ($3.5  million).  The $3.5  million  increase  in accounts
receivable was primarily due to new contracts for hospital-based  services added
during the year ended  December 31, 1996.  The Company met its cash needs during
this period  primarily  through  borrowings  under its revolving credit facility
with NationsBank of Florida,  N.A.  ("NationsBank  Florida") ($13.2 million) and
its net income,  excluding  non-cash  expenses  (write-down of office-based  net
assets, amortization and depreciation) ($8.7 million).

     On November 1, 1995, the Company established a $45 million revolving credit
facility  with  NationsBank  Florida,   which  was  used  primarily  to  finance
acquisitions of physician  practices in 1996. The outstanding  balance under the
credit  facility  increased  from $9.7  million at  December  31,  1995 to $20.0
million at December 31, 1996, primarily due to several acquisitions of physician
practices  completed during 1996. The outstanding  balance  increased from $20.0
million at December 31, 1996 to $25.7  million at March 17, 1997,  primarily due
to the acquisition of an office-based  obstetrical  practice in March 1997 ($3.1
million),  and the  repayment  of a note  payable  that was due in January  1997
($765,000).

     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 $13.00
per share,  and which generated net proceeds of  approximately  $44.8 million to
the  Company.  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 $1.0 million was used to pay certain deferred  payments in connection
with the June 1995  acquisition  of a primary care  practice.  In  addition,  an
outstanding  convertible  promissory note for $5.0 million,  which was issued in
June 1995,  was converted into  approximately  182,000 shares of common stock in
November 1995.

     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 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. There can be no assurance
that such  additional  financing  will be available on terms  acceptable  to the
Company.

     Net cash used by operating  activities was $3.5 million in 1995 compared to
$5.3 million of cash provided by operating  activities in 1996. This improvement
of $8.8 million was  primarily  due to an increase in net income,  excluding the
$17.4 million  write-down of  office-based  net assets,  from a net loss of $3.7
million  in 1995 to net  income of $5.2  million in 1996.  The  increase  in the
Company's net income was  primarily due to an increase in operating  income from
hospital-based services, as discussed above under "Results of Operations," and a
decrease in interest  expense due to the  repayment of  long-term  debt with the
proceeds of the Company's initial public offering, as discussed above.

                                       19
<PAGE>

     Net cash used by investing  activities  increased from $7.9 million in 1995
to  $14.8  million  in  1996,  primarily  due to an  increase  in cash  used for
physician  practice  acquisitions  from $7.4 million in 1995 to $13.8 million in
1996 and an  increase  in capital  expenditures  from  $471,000  in 1995 to $1.2
million in 1996. The increase in capital  expenditures  was primarily due to the
development of the Company's  integrated  management  information system for its
office-based operations (the "Information System") and the relocation of certain
office-based physician practices.  The development of the Information System has
not  been  completed,  and  since  the  Company  currently  intends  to sell the
physician practices for which it was designed, its completion is no longer being
pursued by the  Company.  As a result,  the cost of the  computer  software  and
certain  computer  equipment  related to this system,  which was an aggregate of
approximately  $800,000,  was written off to expense in 1996, and is included in
the $17.4 million write-down of office-based net assets.

     Net cash  provided by financing  activities  increased  slightly  from $8.8
million in 1995 to $9.6  million in 1996.  Net  borrowings  on  long-term  debt,
excluding  transactions related to the initial public offering in November 1995,
increased  from $8.7 million in 1995 to $9.6 million in 1996. The net borrowings
were used primarily to finance acquisitions in 1996, and to finance acquisitions
and increases in accounts receivable in 1995.


                                       20
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
         -------------------------------------------

                                    INDEX TO FINANCIAL STATEMENTS
                                    -----------------------------

                                                                            Page
                                                                            ----
 Report of Independent Certified Public Accountants-
   Sheridan Healthcare, Inc...............................................   22
 Report of Independent Certified Public Accountants-
   Southeastern Anesthesia Management Associates, Inc.....................   23
 Consolidated Balance Sheets as of December 31, 1996 and 1995.............   24
 Consolidated Statements of Operations for the Years ended December 31,
     1996 and 1995, the Period from November 29, 1994 to December 31,
     1994, and the Period from January 1, 1994 to November 28, 1994.......   25
 Consolidated Statements of Stockholders' Equity for the Years ended
     December 31, 1996 and 1995, the Period from November 29, 1994 to
     December 31, 1994, and the Period from January 1, 1994 to
     November 28, 1994....................................................   26
 Consolidated Statements of Cash Flows for the Years ended December 31,
     1996 and 1995, the Period from November 29, 1994 to December 31, 1994,
     and the Period from January 1, 1994 to November 28, 1994..............  27
 Notes to Consolidated Financial Statements................................  28



                                       21
<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,
1996  and  1995,  and  the  related   consolidated   statements  of  operations,
stockholders'  equity and cash flows for the years ended  December  31, 1996 and
1995 and for the period from inception (November 29, 1994) to December 31, 1994.
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, 1996 and 1995, and the results of their
operations  and their cash flows for the years ended  December 31, 1996 and 1995
and the period from November 29, 1994 to December 31, 1994,  in conformity  with
generally accepted accounting principles.




ARTHUR ANDERSEN LLP



Miami, Florida,
     February 21, 1997 (except for the matter discussed
     in Note 12, as to which the date is March 17, 1997).



                                       22
<PAGE>











               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               --------------------------------------------------



To the Stockholders of
     Sheridan Healthcare, Inc.:


We  have  audited  the  accompanying   consolidated  statements  of  operations,
stockholders'  equity  and cash  flows  of  Southeastern  Anesthesia  Management
Associates,  Inc. (a Florida corporation,  formerly a professional  association)
and subsidiaries for the period from January 1, 1994 to November 28, 1994. These
financial  statements are the responsibility of Southeastern's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the results of operations and cash flows of
Southeastern  Anesthesia  Management  Associates,  Inc. and subsidiaries for the
period from January 1, 1994 to November 28, 1994, in conformity  with  generally
accepted accounting principles.




ARTHUR ANDERSEN LLP



Miami, Florida,
     March 17, 1995.



