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

                               ----------------

                                  FORM 10-QSB


[X]     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
              ACT OF 1934
              For the Quarterly Period Ended March 31, 1997

[ ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
              ACT OF 1934


                       Commission File Number 33-30677-NY


                          AMERICAN HEALTHCHOICE, INC.
       -----------------------------------------------------------------
       (Exact Name of Small Business Issuer as Specified in Its Charter)



               New York                                   11-2931252
     -------------------------------                   -------------------
     (State or Other Jurisdiction of                   (I.R.S. Employer
     Incorporation or Organization)                    Identification No.)

1300 West Walnut Hill Lane, Suite 275, Irving, Texas                75038
-----------------------------------------------------             -----------
   (Address of principal executive offices)                       (Zip Code)


Registrant's telephone number, including area code: (972) 751-1900


         Check whether the issuer (1) 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 [ ]

         As of March 31, 1997, there were outstanding 7,653,123 shares of the
issuer's Common Stock, par value $.001 per share.

Transitional Small Business Disclosure Format

         Yes [ ]            No [X]




                                      F-1
<PAGE>   2


                          AMERICAN HEALTHCHOICE, INC.

                    QUARTERLY REPORT ON FORM 10-QSB FOR THE
                          QUARTER ENDED MARCH 31, 1997




                                     INDEX

<TABLE>
<CAPTION>
                                                                                                             PAGE
PART I.  FINANCIAL INFORMATION                                                                              NUMBER
                                                                                                            ------
<S>                                                                                                          <C>

         ITEM 1.     Condensed Consolidated Balance Sheets....................................................F-3

                     Condensed Consolidated Statements of Income..............................................F-4

                     Condensed Consolidated Statements of Cash Flows..........................................F-5

                     Notes to Condensed Consolidated Financial Statements.....................................F-6

         ITEM 2.     Management's Discussion and Analysis of Results of Operation
                              and Financial Condition.........................................................F-11

PART II.  OTHER INFORMATION

         ITEM 1.     Legal Proceedings........................................................................F-15

         ITEM 2.     Changes in Securities ...................................................................F-15

         ITEM 3.     Defaults Upon Senior Securities..........................................................F-15

         ITEM 4.     Submission of Matters to a Vote of Securities Holders....................................F-15

         ITEM 5.     Other Information........................................................................F-15

         ITEM 6.     Exhibits and Reports on Form 8-K.........................................................F-15

SIGNATURES....................................................................................................F-16
</TABLE>






                                      F-2
<PAGE>   3
                         PART I. FINANCIAL INFORMATION


ITEM I.  FINANCIAL STATEMENTS

                          AMERICAN HEALTHCHOICE, INC.
                                AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                               September 30,      March 31,
                                                                                                    1996            1997
                                                                                                ------------    ------------
                                                                                                                 (unaudited)
                                    ASSETS
<S>                                                                                             <C>             <C>         
CURRENT ASSETS:
   Cash                                                                                         $    159,166    $    140,341
   Accounts receivable, less allowance for doubtful accounts of $5,480,389
        in 1996 and $7,584,188 in 1997                                                             7,926,609       8,349,045
   Advances due from an affiliate and stockholders                                                   498,095         525,695
   Advances to physicians and employees                                                               47,104          60,030
   Income tax receivable                                                                              22,000          22,000
   Current portion of note receivable from stockholder                                                54,000          54,000
   Other current assets                                                                               97,173         180,538
                                                                                                ------------    ------------
            Total current assets                                                                   8,804,147       9,331,649

NOTE RECEIVABLE FROM STOCKHOLDER, less current portion                                               216,000         135,710

PROPERTY AND EQUIPMENT, net                                                                        1,259,298       1,599,279

GOODWILL, net                                                                                        633,000         460,556

OTHER ASSETS                                                                                          14,949         106,701
                                                                                                ------------    ------------

            Total assets                                                                        $ 10,927,394    $ 11,633,895
                                                                                                ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current portion of notes payable, including $176,719 due to a stockholder in 1996 and 1997   $  1,799,958    $  3,889,847
   Current portion of capital lease obligations                                                      305,444         305,444
   Advances from stockholders                                                                        145,781         145,781
   Accrued payroll and payroll taxes                                                                 322,062         324,451
   Accounts payable and accrued expenses                                                           1,228,516       1,432,272
   Deferred income taxes                                                                             807,783            --
                                                                                                ------------    ------------
            Total current liabilities                                                              4,609,544       6,097,795

NOTES PAYABLE, less current portion                                                                1,040,741         829,672

CAPITALIZED LEASE OBLIGATIONS, less current portion                                                   64,876         369,080

STOCKHOLDERS' EQUITY:
   Preferred stock, $.001 par value; 5,000,000 shares authorized; none issued                           --              --
   Common stock option                                                                               100,000          12,498
   Common stock subscription payable                                                                  78,527          78,535
   Common stock, $.001 par value; 115,000,000 shares authorized; 7,232,692
        shares issued and outstanding in 1996 and 7,653,123 in 1997                                    7,232           7,653
   Additional paid-in capital                                                                      5,327,256       6,693,810
   Retained earnings                                                                                (300,782)     (2,455,148)
                                                                                                ------------    ------------
            Total stockholders' equity                                                             5,212,233       4,337,348
                                                                                                ------------    ------------

