<PAGE>   1

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                ----------------
                                    FORM 10-K

(MARK ONE)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                    FOR THE FISCAL YEAR ENDED MARCH 31, 1998

                                       OR

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

                          COMMISSION FILE NO. 0-27506

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

                                    COHR INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

            DELAWARE                                             95-4559155
(STATE OR OTHER JURISDICTION OF                               (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                                IDENTIFICATION)

          21540 PLUMMER STREET
         CHATSWORTH, CALIFORNIA                                  91311-4103
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                         (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 773-2647

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

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

             SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
                                      ACT:

                     COMMON STOCK, $0.01 PAR VALUE PER SHARE
                                (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. [ ]

   As of June 19, 1998 there were outstanding 6,433,189 shares of the
Registrant's Common Stock, $0.01 par value ("Common Stock"), which is the only
class of Common Stock of the Registrant. As of June 19, 1998 the aggregate
market value of the shares of Common Stock held by non-affiliates of the
Registrant, computed based on the closing sale price of $5.1875 per share as
reported by the Nasdaq National Market, was approximately $33,372,168.

                       DOCUMENTS INCORPORATED BY REFERENCE

   The information called for by Part III is incorporated by reference to the
definitive Proxy Statement for the 1998 Annual Meeting of Stockholders of the
Registrant which will be filed with the Securities and Exchange Commission.

================================================================================


<PAGE>   2

                                    COHR INC.

                           ANNUAL REPORT ON FORM 10-K

                      FOR FISCAL YEAR ENDED MARCH 31, 1998

<TABLE>
<CAPTION>
                                                                                       PAGE NO.
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<S>               <C>                                                                  <C>
PART I
         Item 1.  Business..........................................................       3
         Item 2.  Properties........................................................       9
         Item 3.  Legal Proceedings.................................................       9
         Item 4.  Submission of Matters to a Vote of Security Holders...............       9
PART II
         Item 5.  Market for the Registrant's Common Stock and
                  Related Stockholder Matters.......................................      10
         Item 6.  Selected Financial Data...........................................      11
         Item 7.  Management's Discussion and Analysis of Financial Condition and
                  Results of Operations.............................................      12
         Item 8.  Financial Statements and Supplementary Data.......................      19
         Item 9.  Changes in and Disagreement with Accountants on Accounting
                  and Financial Disclosure..........................................      19
PART III
         Item 10. Directors and Executive Officers of the Registrant................      20
         Item 11. Executive Compensation............................................      22
         Item 12. Security Ownership of Certain Beneficial Owners and Management....      22
         Item 13. Certain Relationships and Related Transactions....................      22
PART IV
         Item 14. Exhibits, Financial Statements, Financial Statement Schedule
                  and Reports on Form 8-K...........................................      22
</TABLE>


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                           FORWARD LOOKING STATEMENTS

        Statements in this Form 10-K that are not historical facts are hereby
identified as "forward looking statements" for the purpose of the safe harbor
provided by Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and Section 27A of the Securities Act of 1993, as amended (the
"Securities Act"). COHR Inc. ("COHR" or the "Company") cautions readers that
such "forward looking statements," including without limitation, those relating
to the Company's future business prospects, revenues, working capital,
liquidity, capital needs and income, wherever they may appear in this document
or in other statements attributable to the Company, are necessarily estimates
reflecting the best judgment of the Company's senior management and involve a
number of risks and uncertainties that could cause actual results to differ
materially from those suggested by the "forward looking statements." Such
"forward looking statements" should, therefore, be considered in light of
various important factors ("Cautionary Statements"), including those set forth
below and others set forth from time to time in the Company's reports and
registration statements filed with the Securities and Exchange Commission (the
"SEC").

        These "forward looking statements" are found at various places
throughout this document. Additionally, the discussions herein under the
captions "Business--Services and Products," "Business--Competition,"
"Business--Regulatory Matters," "Properties," "Legal Proceedings" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are susceptible to the risks and uncertainties discussed under
"Management's Discussion and Analysis of Financial Condition and Results of
Operation--Risk Factors" and elsewhere in this Form 10-K. In addition,
forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "should," "intend,"
"estimate," "anticipate," "believe," or "continue" or the negative thereof or
variations thereon or similar terminology. Moreover, the Company, through its
senior management or persons acting on its behalf, may from time to time make
"forward looking statements" about the matters described herein or other matters
concerning the Company and such statements are subject to the qualifications set
forth herein and in the Cautionary Statements. The Company disclaims any intent
or obligation to update publicly or revise "forward looking statements."


                                     PART I

ITEM 1.        BUSINESS



GENERAL

        COHR Inc. ("COHR" or the "Company") is a national outsourcing service
company, providing equipment sales and servicing, group purchasing and other
ancillary services to the health care industry. Other services include providing
on-site security, management consulting, employee-benefits insurance brokerage,
medical credentials verification and insurance claims-management software to
hospitals, integrated health systems and alternate site providers. COHR was
founded in 1985 by the Healthcare Association of Southern California (HASC), a
regional trade association comprised of hospitals, health systems, nursing homes
and medical groups. The Company was incorporated in California in 1985 and
reincorporated in Delaware in 1996. The Company completed its initial public
offering in February 1996 and a second public offering in November 1996. The
Company has two lines of business: COHR MasterPlan and Purchase Connection. COHR
MasterPlan is the Company's equipment sales and services division, offering a
full range of equipment maintenance, repair, consulting, refurbishment and sales
services. Purchase Connection is the Company's group purchasing division which
offers access to volume-discount pricing on medical, surgical, laboratory and
dietary supplies, pharmaceuticals and capital equipment. For financial reporting
purposes Purchase Connection also includes the other ancillary services offered
by the Company.


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<PAGE>   4

RECENT DEVELOPMENTS

        On February 17, 1998, the Company disclosed that it had restated its
financial statements for the fiscal year ended March 31, 1997 and for the first
two quarters of the fiscal year ended March 31, 1998. All references herein to
the financial statements for such periods refer to such financial statements as
restated. These restatements related primarily to management's determination
that certain equipment and software sales were prematurely recorded and that
certain liabilities and reserves were understated.

        In June 1998 the Company announced the appointment of Mr. Raymond List
as President and Chief Executive Officer and Mr. Peter Socha as Executive
Vice President, Operations.

        For the fiscal year ended March 31, 1998, the Company reported a net 
loss of $27.3 million, including pre-tax special charges of $11.4 million. The
special charges consisted primarily of a $7.1 million write-off of goodwill
related to certain COHR MasterPlan operations which were deemed to be
permanently impaired, costs to close certain MasterPlan operations, severance
costs and the legal and accounting costs incurred in a special review conducted
at the direction of the Board of Directors during the last two quarters of the
fiscal year. See Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

        During the fourth quarter of fiscal year 1998 and the first quarter of
fiscal year 1999, the Company initiated a cost-reduction program which included
a 7% reduction in overall personnel, the closing or restructuring of certain
MasterPlan refurbishment and service operations and the closing of certain
under-utilized MasterPlan field offices. The Company also instituted stronger
credit and collection policies and procedures and is adopting new inventory
management procedures to reduce its level of inventory investment.

        Federal and state civil lawsuits have been filed against the Company
alleging, among other things, federal and/or state securities law violations and
the Securities and Exchange Commission (the "SEC") has commenced a formal
investigation of the Company. See Item 3 "Legal Proceedings." 

        In February 1998, the Company had announced the engagement of Lehman
Brothers, as its financial advisor, to evaluate strategic alternatives including
a possible sale of the Company. In June 1998, the Board of Directors determined
that it is not in the best interest of the shareholders to continue to pursue a
sale of the Company at the present time.


SERVICES AND PRODUCTS

COHR MASTERPLAN

        Maintenance MasterPlan, COHR MasterPlan's principal product line, is a
comprehensive equipment management plan that offers equipment services at a
fixed cost. In a typical situation, the Company conducts an extensive audit of a
potential client's equipment inventory, existing service contracts,
time-and-materials maintenance histories and key department managers' service
needs. The data generated from the audit, which includes equipment make and
model, its age and expected useful life, maintenance history and location, are
compared to a database of equipment maintenance records. The Company then
presents the client with a comprehensive proposal, which generally includes cost
savings and recommendations for areas of improvement. As part of COHR's pricing
of Maintenance MasterPlan, some clients receive a share of the cost savings
realized when actual maintenance expenses fall below the agreed upon maintenance
budget.

        The Company has found that health care facilities find it increasingly
difficult to maintain medical equipment themselves while matching COHR's price
and service levels due to overhead and administrative burdens. The Company
believes that COHR MasterPlan compares favorably to original equipment
manufacturers (or "OEMs") on the basis of price, its quality reputation, the
wide range of manufacturers' products serviced, and its ability to provide the
customer with unbiased technology management consulting. The Company believes
that these factors account for COHR Masterplan's growth from approximately 300
clients in 1993 to over 2,200 today, with an average contract renewal rate of
approximately 95%. Over 500 technicians, customer service and marketing
personnel operate from 24 regional offices nationwide. COHR MasterPlan revenues
increased from $8 million in fiscal year 1993 to almost $82 million in fiscal
year 1998. In fiscal year 1998, revenues for COHR MasterPlan were up 23.7% over
the previous year. 


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<PAGE>   5
        Through a total of 23 acquisitions since July 1993, the Company has
increased its customer base, added qualified staff and extended the program into
new areas. Specifically, these acquisitions enabled the Company to expand its
imaging business in the East, Southeast and Northwest and its radiology business
in the mid-Atlantic region and the South. In addition, through the acquisition
of a large independent service organization (an "ISO"), the Company entered the
national sterilizer service and refurbishment markets.

        The Company's strategy is to increase its market share in existing
markets by soliciting new accounts and by gaining an increasing proportion of
equipment maintenance business in client facilities where some items are still
covered by OEM agreements. The Company will continue to develop its ability to
service high-technology diagnostic and therapeutic equipment, which typically
generates higher margins than the maintenance of less-sophisticated items. The
Company will seek to enhance its capabilities to participate in the rapid growth
of the refurbished equipment market by purchasing, repairing and reselling used
equipment domestically.

PURCHASE CONNECTION

        Group purchasing organizations (or "GPOs") provide their members access
to discounted prices on a broad range of products and services by negotiating
discounts with manufacturers and distributors based primarily upon the
purchasing volume of their membership. To increase the purchasing volume of
their membership, GPOs attempt to maximize "compliance"-- the percentage of
purchasing volume an individual facility places through contracts negotiated
with the GPOs' vendors. Unlike distributors, GPOs do not themselves make
purchases, carry an inventory or physically handle product. GPOs derive a
substantial portion of their revenues from commissions (as a percentage of
purchasing volume) from manufacturers and distributors and also receive from
their customers a nominal fee for access to contract pricing. In turn,
manufacturers and distributors benefit from the assured access to the GPOs'
customers at costs significantly below those attributable to traditional direct
sales and marketing, and from the committed volume of product sales.

        Many factors have contributed to the growth of Purchase Connection in a
continually evolving health care environment. A national membership of nearly
5,000 facilities accounts for a significant annual volume of contract purchases.
Members have been attracted--and retained--by the bottom-line savings generated
by these purchases, the low cost of membership, the strong support of an
experienced professional staff and the broad range of products available,
including over 400,000 discounted medical, surgical, laboratory and dietary
supplies, pharmaceuticals and capital equipment. Purchase Connection members
also enjoy access to the other value-added services offered by COHR, including
on-site security, management consulting, employee-benefits insurance brokerage,
medical credentials verification and insurance claims-management software.