                                       23
<PAGE>

<TABLE>

                                             SHERIDAN HEALTHCARE, INC.
                                            CONSOLIDATED BALANCE SHEETS
                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>



                                                                                           DECEMBER 31, DECEMBER 31,
                                                                                              1996         1995
                                                                                           -----------  -----------
<S>                                                                                        <C>          <C>

                                                      ASSETS
Current assets:
   Cash and cash equivalents..........................................................     $      ---   $       ---
   Accounts receivable, less allowances of $1,277 and $737............................         18,717        11,040
   Income tax refunds receivable......................................................            570           760
   Deferred income taxes..............................................................          1,154           ---
   Other current assets...............................................................          1,845         1,029
                                                                                           ----------   -----------
     Total current assets.............................................................         22,286        12,829
Property and equipment, net of accumulated depreciation of $2,637 and $635............          3,730         3,767
Goodwill, net of accumulated amortization of $17,756 and $1,760.......................         46,111        45,417
Intangible assets, net of accumulated amortization of $1,942 and $1,140...............          1,281         2,360
                                                                                           ----------   -----------
     Total assets.....................................................................     $   73,408   $    64,373
                                                                                           ==========   ===========

                                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable...................................................................     $      222   $       357
   Amounts due for acquisitions.......................................................            558           559
   Accrued salaries and benefits......................................................          2,798         2,236
   Self-insurance accruals............................................................          3,170         1,615
   Refunds payable....................................................................          1,952           910
   Accrued lease obligations..........................................................            971           502
   Other accrued expenses.............................................................          3,090         1,381
   Current portion of long-term debt..................................................          1,189           970
                                                                                           ----------   -----------
     Total current liabilities........................................................         13,950         8,530
Long-term debt........................................................................         21,367        11,365
Amounts due for acquisitions..........................................................          2,133         1,809
Commitments and contingencies (Note 8)
Stockholders' equity:
   Preferred stock, par value $.01; 5,000 shares authorized; none issued..............            ---           ---
   Common stock, par value $.01; 31,000 shares authorized:
     Voting; 6,418 and 5,773 shares issued and outstanding............................             64            58
     Class A non-voting; 297 shares issued and outstanding............................              3             3
   Additional paid-in capital.........................................................         61,129        55,720
   Excess purchase price distributed to management stockholders.......................         (7,541)       (7,541)
   Retained earnings (deficit)........................................................        (17,697)       (5,571)
                                                                                           ----------   -----------
     Total stockholders' equity ......................................................         35,958        42,669
                                                                                           ----------   -----------
     Total liabilities and stockholders' equity.......................................     $   73,408   $    64,373
                                                                                           ==========   ===========


</TABLE>



                                                 See accompanying notes.


                                                             25
<PAGE>


<TABLE>



                                             SHERIDAN HEALTHCARE, INC.
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)

<CAPTION>



                                                                               COMPANY                  PREDECESSOR
                                                                -------------------------------------   ------------
                                                                                          PERIOD FROM   PERIOD FROM
                                                                                          NOVEMBER 29,   JANUARY 1,
                                                                  YEAR ENDED DECEMBER 31,   1994 TO       1994 TO
                                                                ------------------------  DECEMBER 31,  NOVEMBER 28,
                                                                    1996         1995         1994         1994
                                                                -----------  -----------  ------------  ------------

<S>                                                             <C>          <C>          <C>           <C>
Net revenue...................................................  $    92,767  $    64,665  $      5,129  $     33,495
Operating expenses:
   Direct facility expenses...................................       66,125       47,477         4,089        22,442
   Provision for bad debts....................................        3,605        2,324           159         1,750
   Salaries and benefits......................................        6,967        5,398           452         2,675
   General and administrative.................................        4,561        3,976           297         2,284
   Write-down of office-based net assets......................       17,360          ---           ---           ---
   Physician stockholders' payroll in excess of base salary...          ---          ---           ---         1,949
   Transaction costs..........................................          ---          ---           372           ---
   Amortization...............................................        2,491        2,630           173            97
   Depreciation...............................................        1,023          559            65           112
                                                                 ----------   ----------   -----------  ------------
     Total operating expenses.................................      102,132       62,364         5,607        31,309
                                                                 ----------   ----------   -----------  ------------
Operating income (loss).......................................       (9,365)       2,301          (478)        2,186
Interest expense, net.........................................        2,572        4,254           341           293
                                                                 ----------   ----------   -----------  ------------
Income (loss) before income taxes and extraordinary item......      (11,937)      (1,953)         (819)        1,893
Income tax expense (benefit)..................................          189         (456)         (177)          637
                                                                 ----------   ----------   -----------  ------------
Income (loss) before extraordinary item.......................      (12,126)      (1,497)         (642)        1,256
Extraordinary item (Note 1(j))................................          ---       (2,184)          ---           ---
                                                                 ----------   ----------   -----------  ------------
Net income (loss).............................................   $  (12,126)      (3,681)         (642) $      1,256
                                                                 ==========                             ============

Dividends on convertible preferred stock......................                     1,363           134
                                                                              ----------   -----------
Net loss attributable to common stockholders..................                $   (5,044)  $      (776)
                                                                              ==========   ===========

Loss before extraordinary item per share......................  $     (1.84) $     (1.05)  $      (.36)
Net loss per share............................................        (1.84)       (1.86)         (.36)
Weighted average shares of common stock
   and common stock equivalents outstanding...................        6,587        2,713         2,174



</TABLE>






                                                See accompanying notes.



                                                           26
<PAGE>

<TABLE>


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




                                                                               COMMON STOCK      ADDITIONAL
                                                                            ------------------    PAID-IN    RETAINED
                                                                            SHARES      AMOUNT    CAPITAL    EARNINGS     TOTAL
                                                                            ------     -------   ----------  --------    -------
<S>                                                                        <C>        <C>        <C>         <C>        <C>

THE PREDECESSOR

Balance, December 31, 1993...............................................        1     $   ---   $        1  $    129    $   130
Net income...............................................................      ---         ---          ---     1,256      1,256
                                                                            ------     -------   ----------  --------    -------
Balance, November 28, 1994...............................................        1     $   ---   $        1  $  1,385    $ 1,386
                                                                            ======     =======   ==========  ========    =======
</TABLE>



<TABLE>


                                                                                                          EXCESS
                                                                                                         PURCHASE
                                                   CONVERTIBLE PREFERRED STOCK                            PRICE
                                        CLASS A    ---------------------------                         DISTRIBUTED
                       COMMON STOCK  COMMON STOCK     CLASS A       CLASS B    ADDITIONAL                   TO      RETAINED
                       ------------- ------------- ------------- -------------  PAID-IN  SUBSCRIPTIONS  MANAGEMENT  EARNINGS
                       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>

THE COMPANY

Issuance of common
 and preferred stock
 at inception
 (November 29, 1994) ..   410 $    4    --- $  ---    350 $ 17,500   79  $3,929   $  234     $ (238)     $  (7,541)  $  249 $14,137
Dividends on convertible
 preferred stock.......   ---    ---    ---    ---    ---      ---   ---    ---     ---         ---            ---     (134)   (134)
Net loss...............   ---    ---    ---    ---    ---      ---   ---    ---     ---         ---            ---     (642)   (642)
                        ----- ------  -----  -----  -----  ------- ----  ------ -------     -------        ------- -------- -------
Balance,
 December 31, 1994.....   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
                        ===== ======    ===  =====  =====  ======= ====  ====== =======     =======        ======= ======== =======


</TABLE>















                                                         See accompanying notes.