            Total liabilities and stockholders' equity                                          $ 10,927,394    $ 11,633,895
                                                                                                ============    ============
</TABLE>




                                      F-3
<PAGE>   4



                          AMERICAN HEALTHCHOICE, INC.
                                AND SUBSIDIARIES

                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                      Three Months Ended            Six Months Ended 
                                                          March 31,                     March 31,
                                                     1996           1997           1996           1997
                                                  -----------    -----------    -----------    -----------
                                                  (unaudited)     (unaudited)    (unaudited)    (unaudited)
<S>                                               <C>            <C>            <C>            <C>        
NET PATIENT REVENUES                              $ 2,906,838    $ 2,689,613    $ 5,684,187    $ 5,220,236
OPERATING EXPENSES:
   Compensation and benefits                        1,410,669      2,354,336      2,497,466      4,814,629
   Advertising                                        127,989        138,400        323,028        319,742
   Depreciation and amortization                       30,018        117,278         47,459        229,325
   General and administrative, including
        management fees and other
        expenses paid to related parties
        of $96,000
        for the six months
        ended March 31, 1997; and 65,000
        for the six months ended March 31, 1996       947,273      1,319,160      1,622,994      2,818,689
                                                  -----------    -----------    -----------    -----------

            Total operating expenses                2,515,949      3,929,174      4,490,947      8,182,385
                                                  -----------    -----------    -----------    -----------

            Income (Loss) before income taxes
                and pro forma income taxes            390,889     (1,239,561)     1,193,240     (2,962,149)

INCOME TAXES:
   Current                                           (343,768)       (38,162)      (133,000)      (110,510)
   Deferred                                           784,961       (240,787)       793,961       (697,273)
                                                  -----------    -----------    -----------    -----------

                                                      441,193       (278,949)       660,961       (807,783)
                                                  -----------    -----------    -----------    -----------

NET INCOME (LOSS) BEFORE
   PRO FORMA  INCOME TAXES                            (50,304)      (960,612)       532,279     (2,154,366)

   Pro forma income tax benefit                      (294,610)          --         (213,496)          --
                                                  -----------    -----------    -----------    -----------
NET INCOME (LOSS) AFTER PRO FORMA
   INCOME TAXES                                   $   244,306    $  (960,612)   $   745,775    $(2,154,366)
                                                  ===========    ===========    ===========    ===========

NET INCOME (LOSS) PER SHARE AFTER
   PRO FORMA INCOME TAXES                         $       .04    $      (.13)   $       .12    $      (.29)
                                                  ===========    ===========    ===========    ===========

WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING                               6,448,559      7,492,246      6,133,566      7,373,989
                                                  ===========    ===========    ===========    ===========
</TABLE>




                                      F-4
<PAGE>   5
                          AMERICAN HEALTHCHOICE, INC.
                                AND SUBSIDIARIES


                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                                  Six Months Ended
                                                                                                      March 31,
                                                                                              --------------------------
                                                                                                 1996           1997
                                                                                              -----------    -----------
                                                                                              (unaudited)     (unaudited)
<S>                                                                                           <C>            <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                                 $   532,279    $(2,154,366)
   Adjustments to reconcile net income to cash from operating activities:
        Depreciation and amortization                                                              47,457        229,325
        Gain on write-off of note payable                                                            --          (79,363)
        Common stock issued in connection with financing, capital purchasing and consulting          --          508,081
        Change in assets and liabilities:
            Increase in trade accounts receivable, net                                         (2,041,827)      (422,436)
            Increase in other current assets                                                       (6,023)       347,322
            Increase in deferred taxes                                                            793,961       (807,783)
            Other, net                                                                           (270,875)       194,683
                                                                                              -----------    -----------
                Net cash used in operating activities                                            (945,028)    (2,184,537)
                                                                                              -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Note receivable from stockholder                                                              (270,000)          --
   Cash acquired from acquisitions                                                                 99,434           --
   Cash acquired in Peachtree acquisition                                                        (234,887)          --
   Advances to physicians and other receivables, net                                              (33,735)       (66,963)
   Purchases of property and equipment                                                           (101,136)      (528,655)
   Other, net                                                                                    (207,670)       160,000
                                                                                              -----------    -----------
                Net cash used in investing activities                                            (747,994)      (435,618)
                                                                                              -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from bridge loan                                                                         --        2,200,000
   Payments on notes payable and capital leases                                                   (77,212)      (186,163)
   Proceeds from sale of common stock                                                           1,683,477           --
   Proceeds from sale of stock option                                                             100,000         43,750
   Proceeds from credit revolver                                                                     --          354,744
   Write-off of note payable                                                                         --         (166,361)
   Common stock issued for capital additions                                                         --           51,156
   Capital lease increase                                                                            --          304,204
   Contributions by members of Valley Family Health Center, L.L.C                                    --             --
   Dividends paid to members of Valley Family Health Center, L.L.C                               (140,768)          --
   Cash advances from (to) stockholders, net                                                      (54,493)          --
                                                                                              -----------    -----------

                Net cash provided by financing activities                                       1,511,004      2,601,330
                                                                                              -----------    -----------