        Management intends to grow Purchase Connection by continuing to expand
its membership base and through efforts to increase customer compliance. These
efforts include encouraging customers to participate in Purchase Connection's
sole-source contracts with vendors and engaging in joint marketing efforts with
participating manufacturers and distributors. The Company plans to expand its
geographic penetration of certain regional markets, particularly in the Midwest
and Southeast, by opening regional sales and customer service sites. Finally,
the Company intends to introduce a number of new cost-effective products and
services to help its members meet their constantly changing operating
challenges.



SALES AND MARKETING

        The Company markets its services and products to hospitals, integrated
health systems and alternative site providers through a force of 97 people, as
of March 31, 1998, in sales, marketing and customer service, allocated between
COHR MasterPlan and Purchase Connection. The Company's sales and marketing
personnel use a consultative sales approach to leverage relationships in order
to sell both programs.


                                       5
<PAGE>   6

COHR MASTERPLAN

        The Company employed 64 sales, marketing and customer service personnel
in its COHR MasterPlan division, who are allocated by region and technical
specialty.

        The Company estimates that the sales cycle for the Maintenance
MasterPlan typically takes six months to complete. The sales cycle for other
maintenance contracts is approximately one month. Appointments with customers,
generated by a combination of print advertising response, referrals and cold
calls, involve a presentation of the Company's services to the prospective
customer.

        Many customers enrolling in Maintenance Masterplan or other maintenance 
contracts for the first time are often obligated under certain OEM maintenance
agreements covering recently purchased high technology equipment. The Company
routinely excludes such obligations from the initial Maintenance MasterPlan
agreement, and, with the data from customer equipment audits at hand,
systematically pursues their later inclusion at competitive prices upon the
expiration of the OEM agreement.

PURCHASE CONNECTION

        The Company employed 33 sales, marketing and customer service personnel
in its Purchase Connection division, including regionally located personnel to
provide customers with quality service. The Company generates leads principally
through direct sales efforts, direct mail campaigns targeted to customers of
other GPOs, exhibitions at class-specific trade shows and cross marketing
through other Company services. Given the large territory to be covered,
Purchase Connection has embarked on the development of a telemarketing and
customer service group to increase penetration and membership involvement. The
goal of this group will be to increase customer compliance and increase customer
contact in selected geographic areas.

        The Company's other services and products are actively promoted through
field sales personnel who are specialists in their respective disciplines,
targeted mailings, advertising, word of mouth, educational programs and
cross-marketing.



COMPETITION

        The Company's primary businesses operate in two separate markets, each
of which is highly competitive. In the equipment services market, the Company's
principal competitors are (i) OEMs, including G.E. Medical Systems, Siemens
Medical Systems, Inc. and Picker International, Inc., (ii) ISOs, of which two of
the largest are divisions of Steris Inc. and ServiceMaster, L.P., and (iii)
in-house servicing departments. In the group purchasing markets, the Company's
principal competitors are several major GPOs, including Novation Supply Company,
Premier, Inc., MedEcon Services, Inc., AmeriNet, Inc., Health Services
Corporation of America, Buy Power and Catholic Materials Management Alliance, as
well as in-house corporate purchasing departments of large integrated systems
and multi-hospital systems, various manufacturers and regional GPOs. Certain of
Purchase Connection's GPO competitors have merged or expanded giving such
competitors significantly greater buying power and market leverage. Some have
also expanded their market to physicians and other non-hospital customers and
broadened their product and service offerings to include activities such as fund
raising, resource management and assistance with capitation contracting. The
Company's competitors in each of the separate markets have sales representatives
competing directly with the Company and many are larger and have greater
financial resources than the Company.

        The Company believes that the broad mix of products and services and the
favorable pricing structure that it offers its customers enable it to
differentiate itself from many of its competitors. The Company is unaware of any
other company that offers the combination of equipment services, group
purchasing services and other outsourcing services offered by the Company.



REGULATORY MATTERS

        The health care industry is highly regulated and there can be no
assurance that the regulatory environment in which the Company and its customers
operate will not change significantly in the future. The Company is also subject
to laws and regulations relating to business corporations in general. There can
be no assurance that a review of the Company's business or its customers'
businesses 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 business.


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<PAGE>   7
        Federal Health Care Program Fraud and Abuse. The federal anti-kickback
statute prohibits the offer, payment, solicitation or receipt of any form of
remuneration in return for, or in order to induce, (i) the referral of a person
for the furnishing or arranging for the furnishing of goods, facilities, items
or services reimbursable under most federal health care programs, including
Medicare and Medicaid programs or (ii) the purchase, lease or order or arranging
or recommending purchasing, leasing or ordering of any item or service
reimbursable under most federal health care programs, including Medicare or
Medicaid programs. The Company is not a separate provider of Medicare or state
health program reimbursed services; however, if the Company is deemed to be
paying or receiving prohibited remuneration under the group purchasing
agreements, the financial arrangements under these agreements could be subject
to scrutiny and prosecution under the federal anti-kickback statute, resulting
in civil and criminal penalties. Many states have adopted similar prohibitions
against payments intended to induce referrals of Medicaid or other third party
payer patients or covered services. The applicability of these provisions to
many kinds of business transactions in the health care industry has not yet been
the subject of significant federal or state judicial or regulatory
interpretation.

        The Company does not believe its GPO operations violate these
anti-kickback statutes because it believes its primary relationship with its
members, the participation agreement, falls within any "safe harbors" published
by the federal government, applicable to GPO organizations, but there can be no
assurance that a review of the activities of the Company by courts or regulatory
authorities would not result in a restructuring of some or all of these
relationships or a determination that could have a material adverse effect on
the Company's results of operations or financial condition.

        Antitrust Laws. In certain circumstances, the federal Robinson-Patman
Act prohibits discriminatory pricing by vendors (i.e., a differential in the net
price to customers) with respect to the sale of commodities, where the
discrimination is likely to adversely affect competition. It also prohibits the
payment of "brokerage" by a vendor to an agent of the purchaser. Certain states
have adopted similar prohibitions against discriminatory pricing and payment of
brokerage or commissions.

        While the Company is not a vendor of commodities, it may be viewed as
the agent for its group purchasing customers authorized to negotiate discounted
pricing with vendors. The Robinson-Patman Act provides for buyer liability where
a vendor engages in prohibited discriminatory pricing and the buyer knowingly
induces or receives the discriminatory price. As a consequence, if the discounts
negotiated are deemed to be improper, as a participant in the arrangement, the
Company may be subject to civil damages or injunctive relief under the statute.

        The Company believes that the pricing and commission policies of its
vendors comply with applicable statutory standards, but there can be no
assurance that future interpretations of antitrust laws by regulatory
authorities or courts will not require a restructuring of some or all of the
Company's group purchasing relationships with its vendors or result in a
determination that could adversely affect the Company. The Company does not
believe that the commissions it receives from vendors are prohibited by the
statutes because it provides services in exchange for the commissions.

        Although exclusive dealing agreements generally are found to be lawful
business arrangements, where such agreements result in a significant degree of
foreclosure of the market place and effectively exclude competitors from a
market, they may be found to be unlawful under the federal Sherman Act or
Clayton Act or similar state laws. The Company does not believe that its sole
source contracts (which may be viewed as exclusive dealing agreements) violate
the Sherman Act, the Clayton Act, or similar state laws. However, there is no
assurance that the review of these contracts by courts or regulatory authorities
will not result in a determination that would adversely affect the operations of
the Company. For example, if the contracts were found to be unlawful and,
therefore, unenforceable, the Company would lose the benefits anticipated to be
derived from them.

        Because the Company's group purchasing customers remain separate legal
entities, distinct from each other and from the Company, concerted action
through the GPO such as collective refusals to deal, improper sharing of price
information or other coordinated conduct may lead to allegations of prohibited
anticompetitive conduct. The Company believes that it complies with such state
and federal laws (including the Sherman Act) as may affect group purchasing
organizations, 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 materially adversely affect the operations of the Company.

        Insurance Laws and Regulations. Laws in all states regulate the business
of selling and marketing insurance products, such as life and health insurance,
fire and casualty insurance and variable annuities. The Company believes it is
in material compliance with applicable laws in the states in which it conducts
such business as are applicable to the Company's insurance products but there
can be no assurance that future interpretations of insurance laws by 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
insurance operations. In October 1996, the Company became aware that following
its reincorporation in Delaware in January 1996 and until October 1996, it had


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<PAGE>   8
operated its insurance brokerage business in California without the requisite
license. The Company's predecessor was licensed to conduct the insurance
brokerage business in California until January 1996 and the Company received its
own license in October 1996. The Company disclosed to the California Department
of Insurance that it had operated an insurance brokerage business in California
without the requisite license from January 1996 to October 1996 and the facts
relating thereto. The Company was advised that the Department of Insurance would
open an investigation file in accordance with its standard procedures. The
Company believes, based on discussions with regulatory officials, that no
material enforcement action will be taken against the Company. To date, there
has been no action taken by the Department of Insurance. There is no assurance
that the Company may not be subject to penalties or sanctions. Following its
reincorporation and prior to receipt of its own license, the Company had
received aggregate brokerage commissions with respect to policy renewals
totaling $138,455. Under the California Insurance Code, the Company could be
required to disgorge all such commissions. In addition, the California
Department of Insurance could fine the Company an amount up to 30 percent of
such commissions or place restrictions or limitations upon the Company's
license, such as a requirement for filing periodic reports on the Company's
insurance brokerage business for a fixed period of time. The imposition of
limitations upon its insurance brokerage license in California, either
individually or in the aggregate, could have a material adverse effect on the
Company's business.

        Other Regulations. The Company is subject to various federal, state, and
local laws and regulations. Various state and federal regulatory agencies, such
as OSHA and the Environmental Protection Agency, have jurisdiction over the
facilities of the Company and its customers, including worker safety, community
"right to know" laws, and laws regarding clean air and water. Under various
federal, state, and local laws, ordinances and regulations, an owner or lessee
of real estate may also be liable for the costs of removal or remediation of
certain hazardous or toxic substances located on or in, or emanating from, such
property, as well as related costs of investigation and property damage. Such
laws often impose such liability without regard to whether the owner or lessee
knew of, or was responsible for the presence of, such hazardous or toxic
substances. Furthermore, legislative or regulatory changes may cause future
increases in the Company's operating costs or otherwise negatively affect
operations. There can be no assurance that the Company will not be materially
adversely affected by existing or future requirements or incur materially
increased operating costs in complying therewith.



BUSINESS SEGMENTS

        The Company currently provides services to the health care industry
through two principal business segments: COHR MasterPlan and Purchase
Connection. COHR MasterPlan provides equipment sales and services to hospitals
and other health care providers. Purchase Connection is a group purchasing
organization that negotiates pricing for its membership with manufacturers and
distributors. Refer to Note 13 of the Consolidated Financial Statements, which
disclosure is incorporated herein by reference.



EMPLOYEES

        As of March 31, 1998, the Company employed a total of 869 persons,
consisting of 97 in sales, marketing and customer service, 456 equipment
technicians, 140 security guards and 176 in finance, administration and
information systems. Recent cost-reduction initiatives have reduced the total
employee count to 811 as of June 15, 1998. None of the Company's employees are
covered by a collective bargaining agreement. The Company believes that its
relations with its employees are good.