                                                                     27
<PAGE>

<TABLE>

                                                        SHERIDAN HEALTHCARE, INC.
                                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                             (IN THOUSANDS)
<CAPTION>

                                                                                   COMPANY                PREDECESSOR
                                                                   -------------------------------------  ------------
                                                                                            PERIOD FROM   PERIOD FROM
                                                                                            NOVEMBER 29,   JANUARY 1,
                                                                   YEAR ENDED DECEMBER 31,     1994 TO       1994 TO
                                                                   -----------------------  DECEMBER 31,  NOVEMBER 28,
                                                                      1996         1995         1994         1994
                                                                   ----------   ----------  ------------  ------------
<S>                                                                <C>          <C>         <C>           <C>

Cash flows from operating activities:
   Net income (loss)..........................................     $  (12,126)  $   (3,681) $       (642) $      1,256
   Adjustments to reconcile net income (loss) to
     net cash provided (used) by operating activities:
     Write-down of office-based net assets....................         17,360          ---           ---           ---
     Amortization.............................................          2,491        2,630           173            97
     Depreciation.............................................          1,023          559            65           112
     Provision for bad debts..................................          3,605        2,324           159         1,750
     Net interest amortization on subordinated debt...........            ---          425           ---           ---
     Provision for deferred stockholder compensation..........            ---          ---           ---           242
     Deferred income taxes....................................         (1,154)        (167)       (1,080)          ---
   Changes in operating assets and liabilities:
     Accounts receivable......................................         (7,076)      (5,214)         (749)       (2,731)
     Income tax refunds receivable............................            190         (760)          ---           ---
     Other current assets.....................................           (486)          17          (525)          (56)
     Other assets.............................................            207          ---           424             8
     Accounts payable and accrued liabilities.................          1,229          349         2,200         1,157
                                                                   ----------   ----------  ------------  ------------
     Net cash provided (used) by operating activities.........          5,263       (3,518)           25         1,835
Cash flows from investing activities:
   Acquisitions of physician practices........................        (12,517)      (7,419)       (1,000)       (3,264)
   Investments in management agreements.......................         (1,245)         ---           ---           ---
   Sale of physician practices................................            193          ---           ---           ---
   Capital expenditures.......................................         (1,245)        (471)          (97)         (357)
                                                                   ----------   ----------  ------------  ------------
     Net cash used by investing activities....................        (14,814)      (7,890)       (1,097)       (3,621)
Cash flows from financing activities:
   Borrowings on long-term debt...............................         13,997       15,465           991         4,892
   Issuance of convertible promissory note....................            ---        5,000           ---           ---
   Borrowings on long-term debt in connection
     with acquisition of Predecessor..........................            ---          ---        22,791           ---
   Payments on long-term debt.................................         (4,438)     (39,282)         (165)       (1,676)
   Issuance of common stock in public offering................            ---       44,840           ---           ---
   Redemption of redeemable preferred stock...................            ---      (16,071)          ---           ---
   Issuance of common and preferred stock in
     connection with acquisition of Predecessor...............            ---          ---        21,429           ---
   Acquisition of Predecessor.................................            ---          ---       (43,275)          ---
   Dividends on convertible preferred stock...................            ---       (1,363)         (134)          ---
   Collection of subscriptions receivable.....................            ---          238           ---           ---
   Treasury shares purchased and retired......................             (8)         ---           ---           ---
                                                                   ----------   ----------  ------------  ------------
     Net cash provided by financing activities................          9,551        8,827         1,637         3,216
                                                                   ----------   ----------  ------------  ------------
Increase (decrease) in cash and cash equivalents..............            ---       (2,581)          565         1,430
Cash and cash equivalents, beginning of period................            ---        2,581         2,016           586
                                                                   ----------   ----------  ------------  ------------
Cash and cash equivalents, end of period......................     $      ---   $      ---  $      2,581  $      2,016
                                                                   ==========   ==========  ============  ============

Cash paid for interest........................................     $    2,588   $    3,779  $         90  $        135
Cash paid for income taxes....................................          2,110        1,971           ---           ---
Capital leases entered into...................................            ---        1,887           312           ---

</TABLE>

                                                         See accompanying notes.



                                       28
<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  stockholders'  equity and was not
allocated to the net assets acquired.

     As a result of the allocation of the purchase  price,  $31.2 million of the
purchase price was allocated to goodwill as shown below (in thousands):

<TABLE>

         <S>                                                                                   <C>
         Purchase price......................................................................  $    43,275
         Excess purchase price distributed to management  stockholders.......................       (7,541)
                                                                                               -----------
           Purchase price to be allocated....................................................       35,734
         Net assets acquired:
           Working capital...................................................................        4,365
           Property and equipment............................................................        1,236
           Intangible assets (see Note (f))..................................................        1,880
           Unamortized goodwill related to previous acquisition .............................        7,316
           Other assets......................................................................          609
           Long-term debt....................................................................       (9,580)
           Deferred income taxes.............................................................       (1,247)
                                                                                               -----------
              Total net assets acquired......................................................        4,579
                                                                                               -----------
         Goodwill related to the 1994 Acquisition............................................  $    31,155
                                                                                               ===========
</TABLE>

     In connection with the 1994 Acquisition, the Company paid $372,000 of legal
expenses and other  transaction  costs which were incurred by the  Predecessor's
stockholders. Such costs have been expensed and reflected as "Transaction costs"
in the  accompanying  statement of  operations  for the period from November 29,
1994 to December 31, 1994.

     The  accompanying  financial  statements for 1996, 1995 and the period from
November 29, 1994 to December 31, 1994 include the Company and its subsidiaries.
The  accompanying  financial  statements  for the period from January 1, 1994 to
November 28, 1994 include the Predecessor and its subsidiaries. The accompanying
financial  statements  for  the  period  prior  to  November  29,  1994  are not
necessarily  comparable to the accompanying financial statements for the periods
subsequent to November 28, 1994 due to the 1994 Acquisition.