DECREASE IN CASH                                                                                 (182,018)       (18,825)

CASH, beginning of period                                                                         584,184        159,166
                                                                                              -----------    -----------

CASH, end of period                                                                           $   402,166    $   140,341
                                                                                              ===========    ===========

SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
   Net liabilities purchased                                                                  $  (893,931)   $      --
   Stock issued for financing charges                                                                --          189,875
   Stock issued for clinic                                                                           --           51,156
   Stock issued for consulting                                                                       --           24,500
   Stock subscription related to bridge loan                                                         --          970,200
                                                                                              -----------    -----------
                                                                                              $  (893,931)   $ 1,235,731
                                                                                              ===========    ===========
</TABLE>





                                      F-5
<PAGE>   6



                          AMERICAN HEALTHCHOICE, INC.

                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1.  ORGANIZATION AND BUSINESS:

American HealthChoice, Inc. and subsidiaries (the Company) consists of a parent
company and twenty-one clinics providing physical therapy, chiropractic and
medical services in San Antonio and Houston, Texas, New Orleans, Louisiana and
Atlanta, Georgia, and one clinic providing diagnostic services in San Antonio,
Texas. Substantially all of the Company's revenues are derived from
chiropractic, physical therapy and medical services provided to individuals
living in the vicinity of the clinics.

On March 31, 1995, Paudan, Inc. acquired 100% of the outstanding common stock
of the Company in exchange for 91.6% of the outstanding common stock of Paudan,
Inc. As a result, the stockholders of American HealthChoice, Inc. became the
controlling stockholders of Paudan, Inc. Paudan, Inc. was an inactive public
shell company which had total assets of $200,000, consisting entirely of cash,
and no liabilities at the time of the acquisition. This transaction was
accounted for as a reverse acquisition of Paudan, Inc. by American
HealthChoice, Inc. The accompanying financial statements are those of American
HealthChoice, Inc. for all periods presented. The legal name of Paudan, Inc.
was changed to American HealthChoice, Inc. after the merger.


2.  BASIS OF PRESENTATION:

The accompanying condensed consolidated financial statements have been prepared
by the Company. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. In the opinion of the
Company's management, the disclosures made are adequate to make the information
presented not misleading, and the condensed consolidated financial statements
contain all adjustments necessary to present fairly the financial position as
of March 31, 1997, results of operations for the three months and six months
ended March 31, 1997 and 1996 and cash flows for the six months ended March 31,
1997 and 1996.

The results of operations for the six months ended March 31, 1997 are not
necessarily indicative of the results to be expected for the full year. It is
suggested that the March 31, 1997 financial information be read in conjunction
with the financial statements and notes thereto included in the Company's Form
10-KSB dated September 30, 1996.


3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Net Patient Revenues - Revenue is recognized upon performance of services.
Substantially all of the Company's revenues are derived from personal injury
claims, claims filed on major medical policies, worker's compensation policies
and Medicare or Medicaid. Allowances for doubtful accounts and contractual
allowances are maintained at levels considered appropriate by management based
upon historical charge-off experience and other factors deemed pertinent by
management.

Property and Equipment, net - Property and equipment are stated at cost less
accumulated depreciation. Depreciation is provided over the estimated useful
lives of the related assets, primarily using accelerated methods. Leasehold
improvements are amortized over the shorter of the lease term or the estimated
useful lives of the improvements.

Goodwill - Goodwill arose from the Company's acquisitions of various clinics
and is being amortized on the straight-line method over 20 years (see Note 4).





                                      F-6
<PAGE>   7

                          AMERICAN HEALTHCHOICE, INC.

                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



4.  ACQUISITIONS:

The Company acquired Peachtree Corners Medical Center (Peachtree) on September
22, 1995 in exchange for cash, common stock, the assumption of certain
liabilities and promissory notes due the seller. Peachtree is a medical,
clinical and urgent care center located in Atlanta, Georgia. The amount paid
for Peachtree totaled $1,113,000 as follows: Cash - $100,000; 25,000 shares of
common stock - $75,000; liabilities assumed - $287,000 and notes due the seller
totaling $651,000. The acquisition was accounted for under the purchase method
of accounting and resulted in goodwill of $651,000, which is being amortized
over 20 years on the straight-line method. During fiscal 1996, the Company
wrote down the goodwill related to the Peachtree acquisition by $401,000.

During the second quarter of fiscal 1996, the Company acquired 100% of the
ownership interest of Valley Family Health Center, L.L.C. (a chiropractic
clinic) for 360,000 shares of its common stock. This acquisition was accounted
for under the pooling of interests method of accounting. Accordingly, the
historical financial statements presented herein of the Company have been
restated as if the acquisition had occurred on the first day of the periods
presented (November 1, 1995).

The Valley Family Health Center, L.L.C. was owned by an individual, who became
a consultant to the Company, and a limited liability company equally owned by
the Company's chief executive officer and an individual who also became a
consultant to the Company.