        The Company uses an in-house training program in order to maintain its
service level. Many of the Company's technicians have been employed by the
Company for over five years.


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<PAGE>   9

ITEM 2.        PROPERTIES

        The Company's principal executive offices are located in Chatsworth,
California and consist of approximately 76,000 square feet of leased office,
warehouse and workshop space. This facility houses certain of the Company's
senior management, as well as management information systems, finance and human
resources, its Purchase Connection division and the Company's principal
equipment service facility. This lease expires in January 2009 and includes two
options to extend the term of the lease for consecutive periods of sixty months
each. The Company believes that this space is adequate to meet its current uses
and anticipated growth.

        The Company also leases service and sales sites in Brea, Murrieta,
Pleasanton, Fresno and Ontario, California; Cuyahoga Falls and Pickerington,
Ohio; Erie County and Pittsburgh; Pennsylvania; Arlington, Washington; Islandia,
New York; Ft. Lauderdale, Florida; Charleston, West Virginia; Fredricksburg and
Richmond, Virginia; Fenton, Missouri; and Windsor, Connecticut.


ITEM 3.        LEGAL PROCEEDINGS

        The Company, certain of its present and former officers and directors
and others are named as defendants in four purported class action lawsuits which
allege, among other things, false and misleading statements in various public
disclosures in violation of federal and/or state securities laws. Sherleigh
Associates Inc. Profit Sharing Plan v. Cohr, Inc. et al. (Case No. 98-3028 JSL)
was filed in the United States District Court for the Central District of
California on or about April 21, 1998. Zabronsky et al. v. Cohr, Inc. et al.
(Case No. 98-3493 JSL) was filed in the same court on May 6, 1998. Bird v. Cohr,
Inc. et al. (Case No. 98-4177 WMB) was filed in the same court on May 27, 1998.
Leeds v. Malhotra et al. (Case No. BC198490) was filed in the Superior Court of
the State of California, Los Angeles County, on April 16, 1998. The plaintiffs
in each action seek to represent a class of purchasers of the Company's common
stock during various time periods between 1996 and 1998.

        The plaintiffs in each of the three federal actions filed in the United
States District Court for the Central District of California assert claims of
violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
and of certain regulations promulgated thereunder. The plaintiffs in each of the
three federal actions seek unspecified compensatory damages, interest, attorneys
fees and costs, and injunctive and/or other relief as permitted by law. The
plaintiff in the action filed in California Superior Court asserts claims of
violations of California Corporations Code Sections 25400 and 25500. The
plaintiff in that action seeks unspecified compensatory damages, interest,
attorneys fees and costs, and injunctive and/or other relief as permitted by
law. No class has been certified in any of these actions.

        A shareholder of the Company has brought a derivative lawsuit
purportedly on behalf of the Company, alleging breaches of fiduciary duty and
related claims, and naming certain of its present and former officers and
directors as defendants, with the Company as a nominal defendant. This action,
which is entitled Schug v. Chopra et al. (Case No. BC190933) was filed in the
Superior Court for the State of California, Los Angeles County, on May 12, 1998.
The shareholder-plaintiff seeks unspecified compensatory and punitive damages,
disgorgement of profits and gains, attorneys fees and costs, injunctive relief,
and other relief as permitted by law.

        The Securities and Exchange Commission (the "SEC") is conducting an
investigation relating to the Company. The Company understands that the
investigation relates to, among other things: (1) the accuracy of the Company's
financial statements and periodic filings with the SEC; (2) the accuracy of the
Company's books and records; (3) the adequacy of the Company's system of
internal accounting controls; and (4) trading of the Company's securities by
certain present or former officers, directors, or employees, or other persons.
The Company intends to cooperate fully with the SEC's investigation.

        Management is unable to predict at this time the final outcome of the
matters described above or whether the resolution of such matters will
materially affect the Company's results of operations, cash flows or financial
position.

        The Company is also involved from time to time in various legal
proceedings incidental to the normal conduct of its business. Management does
not believe that such proceedings are likely, individually or in the aggregate,
to have a material adverse effect on the Company's business.


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

        No matters were submitted to a vote of the Company's stockholders during
the fourth quarter of the fiscal year covered by this report.


                                       9
<PAGE>   10

                                     PART II



ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

        The Company's common stock began trading on the Nasdaq National Market 
on February 16, 1996 under the symbol "CHRI." The initial public offering price
was $9.00 per share. The Company issued 1,739,000 new shares, pursuant to a
second public offering on November 21, 1996 at an offering price of $20.00 per
share. The high and low closing sales prices (excluding retail markup, markdowns
and commissions) for the period April 1, 1996 to March 31, 1998, by quarter,
were as follows:

<TABLE>
<CAPTION>
                                                                 High       Low
                                                                 ----       ---
<S>                                                              <C>       <C>
First Quarter-- April 1, 1996 to June 30, 1996                   30 1/2    15 1/2

Second Quarter-- July 1, 1996 to September 30, 1996              28        16 1/2

Third Quarter-- October 1, 1996 to December 31, 1996             29        19 1/4

Fourth Quarter-- January 1, 1997 to March 31, 1997               28 1/2    22 3/8

First Quarter - April 1, 1997 to June 30, 1997                   23        16 3/4

Second Quarter - July 1, 1997 to September 30, 1997              22 1/4    13 7/8

Third Quarter - October 1, 1997 to December 31, 1997             17        10 1/2

Fourth Quarter - January 1, 1998 to March 31, 1998               13        9 1/2
</TABLE>

        As of June 19, 1998, there were approximately 6,433,189 shares
outstanding and approximately 80 stockholders of record.

DIVIDEND POLICY

        At the present time, the Company intends to retain all earnings for
use in the operation and development of its business and does not expect to
declare or pay any cash dividends on its common stock in the foreseeable future.
Any determination in the future to pay dividends will depend upon the Company's
earnings, financial condition, capital requirements, level of indebtedness, and
other factors deemed relevant by the Company's Board of Directors, including any
contractual or statutory restrictions on the Company's ability to pay dividends.


                                       10
<PAGE>   11

ITEM 6. SELECTED FINANCIAL DATA

   The following table presents selected financial data of the Company. The
selected financial data below as of March 31, 1998 and 1997 and for each of the
three years ended March 31, 1998 should be read in conjunction with the audited
consolidated financial statements, the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in this report.

<TABLE>
<CAPTION>
                                                       FISCAL YEARS ENDED MARCH 31,
                                            (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                 ----------------------------------------------------------------------
                                    1998            1997           1996           1995           1994
                                 ---------       ---------      ---------      ---------      ---------
<S>                              <C>             <C>            <C>            <C>            <C>      
INCOME STATEMENT DATA:
Revenues:
  COHR MasterPlan ..........     $  81,655       $  66,012      $  48,160      $  28,042      $  12,617
  Purchase Connection ......        20,489          20,209         18,094         15,618         13,026
                                 ---------       ---------      ---------      ---------      ---------
          Total ............       102,144          86,221         66,254         43,660         25,643
Gross margin ...............        22,276          28,870         22,748         17,512         14,459
Selling, general and                                                                                   
administrative expenses.....        41,567          25,744         19,248         15,474         12,995
Special charges ............        11,440              
Operating income (loss) ....       (30,731)          3,126          3,500          2,038          1,464
Net income (loss) ..........     $ (27,338)      $   2,326      $   2,142      $   1,368      $     946
                                 =========       =========      =========      =========      =========
Net income (loss) per
common share:
  Basic.....................     $   (4.25)      $    0.45      $    0.90      $    0.65      $    0.45
  Diluted...................     $   (4.25)      $    0.42      $    0.89      $    0.65      $    0.45

BALANCE SHEET DATA:
Working capital ............     $  28,190       $  49,889      $  23,470      $   4,127      $   4,626
Equipment and improvements, 
net.........................         6,804           6,636          3,718          2,727          2,611
Intangible assets, net .....         2,615           9,237          2,530          1,967            216
Total assets ...............        56,584          85,079         44,472         21,613         15,836
Total long-term debt .......           498           1,146            276            528
Total shareholders' equity..     $  37,170       $  64,508      $  29,115      $   7,270      $   6,138
SUPPLEMENTAL DATA:
Regional service and sales
sites:
  COHR MasterPlan ..........            26              31             18             14              7
  Purchase Connection ......            10               8              7              6              2
                                 ---------       ---------      ---------      ---------      ---------
          Total ............            36              39             25             20              9
Total employees ............           869             804            558            428            339
Gross margin percentage ....          21.8%           33.5%          34.3%          40.1%          56.4%
Selling, general and
administrative expense
  percentage................          40.7%           29.9%          29.1%          35.4%          50.7%
Operating income (loss)
percentage..................         (30.1%)           3.6%           5.3%           4.7%           5.7%
</TABLE>






                                       11
<PAGE>   12

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

   The following discussion and analysis of the Company's consolidated results
of operations and consolidated financial position should be read in conjunction
with the Selected Financial Data and the Company's Consolidated Financial
Statements, including the notes thereto, appearing elsewhere in this Annual
Report. 

GENERAL

   The Company is a national outsourcing service organization providing
equipment sales and servicing, group purchasing and other ancillary services to
hospitals, integrated health systems and alternate site providers.

   On February 17, 1998, the Company disclosed that it had restated its
financial statements for the fiscal year ended March 31, 1997 and for the first
two quarters of the fiscal year ended March 31, 1998. All references herein to
the financial statements for such periods refer to such financial statements as
restated. These restatements related primarily to management's determination
that certain equipment and software sales were prematurely recorded and that
certain liabilities and reserves were understated.

   In June 1998 the Company announced the appointment of Mr. Raymond List as
President and Chief Executive Officer and Mr. Peter Socha as Executive Vice
President, Operations.

   For the fiscal year ended March 31, 1998, the Company reported a net loss
of $27.3 million, including pre-tax special charges of $11.4 million. The
special charges consisted primarily of a $7.1 million write-off of goodwill
related to certain COHR MasterPlan operations which were deemed to be
permanently impaired, costs to close certain MasterPlan operations, severance
costs and the legal and accounting costs incurred in a special review conducted
at the direction of the Board of Directors during the last two quarters of the
fiscal year.

   During the fourth quarter of fiscal year 1998 and the first quarter of fiscal
year 1999, the Company initiated a cost-reduction program which included a 7%
reduction in overall personnel, the closing or restructuring of certain
MasterPlan refurbishment and service operations and the closing of certain
under-utilized MasterPlan field offices. The Company will continue to pursue
additional cost-reduction opportunities during the balance of fiscal year 1999.
The goal to improve profitability may include the elimination or repricing of
certain low margin or unprofitable contracts. The Company has also instituted
stronger credit and collection policies and procedures and is adopting new
inventory management procedures to reduce its level of inventory investment.

   In connection with the special review conducted over the course of the prior
two quarters as directed by the Board of Directors, the Company's auditors did
note certain conditions that were deemed to be material weaknesses in internal
controls. The Company has initiated actions it deems to be appropriate to
address these conditions.

   Federal and state civil lawsuits have been filed against the Company
alleging, among other things, federal and/or state securities law violations
and the Securities and Exchange Commission (the "SEC") has commenced a formal
investigation of the Company. See Item 3 "Legal Proceedings."