                                       29
<PAGE>

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


     In addition to the  subsidiaries  of the Company and the  Predecessor,  the
accompanying  financial  statements  include certain  affiliates of the Company,
since  the  non-medical  operations  of such  affiliates  are  considered  to be
unilaterally  and  perpetually  controlled  by the  Company  due  to  management
services  agreements  between such  affiliates  and the Company.  Although  such
affiliates  are  not  subsidiaries  of the  Company,  inclusion  of  them in the
accompanying  consolidated  financial  statements is necessary to fairly present
the financial position and results of operations of the Company. The stockholder
of  such  affiliates  is an  officer  and  stockholder  of the  Company  and the
management  services  agreements  between  such  affiliates  and the Company are
terminable  only under  limited  conditions,  such as bankruptcy of the Company.
Accordingly,  control of such  affiliates by the Company is not considered to be
temporary.

     A summary of the combined balance sheets of such affiliates at December 31,
1996 and 1995, and the combined  statements of operations of such affiliates for
the years ended December 31, 1996 and 1995 is as follows (in thousands):
<TABLE>
<CAPTION>


                                                                                     1996          1995
                                                                                  -----------  -----------

         <S>                                                                      <C>          <C>
         Cash and cash equivalents............................................    $        31  $       ---
         Accounts receivable, net.............................................          3,791        2,313
         Other current assets.................................................            172           77
         Property and equipment, net..........................................             98          ---
                                                                                  -----------  -----------
           Total assets.......................................................    $     4,092  $     2,390
                                                                                  ===========  ===========

         Accounts payable and accrued expenses................................    $     1,214  $       658
         Intercompany liabilities.............................................          1,601        1,159
         Stockholder's equity.................................................          1,277          573
                                                                                  -----------  -----------
           Total liabilities and stockholder's equity.........................    $     4,092  $     2,390
                                                                                  ===========  ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31,
                                                                                   -----------------------
                                                                                      1996         1995
                                                                                   ----------   ----------

         <S>                                                                       <C>          <C>
         Net revenue..........................................................     $   15,359   $    7,201
         Direct facility expenses.............................................        (11,451)      (5,184)
         Management fees to the Company.......................................         (3,304)      (1,655)
         Other, net...........................................................             21          (45)
                                                                                   ----------   ----------
           Net income.........................................................     $      625   $      317
                                                                                   ==========   ==========
</TABLE>

     All significant intercompany balances and transactions have been eliminated
in consolidation.

(b) 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.



                                       30
<PAGE>

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


(c) Accounts Receivable And Net Revenue

     The Company derives substantially all of its revenues,  and the Predecessor
derived  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,  and  the
Predecessor recorded, 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  significant  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.

(d) Charity Care

     The Company and the  Predecessor  have 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.

(e) Goodwill

     Approximately  $29.3  million  of the  total  amount  of  goodwill,  net of
accumulated  amortization,  at  December  31,  1996,  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.

     The  remaining  $16.8  million  of the  total  amount of  goodwill,  net of
accumulated   amortization,   at  December  31,  1996,  is  related  to  several
acquisitions  of physician  practices by the Company and its  Predecessor.  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 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 20 years.


                                       31
<PAGE>


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


     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 (i) 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 (f) below.

(f) 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 (i) below
for a  description  of an  adjustment  to reduce the carrying  values of certain
intangible assets to their net realizable values during 1996.

(g) 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.

(h) 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
financial statements at cost which approximates fair value.

(i) 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>

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

                                       32
<PAGE>


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


     One of the physician  practices that comprise the  non-strategic  practices
referred  to above was sold by the  Company in  December  1996,  and the Company
currently intends to sell several other non-strategic practices.

(j) 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  10).  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).

(k) Net Income (Loss) Per Share

     Net income (loss) per share is equal to net income (loss)  attributable  to
common  stockholders  divided by the weighted average number of shares of common
stock outstanding.  Net income  attributable to common  stockholders is equal to
net income (loss) less dividends on convertible  preferred  stock.  Common stock
equivalents,  which consist of stock options  issued to employees and directors,
are not included in the determination of the net loss per share in 1996 and 1995
since  they would have the  effect of  reducing  the net loss per share.  Common
stock  equivalents are included in the  determination  of the net loss per share
for the period from  November 29, 1994 to December 31, 1994 because they consist
of stock  options  issued  within  one year  prior to the date of the  Company's
initial public  offering (see Note 10) at exercise  prices less than the initial
public offering price,  which are included even though they have an antidilutive
effect on the net loss per share.

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

     In September  1994, the Predecessor  acquired a four-facility  primary care
practice for cash and notes in an aggregate  amount  originally  estimated to be
$7.9 million,  which included certain contingent obligations of the Predecessor.
The purchase  price is currently  estimated to be $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,  as shown below (in
thousands):

<TABLE>

         <S>                                                                                   <C>
         Purchase price.....................................................................   $     8,723
         Net assets acquired:
           Working capital (deficit)........................................................          (355)
           Property and equipment...........................................................           868
                                                                                               -----------
              Net assets acquired...........................................................           513
                                                                                               -----------
         Goodwill related to the acquisition................................................   $     8,210
                                                                                               ===========
</TABLE>



                                       33
<PAGE>

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


     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,  as shown
below (in thousands):
<TABLE>

         <S>                                                                                   <C>
         Purchase price.....................................................................   $     1,437
         Net assets acquired:
           Working capital..................................................................           118
           Property and equipment...........................................................            78
           Intangible assets................................................................           400
                                                                                               -----------
              Net assets acquired...........................................................           596
                                                                                               -----------
         Goodwill related to the acquisition................................................   $       841
                                                                                               ===========
</TABLE>


     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, as shown
below (in thousands):

<TABLE>

         <S>                                                                                   <C>

         Aggregate purchase price...........................................................   $     7,880
         Net assets acquired:
           Working capital..................................................................           144
           Property and equipment...........................................................           358
           Intangible assets................................................................            30
                                                                                               -----------
              Net assets acquired...........................................................           532
                                                                                               -----------
         Goodwill related to the acquisitions...............................................   $     7,348
                                                                                               ===========
</TABLE>


     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, as shown below (in thousands):