In March 1996, the Company acquired substantially all of the assets and
liabilities of four medical clinics located in and around Atlanta, Georgia
(Metropolitan) for $1,564,516, consisting of various trade liabilities, notes
payable due physicians assumed by the Company and direct acquisition costs.
This acquisition was accounted for on the purchase method of accounting and
gave rise to goodwill of $908,225, which is being amortized over 20 years.
During fiscal 1996, the Company wrote down the goodwill related to the
Metropolitan acquisition by $525,225.

<TABLE>
<S>                                                                 <C>        
Current assets                                                      $   498,791
Furniture, fixtures and equipment                                       157,500
                                                                    -----------
Total assets acquired                                                   656,291
                                                                    -----------
Trade liabilities                                                      (402,246)
Notes payable to physicians                                          (1,162,270)
                                                                    -----------
Total liabilities acquired                                           (1,564,516)
                                                                    -----------
                                                                    $  (908,225)
                                                                    ===========
</TABLE>

In December 1995, the Company acquired a medical clinic in San Antonio
(Southcross) for $315,000 consisting of cash of $100,000, a note for $200,000
and direct acquisition costs of $15,000. This acquisition was accounted for on
the purchase method of accounting and gave rise to goodwill of $55,000. During
fiscal 1996, the Company wrote down the amount of goodwill related to the
Southcross Joint Venture by $55,000. The following is a summary of the assets
acquired:

<TABLE>
<S>                                                                  <C>        
Accounts receivable and inventory                                    $    45,000
Land and buildings                                                       165,000
Furniture and fixtures                                                    50,000
                                                                     -----------
                                                                     $   260,000
                                                                     ===========
</TABLE>

The poorer than expected 1996 operating results for the Peachtree, Metropolitan
and Southcross clinics during fiscal 1996 resulted in an evaluation of related
goodwill for possible impairment. The Company evaluated the clinics and
determined based on their expected future revenues and cash flows that the
goodwill relating to these clinics was impaired. The Company closed one of the
Metropolitan clinics on February 28, 1997. Additionally, the Company is in
negotiations to transfer the clinic back to the seller. Based on this analysis,
the Company wrote down goodwill during fiscal 1996 by $1,054,829. Management
believes the remaining carrying value of goodwill will be supported by the
anticipated cash flows of the remaining clinics.







                                      F-7
<PAGE>   8

                          AMERICAN HEALTHCHOICE, INC.

                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The Company and the Provider at the Windy Hill Clinic mutually terminated the
Provider Agreement in October 1996. The Separation Agreement terminated the
Provider Agreement in exchange for forgiveness of a note in the amount of
$166,000 and the transfer of leased equipment in the amount of $73,000 to the
Company. The Company wrote-off $160,000 of goodwill associated with the clinic.
The transaction resulted in a gain of $79,000.


5.  STOCKHOLDERS' EQUITY:

The Company granted an investment group the right to acquire an option to
acquire the Company's common stock at specified prices over a defined period of
time. The agreement provides for each option to be issued in exchange for
$100,000, which amount will be applied to the purchase of common stock, when
and if the option is exercised. The following is a summary of the terms of the
transaction:

<TABLE>
<CAPTION>
    LAST                        NONREFUNDABLE       POSSIBLE
  OPTION                           FEE TO            TOTAL           EXERCISE
 PURCHASE                          ACQUIRE          EXERCISE           PRICE
    DATE                           OPTION            PRICE           PER SHARE
    ----                           ------            -----           ---------
<S>                               <C>              <C>                <C>   
March 18, 1996                    $ 100,000        $ 750,000          $ 2.25
June 18, 1996                     $ 100,000        $ 750,000          $ 4.90
September 18, 1996                $ 100,000        $ 750,000          $ 4.90
December 18, 1996                 $ 100,000        $ 750,000          $ 4.90
</TABLE>

The first option was exercised in May 1996 and 333,333 shares of common stock
were issued for $750,000. The second option was exercised in August 1996 and
102,041 shares of common stock were issued for $500,000. The third option was
exercised in September 1996 and 99,277 shares of common stock were issued for
$486,457. In addition, $100,000 was received in September 1996 to acquire the
fourth option. Under the terms of the second, third and fourth options, the
options are exercisable over the 24-month period following the acquisition of
the option. As of September 30, 1996, under the terms of the second, third and
fourth options, the investment group has the right to purchase an additional
257,865 shares of the Company's common stock at $4.90 per share. In December
1996, $43,750 was received related to the third and forth options. The shares
were issued in February 1997. To the extent an option is not purchased, then
all rights to the remaining options are forfeited. The Company has granted
registration rights to all of the shares issued and to be issued in connection
with this transaction.

The Company issued 768,001 shares of common stock during the second quarter of
fiscal 1996 in connection with a private placement of its stock. The Company
sold 711,111 shares at $2.25 per share and issued 56,890 shares to the
placement agent as compensation. The net proceeds of the offering amounted to
$1,487,477. Under the terms of the private placement agreement, the Company
agreed to file a registration statement with the Securities and Exchange
Commission within a specified period of time following the private placement
for the purpose of registering such shares. The Company failed to file a
registration statement within the period specified and, as a result, was
required to issue each holder of the shares sold in the private placement, one
share of common stock for every ten shares held by such stockholder. The
company issued an additional 142,222 shares in February 1997, in accordance
with the provision for not filing.