        In February 1998, the Company had announced the engagement of Lehman
Brothers, as its financial advisor, to evaluate strategic alternatives including
a possible sale of the Company. In June 1998, the Board of Directors determined
that it is not in the best interest of the shareholders to continue to pursue a
sale of the Company at the present time.   

RESULTS OF OPERATIONS

Fiscal Year Ended March 31, 1998 Versus Fiscal Year Ended March 31, 1997

   Revenues. The Company's revenues for the fiscal year ended March 31, 1998
totaled $102.1 million, an increase of $15.9 million or 18.5% over revenues of
$86.2 million for the fiscal year ended March 31, 1997. Substantially all of the
growth in revenues was produced by the COHR MasterPlan segment as a result of
acquisitions completed during fiscal years 1998 and 1997 and the addition of new
accounts.

   Direct Operating Expenses. The Company's direct operating expenses for the
fiscal year ended March 31, 1998 totaled $79.9 million, an increase of $22.5
million or 39.3% over the fiscal year 1997 total of $57.4 million. Direct
operating expenses as a percentage of revenues for fiscal year 1998 increased to
78.2% from 66.5% for the fiscal year ended March 31, 1997. This increase
resulted primarily from the fact that the Company derived a greater percentage
of revenues from COHR MasterPlan, which has higher direct operating expenses as
a percentage of revenues than Purchase Connection; the fact that direct
operating expenses in COHR MasterPlan increased at a faster rate than revenues
due to an increased reliance on outsourced service providers; and a $2.5 million
inventory write-down in fiscal year 1998. The Company initiated a cost-reduction
program in the fourth quarter of fiscal year 1998 and has continued that program
in the first quarter of fiscal year 1999 to reduce direct operating expenses as
a percentage of revenues. Cost-reduction initiatives include the elimination of
certain field service positions and the redeployment of others and the shutdown
of unprofitable refurbishment operations in Florida and California.

   Gross Margin. The Company's gross margin for the fiscal year ended March 31,
1998 totaled $22.3 million, a decrease of $6.6 million or 22.8% from the fiscal
year ended March 31, 1997 total of $28.9 million. Gross margin as a percentage
of revenues decreased to 21.8% for fiscal year 1998 from 33.5% for fiscal year
1997. The decrease in gross margin percentage resulted from the increase in
direct operating expenses noted above.

   Selling, General and Administrative Expenses. The Company's selling, general
and administrative expenses for the fiscal year ended March 31, 1998 totaled
$41.6 million, an increase of $15.8 million or 61.5% over the fiscal year ended
March 31, 1997 total of $25.7 million. As a percentage of revenues, selling,
general and administrative expenses increased during fiscal year 1998 to 40.7%
from 29.9% during the prior fiscal year. Factors contributing to the higher
selling, general and administrative expenses included the 


                                       12
<PAGE>   13
increased overhead expenses associated with acquisitions completed during fiscal
years 1998 and 1997, the full-year impact of higher headquarters operating
expenses, a $5.0 million increase in the provision for bad debts in fiscal year
1998 versus the prior fiscal year and an unusually high level of legal,
accounting and consulting services expenses in fiscal year 1998 (in addition to
the legal and accounting costs classified as Special Charges). The Company's
ongoing cost-reduction program noted above has included initiatives to reduce
selling, general and administrative expenses as a percentage of revenues. Those
initiatives have included the elimination of certain corporate and field
administrative and sales positions, the closing of under-utilized field offices,
the shutdown of unprofitable refurbishment operations in Florida and California
and the implementation of strengthened credit and collection policies and
procedures.

   Special Charges. The Company recorded special charges of $11.4 million for
the fiscal year ended March 31, 1998. There were no special charges recorded in
the prior fiscal year. Included in the $11.4 million total was the write-down of
goodwill related to certain COHR MasterPlan acquisitions and other assets of
$9.1 million, potential severance and severance related litigation costs of $1.1
million (of which $130,000 has been paid) and legal and accounting costs of $1.2
million associated with the special review conducted at the direction of the
Company's Board of Directors in the last two quarters of fiscal year 1998.

   Operating Income (Loss). The Company experienced an operating loss of $30.7
million for the fiscal year ended March 31, 1998 compared to operating income of
$3.1 million for the fiscal year ended March 31, 1997. Operating income or loss
as a percentage of revenues was a negative 30.1% for fiscal year 1998 versus a
positive 3.6% for fiscal year 1997.

   Provision for Income Taxes (Tax Benefit). The Company's operating loss for
the fiscal year ended March 31, 1998 resulted in an income tax benefit for the
year of $2.7 million, as compared to an income tax provision of $1.6 million for
the fiscal year ended March 31, 1997. The Company's effective tax benefit rate
for fiscal year 1998 was 9.1% as compared to an effective tax rate of 40.7% for
fiscal year 1997. The effective tax benefit rate in fiscal year 1998 was less
than expected as a result of being unable to: 1) carryback net operating losses
for state income tax purposes and 2) fully utilize the net operating loss for
Federal income tax purposes. As of March 31, 1998, the net operating loss
carryforward was approximately $8 million for federal income tax purposes and
$7.1 million for state income tax purposes.

   Net Income (Loss). The Company's net loss for the fiscal year ended March 31,
1998 totaled $27.3 million as compared to net income for the fiscal year ended
March 31, 1997 of $2.3 million. As a percentage of revenues, the net loss for
fiscal year 1998 amounted to a negative 26.7% versus a positive 2.7% of revenues
for fiscal year 1997. The net loss per basic share amounted to $4.25 in fiscal
year 1998 as compared to basic net income per share of $0.45 in fiscal year
1997. The weighted average number of basic shares increased to 6,430,000 from
5,165,000 in fiscal year 1997 due to the full-year impact of the issuance of
1,739,000 shares of common stock in the Company's second public offering.

   Reclassifications. Certain reclassifications have been made to prior periods'
consolidated financial statements to conform to the current period's
presentation.

Fiscal Year Ended March 31, 1997 Versus Fiscal Year Ended March 31, 1996

   Revenues. The Company's revenues for the fiscal year ended March 31, 1997
totaled $86.2 million, an increase of $20.0 million or 30.1% over revenues of
$66.3 million for the fiscal year ended March 31, 1996. Of the $20.0 million
increase in revenues, approximately $16.0 million was due to revenue growth
related to COHR MasterPlan. During fiscal year 1997, COHR MasterPlan acquired
nine smaller service maintenance companies (12 sites) and opened nine new sites.
The remaining revenue increase was due to internal growth and the opening of new
sites for Purchase Connection. During fiscal year 1997, the Company opened or
acquired a total of 23 new sales and customer service sites. As a result of
these acquisitions, revenues increased by $7.0 million.

   Direct Operating Expenses. The Company's direct operating expenses for the
fiscal year ended March 31, 1997 totaled $57.4 million which was an increase of
$13.8 million or 31.8% over the fiscal year ended March 31, 1996 total of $43.5
million. Direct operating expenses as a percentage of revenues increased to
66.5% in fiscal year 1997 from 65.7% in the prior fiscal year. COHR MasterPlan
has higher direct operating expenses as a percentage of revenues than Purchase
Connection and COHR MasterPlan is a more labor intensive business than Purchase
Connection which results in lower gross margins than those realized by Purchase
Connection.

   Gross Margin. The Company's gross margin for the year ended March 31, 1997
totaled $28.9 million, an increase of $6.1 million or 26.9% over the year ended
March 31, 1996 total of $22.7 million. Gross margin as a percentage of revenues
decreased to 33.5% for fiscal year 1997 from 34.3% for fiscal year 1996. The
decrease in gross margin percentage was primarily due to an increase in the
percentage of the Company's revenues derived from the lower-margin COHR
MasterPlan.


                                       13
<PAGE>   14

   Selling, General and Administrative Expense. The Company's selling, general
and administrative expenses for the year ended March 31, 1997 totaled $25.7
million, an increase of $6.5 million or 33.7% over the year ended March 31, 1996
total of $19.2 million. As a percentage of revenues, selling, general and
administrative expenses increased during fiscal year 1997 to 29.9% from 29.1%
during fiscal year 1996. The actual increase in expenses reflected the increase
in costs necessary to support the Company's rapid growth. 

   Operating Income. The Company's operating income for the year ended March 31,
1997 totaled $3.1 million, a decrease of $0.4 million from the year ended March
31, 1996 total of $3.5 million. Operating income for the year ended March 31,
1997 as a percentage of revenues decreased to 3.6% from 5.3% for the year ended
March 31, 1996. This was primarily the result of an increase in direct operating
expenses as a percentage of revenues.

   Provision for Income Taxes. The Company's provision for income taxes for the
year ended March 31, 1997 totaled $1.6 million, an increase of $0.1 million from
the year ended March 31, 1996 total of $1.5 million, due to the increase in
pre-tax income for the year ended March 31, 1997. The Company's effective tax
rate of 40.7% was lower than the prior year's rate of 40.9% due to interest
income being earned free of income taxes in fiscal year 1997 compared to taxable
interest being earned in fiscal year 1996.

   Net Income. The Company's net income for the year ended March 31, 1997
totaled $2.3 million, an increase of $0.2 million over the total for the year
ended March 31, 1996 of $2.1 million. As a percentage of revenues, net income
decreased to 2.7% in fiscal year 1997 from 3.2% in fiscal year 1996, due
primarily to increased direct operating expenses as a percentage of revenues.
Net income per basic share decreased to $0.45 cents in fiscal year 1997 from
$0.90 in fiscal year 1996 primarily as a result of the effect of the issuance of
2,450,000 new shares of common stock in February 1996 and 1,739,000 new shares
of common stock in a second public offering in November 1996.

   Reclassifications. Certain reclassifications have been made to prior periods'
consolidated financial statements to conform to the fiscal year 1998 
presentation.


LIQUIDITY AND CAPITAL RESOURCES

   In November and December 1996, the Company sold 1,739,000 shares of its
common stock, $0.01 par value, at $20.00 per share pursuant to a second public
offering, realizing $33.2 million in net proceeds after fees and other selling
expenses. In fiscal years 1998 and 1997, the Company utilized $1.3 million and
$8.3 million, respectively, for acquisitions.

   The Company had working capital of $28.2 million, $49.9 million and $23.5
million as of March 31, 1998, 1997 and 1996, respectively. The Company had cash,
cash equivalents and investments of $14.0 million, $28.9 million, and $19.3
million at those same respective dates.

   Net cash used in operating activities was $8.6 million, $11.3 million and
$1.9 for fiscal years 1998, 1997 and 1996, respectively. The cash used in
operations in fiscal year 1998 was primarily caused by the operating loss. In
fiscal years 1997 and 1996, cash used in operations was primarily to support
changes in accounts receivable, inventories, accounts payable and current income
tax liabilities. A significant portion of the Company's growth has been funded
from the proceeds of the public offerings and exercise of options.

   Net cash provided by investing activities was $2.5 million for fiscal year
1998, compared to net cash used in investing activities of $16.9 million and
$2.8 million for fiscal years 1997 and 1996, respectively. The principal uses of
this cash were for acquisitions and investments. Capital expenditures during
these periods amounted to $2.2 million, $2.6 million and $1.4 million,
respectively.