<TABLE>

         <S>                                                                                   <C>
         Purchase price.....................................................................   $     9,644
         Net assets acquired:
           Working capital..................................................................         1,407
           Property and equipment...........................................................            78
           Accrued termination benefits.....................................................        (1,100)
           Long-term debt...................................................................          (500)
                                                                                               -----------
              Net assets acquired...........................................................          (115)
                                                                                               -----------
         Goodwill related to the acquisition................................................   $     9,759
                                                                                               ===========
</TABLE>


                                       34
<PAGE>


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


     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, as shown below (in thousands):

<TABLE>

         <S>                                                                                   <C>
         Aggregate purchase price...........................................................   $     8,210
         Net assets acquired:
           Working capital..................................................................           830
           Property and equipment...........................................................           670
           Intangible assets................................................................            60
           Long-term debt...................................................................          (130)
                                                                                               -----------
              Net assets acquired...........................................................         1,430
                                                                                               -----------
         Goodwill related to the acquisitions...............................................   $     6,780
                                                                                               ===========
</TABLE>


     All of the  above  acquisitions,  including  the  assignment  of the  panel
services  agreement  in  June  1995,  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.

     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,
                                                                                   -----------------------
                                                                                     1996           1995
                                                                                   ---------     ---------
                                                                                    (IN THOUSANDS, EXCEPT
                                                                                        PER SHARE DATA)
         <S>                                                                      <C>          <C>
         PRO FORMA RESULTS OF OPERATIONS:
         Net revenue..........................................................    $   96,780   $    83,476
         Loss before income taxes and extraordinary item......................       (11,463)       (1,732)
         Loss before extraordinary item.......................................       (11,652)       (1,276)
         Net loss.............................................................       (11,652)       (4,823)
         Loss before extraordinary item per share.............................         (1.73)         (.78)
         Net loss per share...................................................         (1.73)        (1.43)
</TABLE>

                                       35
<PAGE>


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


(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>

                                                                                     1996         1995
                                                                                  -----------  -----------
         <S>                                                                      <C>          <C>
         Equipment............................................................    $     2,355  $     1,490
         Furniture and fixtures...............................................          2,259        1,543
         Computer software....................................................            806          642
         Building and improvements............................................            947          727
                                                                                  -----------  -----------
           Total, at cost.....................................................          6,367        4,402
         Accumulated depreciation and amortization............................         (2,637)        (635)
                                                                                  -----------  -----------
           Property and equipment, net........................................    $     3,730  $     3,767
                                                                                  ===========  ===========
</TABLE>


     At December 31, 1996, the net book value of property and equipment  related
to capital lease obligations was $1,350,000.  See Note l(i) 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.

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

     Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
                                                                                     1996         1995
                                                                                  -----------  -----------
         <S>                                                                      <C>          <C>
         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  $     9,700
         Capital lease obligations, payable in aggregate monthly installments
            of $45 as of December 31, 1996, including interest ranging from
            4% to 10%, maturing at various dates through 2001, secured by
            property and equipment............................................          1,809        2,035
         Note payable, interest at 8%, maturing in January 1997...............            765          ---
         Note payable, interest at 8.5%, maturing in March 1996...............            ---          600
                                                                                  -----------  -----------
            Total debt........................................................         22,556       12,335
         Less - Current portion...............................................         (1,189)        (970)
                                                                                  -----------  -----------
            Total long-term debt..............................................    $    21,367  $    11,365
                                                                                  ===========  ===========
</TABLE>

     Annual maturities of long-term debt as of December 31, 1996 are as follows
    (in thousands):
<TABLE>

         <S>                                                                                   <C>
         1997...............................................................................   $     1,189
         1998...............................................................................           492
         1999...............................................................................           482
         2000...............................................................................        20,389
         2001...............................................................................             4
                                                                                               -----------
           Total............................................................................   $    22,556
                                                                                               ===========
</TABLE>



                                       36
<PAGE>

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


     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 are no principal payments due in 1997 under the new facility,  the balance
is classified as long-term on the accompanying  consolidated  balance sheet. See
Note 12 for more information on the new credit facility.

     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(i).  However,  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.

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

     The  Company  maintains,  and the  Predecessor  maintained,  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, 1996, the Company and the  Predecessor  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 year ended  December  31, 1996.  Aggregate  expense
related to the Plans was $501,000 for the year ended December 31, 1995,  $75,000
for the period from  November 29, 1994 to December 31, 1994 and $925,000 for the
period from January 1, 1994 to November 28, 1994.

(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>

                                                                         COMPANY                PREDECESSOR
                                                       --------------------------------------- -------------
                                                                                 PERIOD FROM    PERIOD FROM
                                                                                  NOVEMBER 29,   JANUARY 1,
                                                         YEAR ENDED DECEMBER 31,   1994 TO        1994 TO
                                                       -------------------------  DECEMBER 31,  NOVEMBER 28,
                                                           1996         1995         1994          1994
                                                       -----------   ----------  ------------- -------------

<S>                                                    <C>           <C>          <C>          <C>
         Current...................................    $     1,343   $     (289)  $       903  $         637
         Deferred..................................         (1,154)        (167)       (1,080)           ---
                                                       -----------   ----------   -----------  -------------
            Total..................................    $       189   $     (456)  $      (177) $         637
                                                       ===========   ==========   ===========  =============

         Federal...................................    $       (27)  $     (349)  $      (144) $         543
         State.....................................            216         (107)          (33)            94
                                                       -----------   ----------   -----------  -------------
           Total...................................    $       189   $     (456)  $      (177) $         637
                                                       ===========   ==========   ===========  =============
</TABLE>

                                       37
<PAGE>

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


     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>

                                                                       COMPANY                   PREDECESSOR
                                                         -------------------------------------  -------------
                                                                                  PERIOD FROM    PERIOD FROM
                                                                                  NOVEMBER 29,    JANUARY 1,
                                                         YEAR ENDED DECEMBER 31,    1994 TO        1994 TO
                                                         -----------------------  DECEMBER 31,   NOVEMBER 28,
                                                           1996         1995          1994            1994
                                                         ---------   ---------    ------------   ------------
<S>                                                    <C>           <C>          <C>          <C>
         Tax provision (benefit) at the
            federal statutory rate.................     $   (3,721)  $    (664)   $       (278)  $        644
         State income taxes........................           (433)        (71)            (22)            62
         Valuation allowance for
            deferred tax assets....................          2,122         ---             ---            ---
         Non-deductible portion of write-down
            of office-based net assets.............          1,279         ---             ---            ---
         Non-deductible goodwill amortization......            516         ---             ---            ---
         Income of affiliates that cannot be
            offset against net operating
            losses of the Company..................            296         279             ---            ---
         Non-deductible legal expenses.............            ---         ---             150            ---
         Other, net................................            130         ---             (27)           (69)
                                                        ----------   ---------    ------------   ------------
            Total..................................     $      189   $    (456)   $       (177)  $        637
                                                        ==========   =========    ============   ============
</TABLE>