The Company issued 100,000 shares of its common stock during the second quarter
of fiscal 1996 for $2.00 per share under Regulation S of the Securities Act of
1933. Total proceeds from this transaction amounted to $200,000. The Company
has granted registration rights to the holders of these shares.

The holders of any preferred stock which might be issued shall have such
rights, preferences and privileges as may be determined by the Company's board
of directors.





                                      F-8
<PAGE>   9
                          AMERICAN HEALTHCHOICE, INC.

                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


In November and December 1996, the Company obtained $2,200,000 in a private
placement of promissory notes. The notes bear interest at 10% and are due the
earlier of twelve months after the final closing of the private placement or
the closing of a public offering of the Company's equity securities which
produces gross proceeds of at least $10 million. The Company issued 198,000
shares of its common stock to the note holders at a cost of $.001 per share.
The notes are collateralized by accounts receivable, furniture, fixtures and
equipment, and all other assets of the Company to the extent not encumbered.
The cost of arranging the bridge loan was 5% of the loan ($110,000) and 13,750
shares valued at $4.90 per share, an additional cost of $177,000 amortized over
the term of the note.

For the first quarter the Company issued 38,700 shares of common stock in
connection with an amendment to several notes. The Company issued 2,500 shares
of common stock to a new Board member for agreeing to serve on the Company's
Board.

The Company sold two (2) 8% Cumulative Convertible Debentures dated April 22,
1997 and April 25, 1997 in the aggregate amount of two million six hundred
thousand dollars ($2,600,000) in a Regulation S offering. The Debentures are
convertible after 41 days at a conversion price equal to eighty (80%) of the
average closing bid price of the shares of common stock of the Company as
quoted on NASDAQ for the five (5) trading days preceding the date of
conversion. The interest on the note is payable in cash or in kind as shares.
The investment banking firm received $318,000 in addition to 400,000 two year
warrants at an option price of $3.00. During the interim a bridge loan of
$750,000 was advanced to the company by an investor group. The loan was at a
rate of 10% annually and as additional compensation for brokering the placement
the group received 1,000,000 warrants at 2 3/8. A consultant of the group
received 200,000 shares of the Company's common stock as compensation.

The president and CEO of the Company loan $127,000 to the Company on May 13,
1997. The loan bears interest at 10% and is convertible in 90 days at a 15%
discount fixed, on date of execution.


6. PENDING ACQUISITIONS:

The Company has entered into letters of intent to acquire various companies
from time to time. These potential acquisitions are subject to due diligence,
further negotiations, execution of definitive agreements and the success of the
Company to obtain additional funds (total or partial) for the acquisition
price. Due to the Company's operating losses and an inability to generate
sufficient cash flows from operations, the Company has determined to delay this
acquisition process.


7. LEGAL PROCEEDINGS:

Approximately $600,00 in Medicaid accounts receivable of the Company were not
filed timely with the state of Texas and have been rejected for payment. The
Company has submitted such claims for payment and has been granted an
administrative hearing. In February, both sides agreed to defer the hearing to
seek alternate means of resolution. As of May 12, 1997, the company's claims
have been cleared for payment and processing is to begin immediately.


The seller of Peachtree Medical Center Northside clinic has alleged contract
default by the Company and is claiming all rights to this clinic. The seller
has taken possession of the clinic to the exclusion of the Company. The Company
is attempting to pursue alternative dispute resolutions prior to instituting
legal action to protect the Company's assets.


The Company has received notice that a shareholder is considering possible
legal action against the Company due to alleged material changes reported in
the Form 10-QSB for the period ending July 31, 1996 as compared to the Form
10-KSB for fiscal year 1996. The same shareholder has made similar
representations with regard to investing in the November 1996 private







                                      F-9
<PAGE>   10
                          AMERICAN HEALTHCHOICE, INC.

                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

placement.

The Company is not involved in any other material litigation nor is management
aware of any other pending litigation that would substantially impact the
Company's financial position.



                                     F-10
<PAGE>   11
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

OVERVIEW

The following discussion of the results of operations and financial condition
of the Company should be read in conjunction with the Company's audited
consolidated financial statements and notes thereto for the fiscal years ended
September 30, 1996 and September 30, 1995 and the Company's unaudited condensed
consolidated financial statements and notes thereto for the three months and
six months ended March 31, 1997 and 1996, included elsewhere in this document.

The Company is an integrated provider network with an emphasis on non-invasive,
primary care and rehabilitative services. The Company acquires, organizes and
manages physician groups into cost-effective delivery systems which respond to
the economic imperative to control and reduce health care expenditures. The
Company will continue seeking acquisitions in its existing and expanding
regional markets. In addition, the Company plans to vertically integrate health
care services in order to deliver an increasing proportion of covered benefits
and to achieve operational efficiencies within its system. The Company provides
a variety of services to physicians' practices for the purposes of maximizing
revenues and services to the health care markets. Being able to supply more
services in a given market provides a strong competitive edge when bidding on a
contract basis. More important is the Company's ability to focus on improved
health care and reduced costs, and the Company's ability to help ensure that
each patient receives appropriate and necessary quality care.