   Cash provided by financing activities was from the issuance of new stock and
amounted to $33.1 million in fiscal year 1997 and $20.0 million in fiscal year
1996. Cash used in financing activities were principally for the repayment of
notes payable and long-term debt of $2.8 million, $1.3 million and $0.1 million
for the fiscal years ended March 31, 1998, 1997 and 1996, respectively, and
payment of dividends to its stockholders of approximately $0.2 million for the
fiscal year ended March 31, 1996. The Company has not paid dividends since its
initial public offering in February 1996.

   The Company is subject to various commitments and contingencies. See Item 3
"Legal Proceedings," Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Risk Factors" below, and Note 9 to
Consolidated Financial Statements.

   At present, the Company does not have a credit facility or line of credit.
The Company believes that its cash on hand and anticipated cash flows will be
sufficient to meet the Company's operating needs for the next fiscal year.



                                       14
<PAGE>   15
RISK FACTORS

        The Company's business is subject to a number of risks, some of which
are beyond the Company's control. The Company has identified below important
factors that could cause actual results to differ materially from those
projected in any forward looking statements the Company may make from time to
time.

Recent Developments -- General

        The Company suffered certain setbacks during the last fiscal year,
including: (i) a restatement of its financial statements for the fiscal year
ended March 31, 1997 and the first two quarters of the fiscal year ended March
31, 1998 and the identification by the Company's auditors of certain conditions
that were deemed to be material weaknesses in internal controls, (ii) the
replacement of the Company's prior senior management, including its Chief
Executive Officer and Chief Financial Officer and the removal of its Chief
Operating Officer and Senior Vice President, COHR MasterPlan, (iii) the
incurrence of significant special charges and operating losses for the fiscal
year ended March 31, 1998, (iv) the filing of various lawsuits against the
Company, including shareholder class action lawsuits alleging violation of the
federal and/or state securities law and the commencement of an SEC formal
investigation of the Company, and (v) a steep drop in the price of the Company's
Common Stock. The Company is not able to predict what effect these recent
developments may have on its operating results, relationships with customers,
employees or future stock prices.

Management Stability and Recruiting

        In its Form 10-K for the fiscal year ended March 31, 1997, the Company
disclosed that it will depend in large part on the performance of a number of
key employees, including Paul Chopra, its then Chairman of the Board and Chief
Executive Officer (CEO). The Company replaced (i) Mr. Chopra in November of 1997
with an interim CEO who was replaced with a new CEO in June 1998, and (ii) its
Chief Financial Officer (CFO) in February 1998 and removed its Chief Operating
Officer (COO) and Senior Vice President, COHR MasterPlan in June 1998. The
Company believes that it has secured qualified replacements where needed but
these individuals are not as familiar with the operations of the Company as
their predecessors. The Company's success continues to depend to a significant
degree upon continued contributions of its key management, sales and operational
personnel and the Company's ability to retain and continue to attract highly
skilled personnel. The loss of key management personnel, including the recently
retained management team, could have a material adverse effect on the Company's
business. Uncertainty about the Company's future and significant changes in
senior management may limit the Company's ability to attract and retain
personnel for critical positions. The failure of the Company to attract and
retain key personnel would have a material adverse effect on the Company's
business, operating results and financial condition.

Ability to Achieve Improved Operating Results

        The Company has initiated significant cost reduction measures in an
effort to improve the Company's earnings. These measures include a 7% reduction
in total personnel, closing of certain under-utilized field offices,
restructuring certain unprofitable operating units, revision of inventory
management procedures and strengthening credit and collection policies. The
Company will continue to face certain challenges in implementing these measures
and improving the Company's operating results including (1) shifting its
strategic focus from acquiring compatible businesses to running its existing
businesses efficiently and profitably, (2) managing existing customers'
perceptions of the Company's continued viability, (3) refocusing on the high
levels of customer service required to develop new customers and retain existing
customers, (4) securing current employees, particularly in light of declines in
the market value of the Company's common stock (the value of which often plays a
role in compensation of employees), and (5) reducing costs and increasing
efficiencies. There can be no assurance that the Company will successfully meet
these or other operating challenges or that the Company's operating plans
ultimately will be successful. No assurances can be give that the Company will
achieve profitable operations in the near term.



                                       15
<PAGE>   16

Legal Proceedings

        Federal and state civil lawsuits have been filed against the Company
alleging, among other things, federal and/or state securities law violations and
the Securities Exchange Commission (the "SEC") has commenced a formal
investigation of the Company. See Item 3 "Legal Proceedings." The Company is not
able to predict at this time the final outcome of such matters or whether the
resolution of such matters will materially affect the Company's results of
operations, cash flow or financial position. 

Risks Associated with Former Acquisition Strategy

        A principal component of the Company's business strategy, particularly
in its equipment services division, had been to grow by acquiring new sites to
augment its presence in markets it already served and in new geographic markets.
The sites acquired by the Company to date typically operated at a break even or
small loss basis prior to acquisition. There can be no assurance that the
Company's efforts to improve profitability of acquired businesses by increasing
revenues and eliminating duplicative administrative costs will be successful.

Need for Additional Financing

        At present, the Company does not have a credit facility or line of
credit. The Company believes that its cash on hand and anticipated cash flows
will be sufficient to meet the Company's operating needs for the next fiscal
year. There can be no assurance that additional financing, if and when required,
will be available on terms acceptable to the Company or at all.        

Risks Associated With Management of Data and Year 2000 Issues

        The Company's business is dependent upon its ongoing ability to obtain,
process, analyze and manage data and to maintain and upgrade its data processing
capabilities. Interruption of data processing capabilities for any extended
length of time, the failure to upgrade data services, difficulties in converting
data and information systems after acquisitions, loss of stored data,
programming errors or other computer programs could have a material adverse
effect on the Company's business. As the year 2000 approaches, an issue ("Year
2000 Issue") affecting all companies has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. In brief, many existing applications in the marketplace and some
proprietary database applications developed by the Company were designed to use
a two-digit date position to represent the year (e.g., "98" is stored on the
systems and represents the year 1998). The Company has initiated an assessment
of its own computer systems and other data-sensitive electronic systems, such as
security systems. The financial and general ledger systems of the Company are
substantially compliant already; the costs to upgrade these systems is not
expected to be material. The Company has also commenced to communicate with
suppliers, customers, financial institutions and others with whom it conducts
business to assess whether the systems of these other companies with which the
Company interfaces or on which the Company relies, will be upgraded on a timely
basis or that such systems will not have an adverse effect on the Company's
systems. The Company does not believe that it will incur a material financial
impact from the risk, or from assessing the risk, arising from the Year 2000
Issues. However, there can be no assurance that the Company's initial assessment
of this risk will be accurate or that the Year 2000 Issue will not materially
affect future financial results or future financial conditions.

        Another area of potential risk is with certain medical equipment which
belongs to the Company's customers but which is maintained or serviced by the
Company and has microprocessors with date functionality which could malfunction
in the year 2000. Among other steps, the Company has initiated formal
communications with all of its customers and with all of the major suppliers of
medical equipment to ensure that these third parties are also working to
remediate their own Year 2000 Issues, if applicable. However, the Company is
unable to determine whether the Year 2000 Issue related to customers' medical
equipment  which is serviced or maintained by the Company will materially affect
future financial results or future financial conditions. 


                                       16
<PAGE>   17

Competition

        The marketing of equipment services and group purchasing services to
health care institutions is highly competitive. Many of the Company's
competitors are larger, have greater financial and marketing resources than the
Company, and have not faced the challenges confronting the Company related to
its operations. (See "Business-Competition," "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Risk Factors -
Ability to Achieve Improved Operating Results.") Some of the Company's
competitors are nonprofit cooperatives that enjoy tax advantages unavailable to
the Company. The Company could encounter additional competition because many of
the services and products it sells are easily obtainable by others from various
sources of supply and such competitors could consolidate into regional or
national networks. Significant increases in competition encountered by the
Company in the future may limit the Company's ability to expand its business or
maintain its current customer base, which could have a material adverse effect
on the Company's business.

Risks of Reduced Customer Base Associated with Consolidation of the Health Care
Industry

        As consolidation among health care institutions, particularly hospitals
and integrated health systems, continues, the Company's customer base may be
reduced either because customers may be consolidated with or acquired by other
entities or because purchasing decisions for products and services may shift to
individuals with whom the Company has not had prior selling relationships. There
can be no assurance that the Company will be able to maintain relationships with
its customers following such an acquisition or consolidation. Any significant
reduction in the Company's customer base could have a material adverse effect on
the Company's business.

Costs Associated with Regulation of the Health Care Industry

        The Company focuses its business on providing services to health care
institutions, particularly hospitals. The health care industry is subject to
extensive government regulation, licensure and prescribed operating procedures.
The acceptance of the Company's services and products by its customers will
depend, to a very significant degree, upon whether such services and products
will be in compliance with applicable regulations or will assist health care
institutions in complying with such regulations. While the Company monitors such
regulations and designs its services and products accordingly, a substantial
change in the level of regulation or the substance of particular regulations
could have a material adverse effect on the Company's business. See "Business -
Regulatory Matters."

Liability Risks Associated with Governmental Regulations and Environmental
Hazards

        The health care industry is highly regulated and there are numerous
federal and state laws, which regulate the relationships between health care
providers and the persons, or entities, which sell goods or services to health
care providers. These laws include the fraud and abuse provisions of the
Medicare and Medicaid statutes, certain federal antitrust laws such as the
Robinson-Patman Act, the Sherman Act and the Clayton Act, regulations regarding
the sale and marketing of insurance products, such as life and health insurance,
fire and casualty insurance and variable annuities, and laws and regulations
regarding worker safety, community "right to know" and clean air and water.
Although the Company believes it has been and is currently in substantial
compliance with the applicable standards pursuant to such laws and regulations,
there can be no assurance that the Company will not be materially adversely
affected by existing or future requirements or incur materially increased
operating costs in complying therewith. There can be no assurance that review of
the Company's business by courts or regulatory authorities will not result in a
determination that could adversely affect the Company's business or that the
health care regulatory environment will not change so as to restrict the
Company's existing operations or their expansion.

Dependence upon Relationships with Third Party Vendors; Consolidation of Vendors

        The Company offers equipment servicing and group purchasing services for
over 400,000 different products distributed or manufactured by approximately
5,558 vendors and is dependent on these vendors for the manufacture and supply
of product. Presently, the Company relies on vendors for (i) technical and
selling support, (ii) favorable purchasing and delivery terms, (iii) promotional
materials, and (iv) replacement parts. The Company's dependence on third party
suppliers includes several potential risks, including limited control over
pricing, product and service availability and quality, and delivery schedules.
The Company's inability to maintain good relations with these vendors could have
a material adverse effect on the Company's business. Certain of the vendors,
including in the drug wholesaling and distributing industry, are also
consolidating which may reduce the number of options available to the Company
and/or the largest of such vendors may also attempt to deal directly with
customers as opposed to through GPOs such as Purchase Connection or only with
certain select GPOs not including Purchase Connection. See "Business - Services
and Products."