     Deferred income taxes were related to the following  timing  differences at
December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>

                                                                                     1996         1995
                                                                                  -----------  -----------
         <S>                                                                      <C>          <C>
         Write-down of office-based net assets...............................     $     4,211  $       ---
         Accrual basis income of cash basis affiliates.......................          (1,272)          ---
         Net operating loss carryforwards....................................             ---        1,170
         Self-insurance accruals.............................................             933          630
         Conversion from cash to accrual basis...............................            (398)        (743)
         Bad debt reserve....................................................             ---          712
         Amounts due for acquisitions........................................            (342)         ---
         Goodwill............................................................             ---          422
         Other, net..........................................................             144          ---
                                                                                  -----------  -----------
            Total............................................................           3,276        2,191
         Valuation allowance.................................................          (2,122)      (2,191)
                                                                                  -----------  -----------
            Net deferred income taxes........................................     $     1,154  $       ---
                                                                                  ===========  ===========
</TABLE>

     Because the  realization of a portion of the net deferred tax assets is not
more likely than not, due to the Company's loss  carryforward for book purposes,
a valuation allowance has been established.


                                       38
<PAGE>


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


(7)  DEFERRED PHYSICIAN STOCKHOLDER COMPENSATION
     -------------------------------------------

     Under the employment  agreements  between the Predecessor and its physician
stockholders,   physician   stockholders   were  eligible  to  receive  deferred
compensation  upon  their  death or  extended  disability  after  five  years of
employment or upon termination of their employment for any other reason after 10
years of employment.  The minimum deferred  compensation  payable to a physician
stockholder was $150,000 plus an additional  $10,000 per full year of employment
after 10 years with a maximum amount of deferred compensation of $250,000. These
deferred  compensation  arrangements were terminated in connection with the 1994
Acquisition,  and the related  liability as of November 28, 1994 was not assumed
by the Company.

(8)  COMMITMENTS AND CONTINGENCIES
     -----------------------------

(a) Major Customers

     The Company generates, and the Predecessor generated, a majority of its net
revenue by delivering  physician  services at hospitals and  ambulatory  surgery
centers with which it has exclusive contracts or other similar arrangements. The
Company's  delivery of services at one particular  hospital  accounted for 12.0%
and 13.7% of its total net  revenue  in 1996 and 1995 and 16.3% of its total net
revenue  in the  period  from  November  29,  1994 to  December  31,  1994.  The
Predecessor's  delivery of services at that hospital  accounted for 24.7% of its
total net revenue in the period from January 1, 1994 to November  28,  1994.  No
other facility  accounted for 10% or more of the Company's or the  Predecessor's
total net revenue.

     In addition,  the Company  derived 20.8% and 29.5% of its total net revenue
in 1996 and 1995 and 38.5% of its total net revenue in the period from  November
29, 1994 to December 31, 1994 from a single  third-party  payor. The Predecessor
derived  27.6% of its total net  revenue in the period  from  January 1, 1994 to
November 28, 1994 from the same third-party payor. No other third-party payor or
other customer  accounted for 10% or more of the Company's or the  Predecessor's
net revenue.

(b) Employment Agreements

     The Company has employment  contracts with certain  executives,  physicians
and other clinical and administrative employees.  Future annual minimum payments
under such  employment  agreements  as of  December  31, 1996 are as follows (in
thousands):
<TABLE>

         <S>                                                                                   <C>
         1997...............................................................................   $     4,453
         1998...............................................................................         3,060
         1999...............................................................................         2,827
         2000...............................................................................         2,183
         2001...............................................................................         1,343
         Thereafter.........................................................................         3,338
                                                                                               -----------
           Total  ..........................................................................   $    17,204
                                                                                               ===========
</TABLE>

(c) Self-insurance

     Due to the  nature  of  its  business,  the  Company  occasionally  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.

                                       39
<PAGE>

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


     The  liability  for  self-insurance  accruals  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  $2,095,000 and
$794,000 at  December  31,  1996 and 1995.  An  analysis  of the  self-insurance
accrual is as follows (in thousands):
<TABLE>
<CAPTION>

                                                                                   YEAR ENDED DECEMBER 31,
                                                                                   -----------------------
                                                                                      1996         1995
                                                                                   ----------  -----------

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


     During the period from November 29, 1994 to December 31, 1994,  the Company
increased its self-insurance  accrual by approximately $500,000 as a result of a
claims review performed and medical incidents identified during the period.

(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  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 intends to vigorously defend against it.

(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
$2,399,000 and $1,716,000 in 1996 and 1995,  $26,000 in the period from November
29, 1994 to December 31,  1994,  and $288,000 in the period from January 1, 1994
to November 28, 1994.  Future  annual  minimum  payments  under  non-cancellable
operating leases as of December 31, 1996 are as follows (in thousands):
<TABLE>


         <S>                                                                                   <C>
         1997..............................................................................    $     2,444
         1998..............................................................................          2,217
         1999..............................................................................          1,945
         2000..............................................................................          1,670
         2001..............................................................................          1,338
         Thereafter........................................................................          4,398
                                                                                               -----------
            Total..........................................................................    $    14,012
                                                                                               ===========
</TABLE>

                                       40
<PAGE>



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


(9)  OPERATING RESULTS BY DIVISION
     -----------------------------

     The Company's  operations consist of the  hospital-based  services division
and the office-based  services division.  The  hospital-based  services division
provides  specialist  physician  services at hospitals and  ambulatory  surgical
facilities in the areas of  anesthesia,  neonatology,  pediatrics  and emergency
services.  The  office-based  services  division owns and operates,  or manages,
office-based primary care, obstetrical and rheumatology practices. The following
table shows net  revenue  and  operating  income for each of the  Company's  two
divisions.