The Company has unilateral control over the assets and operations of the
various medical practices. American HealthChoice, Inc. manages all aspects of
the clinic other than the provision of medical services which is controlled by
the employed or contracted physician groups. The Company's financial
relationship with each practice offers the physician an opportunity to earn a
level of compensation commensurate with the marketplace, but usually less than
that which the physician earned prior to the affiliation, while giving the
practices access to capital, management expertise, information systems, and
managed care contracts.

The Company's profitability depends on enhancing clinic operating efficiency,
expanding health care services provided, increasing market share, and assisting
affiliated physicians in managing the delivery of medical care. The Company
does not charge management fees for managing the operations of the clinics
which it owns.

         As of March 31, 1997, the Company owned 21 clinics in three states:
Texas, Louisiana, and Georgia. The following chart details the clinics,
location, metropolitan areas served, services provided and date acquired or
commenced operation by the Company.

<TABLE>
<CAPTION>
                                                 METROPOLITAN AREA
CLINIC                        LOCATION           SERVED            SERVICES PROVIDED          DATE ACQUIRED
------                        --------           ------            -----------------          -------------

<S>                           <C>                <C>               <C>                        <C>  
Nationwide Sports &           Katy, TX           Houston           physical therapy           10/94
  Injury

United Health Services        Katy, TX           Houston           chiropractic               10/94

Nationwide Sports &           San Antonio, TX    San Antonio       physical therapy           7/94
  Injury

United Health Services        San Antonio, TX    San Antonio       chiropractic               7/94

Nationwide Sports &           San Antonio, TX    San Antonio       physical therapy           10/94
  Injury

United Health Services        San Antonio, TX    San Antonio       chiropractic               10/94

Nationwide Sports &           San Antonio, TX    San Antonio       physical therapy           10/94
  Injury

United Health Services        San Antonio, TX    San Antonio       chiropractic               10/94

Peachtree Corners             Norcross, GA       Atlanta           primary medical care,      9/95
Medical Center                                                     urgent care

San Pedro MediClinic          San Antonio, TX    San Antonio       primary medical care       10/94

South Cross MediClinic        San Antonio, TX    San Antonio       urgent care, primary       12/95
                                                                   medical care
</TABLE>




                                     F-11
<PAGE>   12

<TABLE>
<S>                           <C>                 <C>                 <C>                       <C> 
United Chiropractic            New Orleans, LA     New Orleans         chiropractic              7/94
New Orleans East

United Chiropractic            New Orleans, LA     New Orleans         chiropractic              7/94
Uptown

Peachtree Medical Center       Atlanta, GA         Atlanta             internal medicine         2/96
of Northside *

Peachtree Medical Center       Conyers, GA         Atlanta             primary medical care      2/96
of Conyers

Peachtree Medical Center       McDonough, GA       Atlanta             primary medical care      2/96
of McDonough

Valley Family Health           McAllen, TX         McAllen             chiropractic              1/96
Center

Valley Family Health           Weslaco, TX         Weslaco             primary medical care      7/96
Center

ACME Brownsville               Brownsville, TX     Rio Grande Valley   chiropractic              7/96
Chiropractic

Corpus Christi Rehabilitation  Corpus Christi, TX  Corpus Christi      primary medical care      6/96

SouthMost Medical Clinic       Brownsville, TX     Rio Grand Valley    primary medical care      9/96
</TABLE>


*     The seller of this clinic has alleged contract default by the Company and
      is claiming all rights to this clinic. The seller has taken possession of
      the clinic to the exclusion of the Company. The Company is attempting to
      pursue alternative dispute resolutions prior to instituting legal action
      to protect the Company's assets.


RESULTS OF OPERATIONS

Comparison of three months ended March 31, 1997 to three months ended March 31,
1996

For the three months ended March 31, 1997, net revenues amounted to $2,690,000
compared to $2,907,000 for the same period in 1996. This decrease in net
revenues is related to the increase in the provision on gross services to 38%
compared to 18% for the same period in 1996. This increased the provision by
$942,000 as compared to 1996. The overall increase in operating costs for the
three months ended March 31, 1997 are the result of increased activity within
the Company as new clinics were acquired and new clinics opened and the higher
costs of operating medical clinics as compared to chiropractic clinics. The
Company's revenues for the second quarter 1997 were derived from 51% delivery
of chiropractic services and 49% from medical services, for the three-month
period.

The Company's operations are labor intensive with salaries and benefits
comprising the single largest item in operations. Payroll costs increased from
$1,411,000 for the three months ended March 31, 1996 compared to $2,354,000 for
the three months ended March 31, 1997. The Company is adjusting staffing levels
and clinic operations at all clinics to reduce payroll costs.

The Company has continued its transition from the chiropractic to the primary
care medical services business; however, this has had a significant impact on
the profitability of the Company given the higher operating costs and lower
margins of the physician practices acquired by the Company. As a result, the
small decrease in net revenues during the three-month period ended March 31,
1997 has resulted in a larger decrease in net income. The Company intends to
adjust the number of employees at the medical clinics and to renegotiate
physician contracts to establish a more acceptable level of physician and staff
costs in relation to revenues produced in those clinics. Clinics that were not
deemed to be profitable in the immediate future were closed or sold.