                                       17
<PAGE>   18
\
Impact of External Reporting to the Company of Purchasing Volume

        In fiscal 1998, commissions from manufacturers and distributors,
together with access fees from customers, accounted for approximately two-thirds
of the revenues of the Purchase Connection segment, which includes the Company's
group purchasing organization. Commissions are received from manufacturers and
distributors in exchange for delivering volume purchases to those manufacturers
and distributors. In the group purchasing industry, it is difficult for group
purchasing organizations ("GPOs") to determine accurately the volume of
purchases made by their customers from manufacturers and distributors because
orders are placed directly by customers with manufacturers and distributors.
Accordingly, it is difficult for GPOs to verify that the amount of commissions
received from manufacturers and distributors accurately reflects purchases made
by the GPOs' customers. In order to verify the amount of commissions to which it
is entitled, the Company currently relies on manufacturers and distributors to
report accurately purchases made by the Company's customers, and the Company's
ability to audit such information based upon customer records is therefore
limited. Although the Company has developed Power Connection, an on-line or
stand-alone electronic catalog that will enable the Company to better monitor
manufacturer and distributor reporting, few of the Company's group purchasing
customers currently use Power Connection, and there can be no assurance that the
Company will be successful in making Power Connection available to all of its
customers on a cost-effective basis. Lost commissions to the Company due to
inaccurate reporting of volume purchases made by its customers could have a
material adverse effect on the Company's business. See "Business - Services and
Products."

Risks Related to Fixed Price Contracts

        In the Company's equipment servicing business, the Company offers
contracts for services at a fixed price. In the event that the cost to the
Company of performing services under a fixed price contract exceeds the quoted
fixed price, the Company would bear any such excess cost. In the event that the
Company's costs of performing services exceeds the fixed price it is to receive
under a significant number of fixed price contracts, the Company's business and
results of operations may be materially adversely affected.

Liability Risks and Insurance Coverage

        Although the Company is not a manufacturer, the servicing, maintenance
and sale of medical equipment entails risks of product liability. Additionally,
the Company may be subject to lawsuits alleging negligence or related legal
theories in connection with its security services and consulting services,
including environmental, safety and professional consulting services. The
Company maintains liability insurance coverage, however, there can be no
assurance that claims or judgments in excess of the Company's coverage limits,
or outside the scope of the coverage where applicable, will not have a material
adverse effect upon the Company's business or results of operations.

Dependence on Third Party Reimbursement

        The cost of a significant portion of medical care in the United States
is funded by government and private insurance programs, such as Medicare,
Medicaid and corporate health insurance plans. In recent years,
government-imposed limits on reimbursement of hospitals and other health care
providers have significantly impacted spending budgets in certain markets within
the medical supply and equipment industry. Private third-party reimbursement
plans are also developing increasingly sophisticated methods of controlling
health care costs through redesign of benefits and exploration of more
cost-effective methods of delivering health care. Accordingly, there can be no
assurance that the Company's customers will continue to have sufficient
spendable funds for purchase and use of the Company's services and products. A
material reduction in the purchasing of such services and products could
adversely affect the Company's business.

Volatility of Stock Price

        The Company believes factors, such as announcements with respect to the
restatement of prior period financial statements, the civil lawsuits against the
Company, the management turnover, the SEC investigation and the variations in
financial results, have caused, and could continue to cause, the market price of
the Company's common stock to fluctuate substantially. Any adverse announcement
with respect to such matters or any shortfall in revenue or earnings from levels
expected by securities analysts could have an immediate and material adverse
effect on the trading price of the Company's common stock in any given period.
As a result, the market for the Company's common stock may experience material
adverse price and volume fluctuations. 

Inflation

        The Company believes that its operations have not been materially
adversely affected by inflation.


                                       18
<PAGE>   19

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Information with respect to this item is set forth in the "Index to
Consolidated Financial Statements." at page 23.



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

        None


                                       19
<PAGE>   20

                                    PART III



ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        Information with respect to this item is incorporated by reference from
the Company's definitive Proxy Statement, under the caption "Election of
Directors - Current Board of Directors," to be filed with the Commission within
120 days after the close of the Company's fiscal year.

EXECUTIVE OFFICERS

        The Company assembled a new management team in June 1998 when it elected
Mr. Raymond List as President and Chief Executive Officer and Mr. Peter Socha as
Executive Vice President, Operations. Mr. Daniel Clark, who was named Executive
Vice President, Finance and Chief Financial Officer in February of 1998, will
remain in that position.

        The names, titles and ages of the executive officers of the Company are
as follows:

<TABLE>
<CAPTION>
Name                  Age    Position
----                  ---    --------
<S>                   <C>    <C>                                  
Raymond List          54     President, Chief Executive Officer

Daniel Clark          46     Executive Vice President, Finance and Chief Financial Officer

Peter Socha           39     Executive Vice President, Operations

David Manigault       39     Senior Vice President, Secretary

Aviva Truesdell       51     Senior Vice President of Business Services

David Roesler         45     Senior Vice President of Operations, Purchase Connection

Bernie Bartoszek      46     Senior Vice President of Sales and Marketing, COHR MasterPlan

Ed Gravell            43     Senior Vice President of Sales and Customer Service, Purchase Connection

Joe Strange           49     Senior Vice President of Management Consulting Services
</TABLE>

        Mr. List was appointed President and Chief Executive Officer and elected
a Director on June 1, 1998. In 1995, Mr. List became Managing General Partner of
Fairfax Partners, an investment and management firm. From 1994 to 1995, he was
affiliated with American Venture Investments and Fairfax Partners. For the
previous twenty years, Mr. List served in various senior management positions,
including Chairman and President, with ICF Kaiser Engineers.


        Mr. Clark has served as Chief Financial Officer since February 1998 and
as Executive Vice President, Finance since January 1998. From December 1997 to
January 1998, he served as a financial consultant to the Company. Before joining
the Company, Mr. Clark served for eleven years with PepsiCo, Inc., most recently
as Chief Financial Officer of California Pizza Kitchen, Inc.


                                       20
<PAGE>   21
        Mr. Socha was appointed Executive Vice President, Operations on June 1,
1998. From 1997 to 1998, Mr. Socha served as President and Chief Executive
Officer of MedEcon Services, Inc. From 1994 to 1997, he served in senior
management positions with Sirrom Capital Corporation. From 1992 to 1994, Mr.
Socha served as President and Chief Operating Officer of Stewart Foods, Inc.

        Mr. Manigault has served as Senior Vice President since January 1998,
Executive Vice President of the Company from November 1995 to January 1998, its
Chief Information Officer since 1984, and its Secretary since November 1996. He
has served as Past Chairman since 1996 and Chairman in 1995 to 1996 of the
Healthcare EDI Coalition, a trade group that establishes EDI pathways based on
ANSI X-12 standards.

        Ms. Truesdell has served as Senior Vice President of Business Services
since October 1991. From January 1986 to September 1991, Ms. Truesdell served as
Vice President of Administration Services. From November 1984 to December 1985,
Ms. Truesdell served as Director, Administration Services.

        Mr. Roesler has served as Senior Vice President of Operations, Purchase
Connection since April 1997. From February 1996 to March 1997, Mr. Roesler
served as Senior Vice President, Medical/Surgical/Laboratory and Capital
Equipment programs of Purchase Connection. From 1980 to January 1996, Mr.
Roesler served as Director and Vice President of National Accounts at the
Eastman Kodak Company.

        Mr. Bartoszek has served as Senior Vice President of Sales and
Marketing, COHR MasterPlan since April 1996. From December 1995 to March 1996,
Mr. Bartoszek served as Senior Vice President of Sales and Operations, COHR
MasterPlan. From May 1995 to November 1995, Mr. Bartoszek served as Vice
President of Sales and Operations, COHR MasterPlan. From November 1993 to April
1995, Mr. Bartoszek served as Executive Vice President at Kinetic Biomedical
Services. From 1987 to October 1993, Mr. Bartoszek served in various managerial
capacities at AMSCO.

        Mr. Gravell has served as Senior Vice President of Sales and Customer
Service, Purchase Connection since July 1995. From March 1993 to June 1995, Mr.
Gravell served as Vice President in the Medical/Surgical/Laboratory program of
Purchase Connection. From November 1990 to February 1993, Mr. Gravell served as
Director of Laboratory Services at Little Company of Mary Hospital.

        Mr. Strange has served as Senior Vice President of Management Consulting
Services since June 1996. From April 1993 to May 1996, Mr. Strange served as
Vice President of Management Consulting Services. From August 1992 to March
1993, Mr. Strange served as Director, Regulatory Consulting Services.

        Certain other persons who served as executive officers during the fiscal
year ended March 31, 1998 but who are no longer executive officers or with the
Company include: Paul Chopra, former President and Chief Executive Officer,
Sandy Morford, former President and Chief Operating Officer, Haresh Satiani,
former Senior Vice President of Operations, COHR Masterplan, Umesh Malhotra,
former Chief Financial Officer and Treasurer, and David Langness, former Senior
Vice President of Corporate Communications.

        Mr. Chopra has held various executive positions including Chief
Executive Officer with the Company from 1987 through November 1997 and currently
serves as a Director.

        Mr. Morford served as Chief Operating Officer of the Company from
November 1996 to June 1998. He served as President from November 1996 until
November 1997. Prior to his departure in June 1998, Mr. Morford was employed by
COHR for nineteen years.

        Mr. Satiani served as Senior Vice President of Operations, COHR
MasterPlan from April 1994 to June 1998. From November 1991 to March 1994, Mr.
Satiani served as Vice President of Operations, COHR MasterPlan.


                                       21
<PAGE>   22

        Mr. Malhotra served as Chief Financial Officer and Assistant Secretary
from 1995 to February 1998 and, additionally, as Treasurer of the Company from
1996 to February 1998. From 1991 to 1995, he served as the Company's Controller
and Vice President of Finance.

        Mr. Langness served as Senior Vice President of Corporate Communications
from February 1996 to January 1998. From April 1986 to January 1996, Mr.
Langness served as Vice President, Communications for HASC.

        Mr. Stephen Gamble served as the Company's interim Chief Executive
Officer from November 1997 to June 1998. He continues to be a Director of the
Company.

ITEM 11.  EXECUTIVE COMPENSATION

        Information with respect to this item is incorporated by reference from
the Company's definitive Proxy Statement, under the caption "Remuneration," to
be filed with the Commission within 120 days after the close of the Company's
fiscal year.



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        Information with respect to this item is incorporated by reference from
the Company's definitive Proxy Statement, under the caption "Voting Securities"
and "Election of Directors," to be filed with the Commission within 120 days
after the close of the Company's fiscal year.



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Information with respect to this item is incorporated by reference from
the Company's definitive Proxy Statement, under the caption "Election of
Directors - Certain Relationships and Related Transactions," to be filed with
the Commission within 120 days after the close of the Company's fiscal year.


                                     PART IV

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


(a) 1.  FINANCIAL STATEMENTS

        The documents described in the "Index to Consolidated Financial
        Statements and Financial Statement Schedule" are included in this report
        starting at page 23.

    2.  FINANCIAL STATEMENT SCHEDULE

        The financial statement schedule described in the "Index to Consolidated
        Financial Statements and Financial Statement Schedule" is included in
        this report starting on page 41.

        All other schedules for which provision is made in the applicable
        accounting regulation of the Securities and Exchange Commission are not
        required under the related instructions or are inapplicable, and
        therefore have been omitted.