<TABLE>
<CAPTION>

                                                                       COMPANY                    PREDECESSOR
                                                          -------------------------------------   ------------
                                                                                    PERIOD FROM   PERIOD FROM
                                                                                    NOVEMBER 29,   JANUARY 1,
                                                          YEAR ENDED DECEMBER 31,     1994 TO       1994 TO
                                                          -----------------------   DECEMBER 31,  NOVEMBER 28,
                                                             1996         1995           1994         1994
                                                          ----------   ----------   ------------  ------------
                                                                            (IN THOUSANDS)
         <S>                                              <C>          <C>          <C>           <C>
         Net revenue:
            Hospital-based services................       $    63,885  $   43,848   $      3,469  $     30,226
            Office-based services..................            28,882      20,817          1,660         3,269
                                                          -----------  ----------   ------------  ------------
              Total net revenue....................       $    92,767  $   64,665   $      5,129  $     33,495
                                                          ===========  ==========   ============  ============

         Operating income (loss):
            Hospital-based services................       $    15,716  $    9,270   $         19  $      2,817
            Office-based services..................            (1,955)     (1,484)           149           363
            Write-down of office-based net assets..           (17,360)        ---            ---           ---
            General corporate expenses.............            (5,766)     (5,485)          (646)         (994)
                                                          -----------  ----------   ------------  ------------
              Total operating income (loss)........       $    (9,365) $    2,301   $       (478) $      2,186
                                                          ===========  ==========   ============  ============
</TABLE>


     Under the Company's new strategic direction, as discussed in Note 1(i), the
Company  intends to integrate its  hospital-based  and  office-based  operations
together in such a way that it will no longer be meaningful to report  operating
income  separately  for these two  divisions.  Therefore,  the Company  does not
expect to report  operating  income  separately  for these two  divisions in the
future.

(10)  STOCKHOLDERS' EQUITY
      --------------------

     The issued and  outstanding  common stock of the  Predecessor  consisted of
1,069 shares of Class A Common Stock ($.01 par value,  3,000 shares  authorized)
and  336  shares  of  Class  B  Common  Stock  ($.01  par  value,  1,000  shares
authorized).

     In  connection  with  the  1994  Acquisition,  management  of  the  Company
subscribed to purchase  409,900  shares of the  Company's  Class A voting common
stock at a purchase price of $0.58 per share.  Also in connection  with the 1994
Acquisition, the Company issued 350,000 and 78,572 shares of Class A and Class B
Convertible Preferred Stock, respectively, at a purchase price of $50 per share.
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.



                                       41
<PAGE>


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


     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 installment,
which  consisted of 15,146  shares,  expired  unexercised  in December 1996. The
remaining two installments of 15,132 shares each will either become  exercisable
or will expire unexercised in September 1997 and 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.

     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.

(11)  STOCK OPTIONS
      -------------

     The Company adopted  Statement of Financial  Accounting  Standards No. 123,
"Accounting for Stock-Based Compensation," ("SFAS 123") in 1996. 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 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.

                                       42
<PAGE>

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


     In 1995 the Company adopted the 1995 Stock Option Plan, under which 750,000
shares of common stock were  reserved for  issuance.  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>

                                                                  1996                      1995
                                                         ---------------------    ----------------------
                                                                      WEIGHTED                  WEIGHTED
                                                                       AVERAGE                   AVERAGE
                                                          NUMBER      EXERCISE      NUMBER      EXERCISE
                                                         OF SHARES      PRICE     OF SHARES      PRICE
                                                         ---------    --------    ---------     --------

        <S>                                               <C>       <C>          <C>           <C>
        Balance, beginning of year................        321,461   $    8.82          ---     $    ---
        Granted during year.......................        608,071        7.17      382,382        10.01
        Terminated during year....................       (335,071)      10.51      (53,421)       16.84
        Forfeited during year.....................        (40,550)      12.32       (7,500)       12.50
                                                         --------                  -------
            Balance, end of year...................       553,911   $    5.73      321,461     $   8.82
                                                         ========                  =======

         Exercisable at end of year.........               131,283   $    3.38       64,604     $   2.63
</TABLE>

     There were no stock options  outstanding in 1994. The weighted average fair
value per share as of the grant date was $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 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 of 78%, and (iv) no expected  dividends  on the  underlying  stock.
Stock options outstanding at December 31, 1996 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           107,840     $    .58     7.9 years     75,486        $    .58
                        $5.75 to $8.13      362,571         6.38     9.1 years     44,131            5.80
                        $8.75 to $13.00      83,500         9.54     9.3 years     11,666           12.36
                                            -------                               -------
                             Total          553,911     $   5.73     8.9 years    131,283        $   3.38
                                            =======                               =======
</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 123 had been used in accounting for stock options.
<TABLE>
<CAPTION>

                                                                                   YEAR ENDED DECEMBER 31,
                                                                                   -----------------------
                                                                                     1996           1995
                                                                                   --------       --------
                                                                                    (IN THOUSANDS, EXCEPT
                                                                                        PER SHARE DATA)
         <S>                                                                      <C>             <C>
         PRO FORMA RESULTS OF OPERATIONS:
         Loss before extraordinary item.......................................    $ (13,047)      $ (1,789)
         Net loss.............................................................      (13,047)        (3,973)
         Loss before extraordinary item per share.............................        (1.98)         (1.16)
         Net loss per share...................................................        (1.98)         (1.97)
</TABLE>

                                       43
<PAGE>

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


(12) SUBSEQUENT EVENT
     ----------------

     On March 12,  1997,  the Company  established  a new $35 million  revolving
credit facility.  The new 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 17, 1997,
the applicable margin was 1.63%.  There are no principal  payments due under the
new credit facility until the maturity date of March 11, 2000. The new revolving
credit facility contains various restrictive covenants that include, among other
requirements,  the maintenance of certain financial ratios, various restrictions
regarding  acquisitions,  sales of assets, liens and dividends,  and limitations
regarding investments,  additional  indebtedness and guarantees.  The Company is
currently in  compliance  with all  covenants in the new credit  agreement.  The
additional  amount  that  can be  borrowed  under  the new  credit  facility  is
determined by a leverage ratio defined in the credit agreement.  The outstanding
balance under the new credit facility was $25.7 million at March 17, 1997. Based
on the  value of the  leverage  ratio as of March  17,  1997,  the  Company  had
additional borrowing availability of $9.3 million.



                                       44
<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 the years
ended  December  31,  1996 and 1995 and the period  from  November  29,  1994 to
December 31, 1994 included in this Form 10-K, and have issued our report thereon
dated  February  21,  1997.  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 takes as a whole.




ARTHUR ANDERSEN LLP



Miami, Florida,
   February 21, 1997.




                                       45
<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 Southeastern Anesthesia Management Associates,  Inc. and
subsidiaries  for the period from January 1, 1994 to November 28, 1994  included
in this Form 10-K,  and have issued our report thereon dated March 17, 1995. Our
audit was 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 audit 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,
   March 17, 1995.