General and administrative expenses increased from $947,000 for the three
months ended March 31, 1996 to $1,319,000 for the three months ended March 31,
1997. This increase is primarily due to management expenses during the three
months ended March 31, 1996 and increased operating cost related to the Georgia
clinics. During the second quarter of fiscal 1997 the Company will implement
operational changes intended to return the Georgia clinics to profitability.
Similarly, personnel and 






                                     F-12
<PAGE>   13

operations at the Company headquarters were evaluated and the appropriate cuts
made. The Company is continuing efforts to reduce costs and boost revenues.

Comparison of six months ended March 31, 1997 to six months ended March 31, 1996

For the six months ended March 31, 1997, net revenues amounted to $5,220,000
compared to $5,684,000 for the same period in 1996. This decrease in net
revenues is related to the increase in the provision on gross services to 38%
compared to 20% for the same period in 1996. This increased the provision by
$1,864,000 as compared to 1996. The increase in operating costs for the six
months ended March 31, 1996 were the result of the higher operating costs of
medical clinics as compared to chiropractic clinics. The Company's revenues for
the first half of 1997 were derived from delivery of chiropractic and medical
services, 51% and 49%, respectively.

The Company's operations are labor intensive with salaries and benefits
comprising the single largest item in operations. Payroll costs increased from
$2,497,000 for the six-months ended March 31, 1996 to $4,815,000 for the six
months ended March 31, 1997. This increase reflects the increased cost of
physician compensation and the addition of new clinics.

The Company has continued its transition from the chiropractic to the primary
care medical services business; however, this has had a significant impact on
the profitability of the Company given the higher operating costs and lower
margins of the physician practices acquired by the Company. The Company intends
to adjust the number of employees at the medical clinics and to renegotiate
physician contracts to establish a more acceptable level of physician and staff
costs in relation to revenues produced in those clinics. However, management
believes that it takes approximately six months before it can begin
significantly adjusting the operations of an acquired clinic in such a way as
not to disrupt physicians and patient care.

General and administrative expenses increased from $1,623,000 for the six
months ended March 31, 1996 to $2,819,000 for the six months ended March 31,
1997. As a percentage of net patient revenues, general and administrative
expense increased from 28.6% for the six months ended March 31, 1996 to 54.0%
for the six months ended March 31, 1997. This increase came as a result of the
increase in the number of clinics and the higher costs associated with medical
clinic operations as opposed to chiropractic clinics. The Company has hired an
outside management firm to evaluate clinic operations in Georgia.


LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 1997, the Company had cash and working capital of $140,000 and
$3,234,000 respectively. The Company's primary current asset is accounts
receivable which represents amounts due from patients for services rendered.
Approximately 71% of the Company's accounts receivable at March 31, 1997
represent receivables from the delivery of chiropractic services, of which the
majority represent personal injury claims which are typically collected once
the lawsuit or claim to which they relate is settled. As a result, the
Company's collections on personal injury claims are often more than a year
after the services are rendered. This extended collection period can and does
cause cash flow difficulties because of the growth in the number of
chiropractic clinics the Company operates and the acquisitions the Company has
consummated. Approximately 51% of revenues during the three-month period ended
March 31, 1997 were derived from chiropractic services.

The Company generally acquires clinics by a combination of cash payment,
installment purchase financing and the issuance of Common Stock of the Company.
The Company then relies upon increases in revenues or decreases in operating
costs of the clinics, or a combination thereof, to repay the installment
financing.

The Company is dependent on the revenues from its existing clinics to fund the
Company's working capital requirements, including the payment of approximately
$1,800,000 of debt associated with the acquisition of its existing clinics.
Because of the higher than expected operating costs and the reduction in
collectability of clinic receivables, the Company has experienced difficulties
in making timely payments on its debt requirements and trade payables.

In November and March 1996, the Company obtained $2,200,000 in a private
placement of promissory notes. The notes bear interest at 10% and are due the
earlier of twelve months after the final closing of the private placement or
the closing of a public offering of the Company's equity securities which
produces gross proceeds of at least $10 million. The Company issued 198,000







                                     F-13
<PAGE>   14

shares of its common stock to the note holders at a cost of $.001 per share.
The notes are collateralized by accounts receivable, furniture, fixtures and
equipment, and all other assets of the Company to the extent not encumbered.

In December 1996, the Company completed a $1.5 million revolving credit
facility with a financial institution. Advances under this facility are limited
to the borrowing base as defined in the agreement and are collateralized by
substantially all of the Company's accounts receivable. Advances outstanding
under the revolving credit facility accrue interest at prime plus 3%. The
facility terminates on December 30, 1998 and is renewed for consecutive one
year terms thereafter unless the Agreement is terminated. The revolving credit
facility agreement contains covenants which requires, among other things, the
Company maintain a minimum tangible net worth of $5,000,000. As of May 1, 1997,
this revolving credit facility was suspended and assigned to an investment
group for a pay down of $50,000 per month. The Company will receive a release
of the Collateral Security Agreement after the investment group is paid in
full.