    3.  EXHIBITS

        Exhibits included or incorporated herein:

          See Exhibit Index

    4.  REPORTS ON FORM 8-K

        The Company filed the following current report on Form 8-K during the
        quarter ended March 31, 1998:

<TABLE>
<CAPTION>
      Date of Report                      Item Reported
      ---------------                     -------------
      <S>                         <C>
      January 2, 1998             Other Events
                                  Engagement of Lehman Brothers as financial 
                                  advisor and estimate of special charges

</TABLE>


                                       22
<PAGE>   23

                           COHR INC. AND SUBSIDIARIES

                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
                          FINANCIAL STATEMENT SCHEDULE

<TABLE>
<CAPTION>
                                                                                   PAGE
                                                                                  NUMBER
                                                                                  ------
<S>                                                                                  <C>
        INDEPENDENT AUDITORS' REPORT.............................................    24

        CONSOLIDATED FINANCIAL STATEMENTS:
          Consolidated Balance Sheets at March 31, 1998 and 1997.................    25

          Consolidated  Statements  of  Operations  for Each of the  Years  Ended
        March 31, 1998, 1997 and 1996............................................    26
             
          Consolidated  Statements of Changes in Shareholders' Equity for Each of
        the Years Ended March 31, 1998, 1997 and 1996............................    27
             
          Consolidated  Statements  of Cash  Flows  for Each of the  Years  Ended
        March 31, 1998, 1997 and 1996............................................    28
             
          Notes to Consolidated Financial Statements.............................    29

          Schedule V-- Valuation  and  Qualifying  Accounts for Each of the Years
        Ended March 31, 1998, 1997 and 1996......................................    41
</TABLE>
             




                                       23
<PAGE>   24

                          INDEPENDENT AUDITORS' REPORT



Board of Directors and Shareholders of
COHR Inc. and Subsidiaries
Chatsworth, California:

   We have audited the accompanying consolidated balance sheets of COHR Inc. and
subsidiaries (the "Company") as of March 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended March 31, 1998. Our audits also
included the financial statement schedule listed in the Index at Item 14(a)2.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the consolidated financial statements and financial statement
schedule 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, such consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of March 31, 1998 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1998 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.


/s/ Deloitte & Touche LLP

Los Angeles, California
June 11, 1998


                                       24
<PAGE>   25

                           COHR INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                            MARCH 31, 1998 AND 1997
                             (DOLLARS IN THOUSANDS)

                                 ASSETS (Note 9)

<TABLE>
<CAPTION>
                                                                1998             1997
                                                            -----------      -----------
<S>                                                         <C>              <C>        
CURRENT ASSETS:
  Cash and cash equivalents ...........................     $    14,026      $    22,948
  Investments .........................................                            6,000
  Accounts receivable, net of allowance for doubtful
     accounts of $4,232 (1998) and $1,490 (1997).......          16,946           27,006
  Inventory ...........................................           6,891            9,126
  Prepaid expenses and other ..........................             716            1,263
  Income tax refund receivable (Note 7) ...............           8,391            1,348
  Deferred income tax asset (Note 7) ..................                            1,124
                                                            -----------      -----------
          Total current assets ........................          46,970           68,815
EQUIPMENT AND IMPROVEMENTS, net (Note 5) ..............           6,804            6,636
INTANGIBLE ASSETS,  net of accumulated  amortization of
$261 (1998) and $665 (1997) ...........................           2,615            9,237
OTHER ASSETS ..........................................             195              391
                                                            -----------      -----------
          TOTAL .......................................     $    56,584      $    85,079
                                                            ===========      ===========
                   LIABILITIES AND SHAREHOLDERS' EQUITY
  CURRENT LIABILITIES:
  Notes payable (Notes 6 and 8) .......................     $        40      $     1,342
  Accounts payable.....................................           6,183            5,668
  Accrued expenses ....................................          11,174            4,669
  Deferred revenue ....................................             734            6,394
  Current portion of long-term debt (Notes 6 and 8) ...             649              853
                                                            -----------      -----------
          Total current liabilities ...................          18,780           18,926
LONG-TERM DEBT (Notes 6 and 8).........................             498            1,146
OTHER LONG-TERM LIABILITIES ...........................             136               
DEFERRED INCOME TAX LIABILITY (Note 7) ................                              499
COMMITMENTS AND CONTINGENCIES (Notes 9 and 10)
SHAREHOLDERS' EQUITY (Notes 11 and 12):
  Preferred  stock,  $.01 par value; 2,000,000 shares
  authorized; no shares issued and outstanding ........              
  Common stock, $.01 par value; 20,000,000 shares
  authorized; 6,433,189 (1998)
  and 6,391,000 (1997) shares issued and outstanding ..             887              887
  Additional paid-in capital ..........................          55,153           55,153
  Retained earnings (accumulated deficit) .............         (18,870)           8,468
                                                            -----------      -----------
          Total shareholders' equity ..................          37,170           64,508
                                                            -----------      -----------
          TOTAL .......................................     $    56,584      $    85,079
                                                            ===========      ===========
</TABLE>

                 See notes to consolidated financial statements.


                                       25
<PAGE>   26

                           COHR INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
           FOR EACH OF THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                1998         1997          1996
                                                             ---------     ---------     ---------
<S>                                                          <C>           <C>           <C>      
REVENUES ................................................    $ 102,144     $  86,221     $  66,254
DIRECT OPERATING EXPENSES ...............................       79,868        57,351        43,506
                                                             ---------     ---------     ---------
GROSS MARGIN ............................................       22,276        28,870        22,748
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 4) ...       41,567        25,744        19,248
SPECIAL CHARGES (Note 3) ................................       11,440             0             0
                                                             ---------     ---------     ---------
OPERATING INCOME (LOSS) .................................      (30,731)        3,126         3,500
INTEREST INCOME .........................................          882           889           155
INTEREST EXPENSE ........................................         (208)          (95)          (30)
                                                             ---------     ---------     ---------
INCOME (LOSS)  BEFORE INCOME TAXES (BENEFIT) ............      (30,057)        3,920         3,625
INCOME TAX PROVISION  (BENEFIT) (Note 7) ................       (2,719)        1,594         1,483
                                                             ---------     ---------     ---------
NET INCOME (LOSS) .......................................    $ (27,338)    $   2,326     $   2,142
                                                             =========     =========     =========
NET INCOME (LOSS) PER COMMON SHARE (Note 1):
  BASIC .................................................    $   (4.25)    $    0.45     $    0.90
                                                             =========     =========     =========
  DILUTED ...............................................    $   (4.25)    $    0.42     $    0.89
                                                             =========     =========     =========
</TABLE>

                 See notes to consolidated financial statements.


                                       26
<PAGE>   27

                           COHR INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  FOR EACH OF THE YEARS ENDED MARCH 31, 1998,
                                 1997 AND 1996
                 (DOLLARS IN THOUSANDS, EXCEPT NUMBER OF SHARES)


<TABLE>
<CAPTION>      
                                                                                                 RETAINED
                                                                                 ADDITIONAL      EARNINGS         TOTAL
                                                           COMMON STOCK            PAID-IN     (ACCUMULATED    SHAREHOLDERS'
                                                      SHARES         AMOUNT        CAPITAL        DEFICIT)        EQUITY
                                                    ---------      ---------      ---------      ---------     -------------
<S>                                                 <C>            <C>            <C>            <C>             <C>      
BALANCE, APRIL 1, 1995 .......................      2,112,000      $     844      $   2,179      $   4,247       $   7,270
  Net proceeds from sale of common stock 
   through initial public offering (Note
   11)........................................      2,450,000             25         19,925                         19,950
  Dividend paid to shareholders (Pre-IPO) ....                                                        (247)           (247)
  Net income .................................                                                       2,142           2,142
                                                    ---------      ---------      ---------      ---------       ---------
BALANCE, MARCH 31, 1996 ......................      4,562,000            869         22,104          6,142          29,115
  Net proceeds from sale of common stock 
   through second public offering
   (Note 11) .................................      1,739,000             17         32,240                         32,257
  Stock options exercised ....................         90,000              1            809                            810
  Net income .................................                                                       2,326           2,326
                                                    ---------      ---------      ---------      ---------       ---------
BALANCE, MARCH 31, 1997 ......................      6,391,000            887         55,153          8,468          64,508
  Shares issued upon exercise of
   warrants ..................................         42,189   
  Net loss ...................................                                                     (27,338)        (27,338)
                                                    ---------      ---------      ---------      ---------       ---------
BALANCE, MARCH 31, 1998 ......................      6,433,189      $     887      $  55,153      $ (18,870)      $  37,170
                                                    =========      =========      =========      =========       =========
</TABLE>

                 See notes to consolidated financial statements.


                                       27
<PAGE>   28

                           COHR INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
           FOR EACH OF THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                      1998          1997          1996
                                                                                    --------      --------      --------
      CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                 <C>           <C>           <C>     
        Net income (loss) .....................................................     ($27,338)     $  2,326      $  2,142
                                                                                    --------      --------      --------
        Adjustments to reconcile net income to net cash provided
          by (used in) operating activities:
          Depreciation and amortization .......................................        2,179         1,364           838
          Provision for losses on accounts receivable .........................        5,614           600           205
          Reduction of (provision for) deferred income taxes ..................        1,124          (267)           49
          Write-down of goodwill ..............................................        7,142
          Loss on asset write-downs ...........................................        1,623
          Increase (decrease) in other long-term liabilities ..................          136          (180)         (592)
          Changes in assets and liabilities, net of effect of
            acquisitions of certain assets and restructuring:
            Accounts receivable, net ..........................................        4,446       (11,275)       (4,890)
            Inventory .........................................................        1,902        (2,631)       (1,078)
            Prepaid expense and other .........................................          547          (379)         (174)
            Other assets ......................................................          196          (184)          (41)
            Income tax refund receivable ......................................       (7,542)       (1,348)
            Accounts payable ..................................................          515        (1,634)          589
            Accrued expenses ..................................................        6,517           543         1,234
            Deferred revenue ..................................................       (5,660)        1,808           344
            Other .............................................................                                     (529)
                                                                                    --------      --------      --------
               Total adjustments ..............................................       18,739       (13,583)       (4,045)
                                                                                    --------      --------      --------
               Net cash used in operating activities ..........................       (8,599)      (11,257)       (1,903)
                                                                                    --------      --------      --------
      CASH FLOWS FROM INVESTING ACTIVITIES:
        Capital expenditures ..................................................       (2,179)       (2,557)       (1,427)
        Payments for business acquisitions ....................................       (1,295)       (8,298)       (1,387)
        Proceeds from  sale of investments ....................................        6,000                            
        Purchase of investments ...............................................                     (6,000)              
                                                                                    --------      --------      --------
              Net cash  provided by (used in) investing activities ............        2,526       (16,855)       (2,814)
                                                                                    --------      --------      --------
      CASH FLOWS FROM FINANCING ACTIVITIES:
        Payment of dividends to shareholders ..................................                                     (247)
        Repayment and current maturities of long-term debt and notes
      payable .................................................................       (2,849)       (1,321)         (125)
        Issuance of common stock ..............................................                     32,257        19,950
        Exercise of stock options .............................................                        810              
                                                                                    --------      --------      --------
               Net cash provided by (used in) financing activities ............       (2,849)       31,746        19,578
                                                                                    --------      --------      --------
      NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ....................       (8,922)        3,634        14,861
      CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ..........................       22,948        19,314         4,453
                                                                                    --------      --------      --------
      CASH AND CASH EQUIVALENTS, END OF PERIOD ................................     $ 14,026      $ 22,948      $ 19,314
                                                                                    ========      ========      ========

      SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
        Cash paid during the period for:
             Income taxes .....................................................     $  3,707      $  3,054      $  1,843
                                                                                    ========      ========      ========
             Interest .........................................................     $    208      $     25      $     37
                                                                                    ========      ========      ========

      DETAILS OF BUSINESSES OR ASSETS ACQUIRED AT FAIR VALUE ARE AS FOLLOWS
        (Note 6):
        Current assets ........................................................     $    494      $  5,727      $    409
        Equipment .............................................................          196         1,426           235
        Goodwill and other intangibles ........................................        1,782         7,092           893
                                                                                    --------      --------      --------
                                                                                       2,472        14,245         1,537
        Liabilities assumed ...................................................                      3,288              
        Debt issued for acquisitions ..........................................        1,177         2,659           150
                                                                                    --------      --------      --------
        NET CASH PAID FOR BUSINESS ACQUISITIONS ...............................     $  1,295      $  8,298      $  1,387
                                                                                    ========      ========      ========
</TABLE>

                 See notes to consolidated financial statements.