                                       46
<PAGE>

<TABLE>
<CAPTION>


                                                        SHERIDAN HEALTHCARE, INC.

                                                               SCHEDULE II

                                                    VALUATION AND QUALIFYING ACCOUNTS

                                             For the Years Ended December 31, 1996 and 1995,
                                     for the Period from November 29, 1994 to December 31, 1994, and
                                        for the Period from January 1, 1994 to November 28, 1994
                                                             (in thousands)





                                                        BALANCE AT   CHARGED TO                BALANCE AT
                                                       BEGINNING OF   COSTS AND                  END OF
                                                          PERIOD      EXPENSES    DEDUCTIONS     PERIOD
                                                       ------------  ----------   ----------   ----------

<S>                                                    <C>           <C>          <C>          <C>
ACCOUNTS RECEIVABLE ALLOWANCES:

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

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

   Period from November 29, 1994 to
     December 31, 1994.............................    $       418   $      159   $      114   $      463
                                                       ===========   ==========   ==========   ==========

THE PREDECESSOR
   Period from January 1, 1994 to
     November 28, 1994.............................    $       431   $    1,750   $    1,763   $      418
                                                       ===========   ==========   ==========   ==========
</TABLE>

                                       47
<PAGE>



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

     None.

                                       PART III

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

     The Proxy  Statement  for the  Company's  Annual  Meeting  of  Stockholders
anticipated  to be held on May 15,  1997,  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 "Section  16(a)
Beneficial  Ownership Reporting  Compliance"  information required by Item 10 of
Form  10-K  as to  directors  and  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
anticipated  to be held on May 15,  1997,  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
anticipated  to be held on May 15,  1997,  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
anticipated  to be held on May 15,  1997,  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.


                                       48
<PAGE>

    3.  Exhibits:

    EXHIBIT
    NUMBER                                 DESCRIPTION
    ------                                 -----------

    3.1   Third Amended and Restated Certificate of Incorporation  (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).

    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  Revolving Credit Agreement by and between NationsBank of Florida, N.A.
          and the Company,  dated as of November 1, 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).

    10.2  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).

    10.3  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).

    10.4  Stockholders'  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).

    10.5  Amended and Restated  Group  Physician  Agreement  dated as of June 5,
          1995 by and between  CAC-Ramsey,  Inc. and Sheridan  Healthcorp,  Inc.
          (incorporated  herein by reference to such exhibit filed as an exhibit
          to the Registration Statement).

    10.6  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).

                                       49
<PAGE>

    3.  Exhibits (cont'd):

    EXHIBIT
    NUMBER                               DESCRIPTION
    ------                               -----------

    10.7  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).

    10.8  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).

    10.9  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).

    10.10 Executive   Employment   Agreement  of   Gilbert Drozdow,  M.D.  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).

    10.11 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).

    10.12 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).

    10.13 Sheridan  Healthcare,  Inc.  Amended and  Restated  1995 Stock  Option
          Plan (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, 1995).

    10.14 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).

    10.15 Anesthesiology   Agreement  by  and  between  South  Broward  Hospital
          District  and  Pavilack,  Karch,  Lipton,  Baran  & Ast,  P.A.,  d/b/a
          Anesthesia Associates of Hollywood, dated as of September 25, 1990, as
          amended  (incorporated herein by reference to such exhibit filed as an
          exhibit to the Registration Statement).

    10.16 Participation  Agreement  by and  between  Health  Options,  Inc.  and
          Southeastern Anesthesia Management Associates ER Physicians,  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).

    10.17 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).

                                       50
<PAGE>

    3.  Exhibits (cont'd):

    EXHIBIT
    NUMBER                               DESCRIPTION
    ------                               -----------

    10.18 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).

    10.19 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 an exhibit to the Registration Statement).

    10.20 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).

    10.21 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).

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

    10.23 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).

    10.24 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).

    10.25 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 an  exhibit
          to the Registration Statement).

    10.26 Form of Letter 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 an exhibit  to the  Registration
          Statement).

    10.27 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 an  exhibit to the  Registration
          Statement).



                                       51
<PAGE>

    3.  Exhibits (cont'd):

    EXHIBIT
    NUMBER                               DESCRIPTION
    ------                               -----------

    10.28 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).

    10.29 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).

    10.30 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).

    10.31 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).

    10.32 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).

    10.33 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).

    10.34 First  Addendum  to  Management  Services   Agreement,   dated  as  of
          September 1, 1995,  by   and   between AMSA,  Inc.,  Sheridan Medical
          Healthcorp, P.C., and Sheridan Healthcorp, Inc.

    10.35 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).

    10.36 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).

    10.37 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).

    10.38 Emergency  Medicine Services  Agreement,  dated as of June 1, 1996, by
          and  between  Wyckoff  Heights  Medical  Center and  Sheridan  Medical
          Healthcorp, P.C. 3. Exhibits (cont'd):

                                       52
<PAGE>

    EXHIBIT
    NUMBER                              DESCRIPTION
    ------                              -----------

    10.39 Executive  Employment  Agreement,  dated as of August 9, 1996,  by and
          between  Sheridan  Healthcorp,  Inc.,  Sheridan  Healthcare,  Inc. and
          Michael F. Schundler.

    11.1  Statement regarding computation of per share earnings.

    21.1  Schedule of Subsidiaries.

    27    Financial Data Schedule.

(b) Reports on Form 8-K:

          No reports on Form 8-K were filed  during the last quarter of the year
     ended December 31, 1996.



                                       53
<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 28, 1997                       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 28, 1997
----------------------------       President, Chief Executive
Mitchell Eisenberg, M.D.           Officer (Principal Executive
                                   Officer)

/s/ Robert W. Daly                Director                        March 28, 1997
----------------------------
Robert W. Daly

/s/ Lewis D. Gold, M.D.           Executive Vice President,       March 28, 1997
----------------------------       Director
Lewis D. Gold, M.D.

/s/ Henry E. Golembesky, M.D.     Director                        March 28, 1997
-----------------------------
Henry E. Golembesky, M.D.

/s/ Neil A. Natkow, D.O.          Director                        March 28, 1997
-----------------------------
Neil A. Natkow, D.O.

/s/ Michael F. Schundler        Chief Financial Officer           March 28, 1997
-----------------------------    (Principal Financial and
Michael F. Schundler              Accounting Officer)

                                       54