The Company sold two (2) 8% Cumulative Convertible Debentures dated April 22,
1997 and April 25, 1997 in the aggregate amount of two million six hundred
thousand dollars ($2,600,000) in a Regulation S offering. The Debentures are
convertible after 41 days at a conversion price equal to eighty (80%) of the
average closing bid price of the shares of common stock of the Company as
quoted on NASDAQ for the five (5) trading days preceding the date of
conversion. The interest on the note is payable in cash or in kind as shares.
The investment banking firm received $318,000 in addition to 400,000 two year
warrants at an option price of $3.00. During the interim a bridge loan of
$750,000 was advanced to the company by an investor group. The loan was at a
rate of 10% annually and as additional compensation for brokering the placement
the group received 1,000,000 warrants at 2 3/8. A consultant of the group
received 200,000 shares of the Company's common stock as compensation.

The president and CEO of the Company loan $127,000 to the Company on May 13,
1997. The loan bears interest at 10% and is convertible in 90 days at a 15%
discount fixed, on date of execution.

In March 1996, the Company entered into an agreement with an investment group
whereby the group was granted the option to purchase up to four options to
acquire the Common Stock of the Company under the following summarized terms:

<TABLE>
<CAPTION>
     Payable 10                  Non-Refundable             Total             Lowest
     Days From                     Option Fee,            Exercise           Possible
    Closing and                  Credited To Price        Price (i.e.,       Exercise
    90 Days Each                  Upon Exercise          Before Credit)     Price/Share
    ------------                 ---------------         --------------     -----------
<S>                              <C>                     <C>                  <C>    
    March 18, 1996               $      100,000          $    750,000         $  2.25
    June 18, 1996                $      100,000          $    750,000         $  4.90
    September 18, 1996           $      100,000          $    750,000         $  4.90
    December 18, 1996            $      100,000          $    750,000         $  4.90
                                 --------------          ------------

    Totals                       $      400,000          $  3,000.000
</TABLE>

The first option was exercised in May 1996 and 333,333 shares of common stock
were issued for $750,000. The second option was exercised in August 1996 and
102,041 shares of common stock were issued for $500,000. The third option was
exercised in September 1996 and 99,277 shares of common stock were issued for
$486,457. In addition, $100,000 was received in September 1996 to acquire the
fourth option. Under the terms of the second, third and fourth options, the
options are exercisable over the 24-month period following the acquisition of
the option. As of September 30, 1996, under the terms of the second, third and
fourth options, the investment group has the right to purchase an additional
257,865 shares of the Company's common stock at $4.90 per share. In December
1996, $43,750 was received related to the third and fourth options. The shares
were issued in February 1997. To the extent an option is not purchased, then
all rights to the remaining options are forfeited. The Company has granted
registration rights to all of the shares issued and to be issued in connection
with this transaction.




                                     F-14
<PAGE>   15



                           PART II. OTHER INFORMATION



                 ITEM 1.    Legal Proceedings

Approximately $600,00 in Medicaid accounts receivable of the Company were not
filed timely with the state of Texas and have been rejected for payment. The
Company has submitted such claims for payment and has been grated an
administrative hearing. In February, both sides agreed to defer the hearing to
seek alternate means of resolution.


The seller of Peachtree Medical Center Northside clinic has alleged contract
default by the Company and is claiming all rights to this clinic. The seller
has taken possession of the clinic to the exclusion of the Company. The Company
is attempting to pursue alternative dispute resolutions prior to instituting
legal action to protect the Company's assets.


The Company has received notice that a shareholder is considering possible
legal action against the Company due to alleged material changes reported in
the Form 10-QSB for the period ending July 31, 1996 as compared to the Form
10-KSB for fiscal year 1996. The same shareholder has made similar
representations with regard to investing in the November 1996 private
placement.

The Company is not involved in any other material litigation nor is management
aware of any other pending litigation that would substantially impact the
Company's financial position.



                 ITEM 2.    Changes in Securities

                            None


                 ITEM 3.    Defaults Upon Senior Securities

                            Not Applicable


                 ITEM 4.    Submission of Matters to a Vote
                            of Security Holders

                            Not Applicable


                 ITEM 5.    Other Information

The Company's Board of Directors on March 6, 1997 accepted the resignations of
its Vice President of Operations, Mr. Jon A. Sommerhauser and its Chief
Financial Officer, Mr. C. Dean York. Mr. Jay Stucki, currently in-house counsel
for the Company, is serving as the interim CFO. The changes were partly done as
a move to cut overhead at Company headquarters and regain investor confidence
in the Company turnaround.

                 ITEM 6.    Exhibits and Reports on Form 8-K

                            Included by reference



                                     F-15
<PAGE>   16

                                   SIGNATURES


Pursuant to the requirements 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.


                                        American HealthChoice, Inc.
                                        ---------------------------
                                        (Registrant)


Date:  May 14, 1997                     By: /s/ Dr. Joseph Wesley Stucki, D.C.
                                            -----------------------------------
                                            Dr. Joseph Wesley Stucki, D.C.
                                            Chairman of the Board
                                            and President



Date:  May 14, 1997                     By: /s/ Randy Johnson
                                            -----------------------------------
                                            Randy Johnson
                                            Assistant Secretary




                                     F-16
<PAGE>   17

                              INDEX TO EXHIBITS



<TABLE>
<CAPTION>
EXHIBIT
NUMBER                   DESCRIPTION
-------                  -----------
<S>           <C>
  27          -  Financial Data Schedule

</TABLE>