                                       28
<PAGE>   29

                           COHR INC. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR
             EACH OF THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Business Description -- COHR Inc. and subsidiaries (the "Company") provide
fee-for-service products and services to hospitals and other health care
providers (see Note 13 for information relating to the Company's business
segments).

   The Company was formerly a majority owned subsidiary of Healthcare
Association of Southern California ("HASC"). Effective February 16, 1996, the
Company became a publicly held company, at which time HASC became a minority
shareholder (see Note 11).

   Basis of Presentation -- The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All intercompany 
accounts and transactions have been eliminated.

   Use of Estimates -- The preparation of the consolidated financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts in the consolidated
financial statements and accompanying notes. Actual results could differ from
the estimates.

   Cash and Cash Equivalents -- The Company considers all highly liquid
investments purchased with initial maturities of generally three months or less
to be cash equivalents. The Company actively evaluates the creditworthiness of
the financial institutions and instruments in which it invests.

   Inventory -- Inventory, consisting primarily of medical equipment repair
parts, is stated at the lower of cost or market, cost being determined on the
first-in, first-out basis.

   Equipment and Improvements -- Equipment and improvements are stated at cost,
net of accumulated depreciation and amortization. Depreciation of furniture and
equipment and amortization of improvements are provided for using the
straight-line method over the estimated useful lives of the respective assets,
as follows:

<TABLE>
<S>                                                   <C>     
               Computer equipment and software.........5 to 10 years
               Office furniture, equipment and
                 automobiles...........................3 to 7 years.
               Technical equipment.....................10 years
               Leasehold improvements..................Shorter of lease term or useful life
</TABLE>

   Intangible Assets -- Goodwill and other purchased intangible assets are
stated at cost and amortized on a straight-line basis over 15 years. The
projection of undiscounted future cash flows of the operations is evaluated at
each reporting period in assessing the recoverability of goodwill and other
purchased intangibles.

   Revenue Recognition -- The COHR MasterPlan is a program whereby the Company
contracts with hospitals on an annual basis to manage the hospitals' equipment
maintenance and repairs. Revenues on those contracts are recognized over the
contract period. Losses, if any, on maintenance contracts are recorded when
known. Group purchasing revenue is recognized in the period earned. Revenue on
equipment sales is recognized when risk of ownership is transferred to the
buyer, which is typically upon delivery.

   Deferred Revenue -- In the quarter ended March 31, 1998, the Company changed
its billing practice under the MasterPlan program. Prior to this change,
billings were made 45 days in advance thereby creating a deferred revenue
balance. The new practice does not bill MasterPlan customers in advance.


                                       29
<PAGE>   30


   Income Taxes -- The asset and liability approach is applied in accounting for
income taxes.  Under this method, deferred tax assets and liabilities are
recorded to reflect the future tax consequences of events that have been
recognized in the Company's financial statements but have not yet been
recognized for tax purposes. Such deferred income tax asset and liability
computations are based on enacted tax laws and rates applicable to years in
which the differences are expected to affect taxable income. A valuation
allowance is established, when necessary, to reduce deferred income tax assets
to the amount expected to be realized. The provision for income taxes is the tax
payable or refundable for the year adjusted for the change during the year in
deferred income taxes.

   Stock Option Plans -- SFAS No. 123, "Accounting for Stock-Based
Compensation," encourages but does not require companies to record compensation
cost for stock-based employee compensation plans at fair value. The Company has
chosen to continue to account for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock.

   Fair Value of Financial Instruments -- The fair values of cash and cash
equivalents, accounts receivable and accounts payable approximate their carrying
values due to the short-term nature of such items. The fair values of notes
payable and long-term debt are deemed not to be materially different from their
carrying values.

   Impairment of Long-Lived Assets -- The Company regularly reviews long-lived
assets and intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount to the asset may not be
recoverable (see Notes 2 and 3).

   Current Accounting Pronouncements -- During 1997, the Financial Accounting
Standards Board issued SFAS No. 130 "Reporting Comprehensive Income," which
requires that an enterprise report, by major components and as a single total,
the change in its net assets during the period from non-owner sources; SFAS No.
131 "Disclosures About Segments of an Enterprise and Related Information," which
establishes annual and interim reporting standards for an enterprise's business
segments and related disclosures about its products, services, geographic areas,
and major customers; and SFAS No. 132 "Employers Disclosures About Pensions and
Other Postretirement Benefits," which revises and standardizes pension and other
benefit plan disclosures. Adoption of the statements will not impact the
Company's consolidated financial position, results of operations or cash flows.
These statements are effective for fiscal years beginning after December 15,
1997.

   Concentration of Credit Risk -- The Company provides services to hospitals
and other health care providers throughout the United States. The Company's
trade accounts receivable is exposed to credit risk; however, such risk is
minimized due to the large numbers and geographic dispersion of the customer
base. The Company monitors the creditworthiness of its customers and provides
allowances for doubtful accounts when appropriate.

   The Company actively evaluates the creditworthiness of the financial
institutions and instruments in which it invests. The Company's investment
policy is to invest its excess cash in a diversified portfolio of high quality,
highly liquid instruments with initial maturities of one year or less.          

   Research and Development -- Research and development costs are expensed as
incurred. Such costs amounted to $480 (1998), $1,059 (1997) and $990 (1996).

   Net Income (Loss) per Common Share -- During fiscal 1998, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." This statement requires presentation of both basic and diluted Earnings
Per Share (EPS) and restatement of all prior-period EPS data presented. Basic
earnings (loss) per common share are computed using the weighted average number
of common shares outstanding during the period. Diluted earnings per share
reflect the incremental shares issuable upon the assumed exercise stock options
unless the effect of such inclusion is anti-dilutive.


                                       30
<PAGE>   31

Basic and diluted income (loss) per share are calculated as follows:


<TABLE>
<CAPTION>
                                                 Fiscal Year Ended March 31,
                                            -----------------------------------
                                              1998          1997         1996
                                            -----------------------------------
<S>                                         <C>           <C>          <C>     
Net income (loss) .....................     $(27,338)     $  2,326     $  2,142
Common share information (in thousands)
  Average common shares outstanding
     for basic income per share .......        6,430         5,165        2,391
  Dilutive effect of stock options ....                        333           11
                                            --------      --------     --------
  Shares for diluted income per share .        6,430         5,498        2,402
                                            ========      ========     ========
Net income (loss) per common share:
  Basic ...............................     $  (4.25)     $    .45     $    .90
                                            ========      ========     ========
  Diluted .............................     $  (4.25)     $    .42     $    .89
                                            ========      ========     ========
</TABLE>

   The computation of diluted earnings per share for fiscal 1998 did not include
stock options for which 408,000 shares were antidilutive. These options expire
through 2008.

   Reclassifications -- Certain reclassifications have been made to the prior
period's consolidated financial statements to conform to the current period's
presentation.


   2. RESULTS OF OPERATIONS AND MANAGEMENT'S PLANS

   The Company incurred a net loss of approximately $27.3 million in fiscal
1998. This loss reduced liquid assets (cash, cash equivalents and short-term
investments) by $14.9 million and working capital by $21.7 million from the
previous year end.

   The Company has instituted plans to restructure its operations and improve
future cash flows. To implement these plans, the Company announced the
appointment of a new management team, effective June 2, 1998. The key elements
of these plans include the following:

   o Establishing near-term cost reduction and cash management programs, and

   o Reorganizing the operations in the equipment maintenance segment including
     closing individual operating units, reducing staff levels and consolidating
     various operational and administrative structures.

   Although management believes that the implementation of these actions will
improve the Company's operating results, there can be no assurance that the
Company's operating plans will be ultimately successful.


                                       31
<PAGE>   32

3. SPECIAL CHARGES

   Special charges for the fiscal year ended March 31, 1998 consist of the
following items:

<TABLE>
<S>                                                                     <C>    
            Write down of goodwill....................................  $ 7,142
            Write down of other assets related to operations
                 abandoned or to be closed............................    1,999
            Severance costs...........................................    1,130
            Legal and accounting costs................................    1,169
                                                                        -------
                 Total................................................  $11,440
                                                                        ======= 
</TABLE>

   During the third quarter of fiscal 1998, the Company recorded a charge of
approximately $2.6 million to write-off the goodwill relating to an acquisition
in its equipment maintenance operation. Under the provisions of Statement of
Financial Accounting Standards (SFAS), No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," the Company
concluded that the value of that asset had been permanently impaired and was
therefore written off.

   During the fourth quarter of fiscal 1998, the Board of Directors authorized a
restructuring plan to reduce costs, close unprofitable operations, and divest
the Company of under-performing assets. As a result of these actions, management
has concluded that the value of goodwill attributable to certain other equipment
maintenance operations has been permanently impaired under SFAS 121 and,
therefore, an additional charge of approximately $4.5 million was recorded to
reduce these intangible assets to their estimated fair value. The evaluation of
fair value was made using both undiscounted future cash flows and the estimated
selling price of such assets. In addition, certain other tangible assets,
relating to operations closed or abandoned, have been written down to their net
realizable value. At March 31, 1998, remaining goodwill consists of $1.4 million
attributable to profitable equipment maintenance operations and $1.2 million
attributable to group purchase operations.

   Severance costs represents potential severance and severance related
litigation costs for those officers and employees who were terminated or removed
from office by the Company as of March 31, 1998. Subsequent to fiscal year end
the Company has made cash payments of $130.

   Legal and accounting costs represents the costs incurred by the Company
during the third and fourth quarters of fiscal 1998 resulting from a special
review of the Company's operations conducted at the direction of the Board of
Directors.


4. RELATED-PARTY TRANSACTIONS

   The Company had related-party transactions resulting from the allocation of
expenses (including rent, travel and insurance) to HASC of $57 (1998), $218
(1997) and $2,427 (1996). The Company also received management fees of $311
(1998), $311 (1997), and $299 (1996) for various management and accounting
services performed for HASC under a management agreement (including accounting,
payroll and personnel costs) expiring in 1999. Expenses allocated to the Company
from HASC are included in selling, general and administrative expenses in the
accompanying statements of income. Occupancy costs are allocated based upon
square footage utilized by the respective entities. Accounting, payroll and
personnel costs are allocated based upon the identification of tasks performed
for the individual companies.

   At March 31, 1998 and 1997, the Company had approximately $3.3 million and
$3.2 million in cash equivalents held at a financial institution of which a
member of the Board of Directors of the Company is a partner.


                                       32
<PAGE>   33

5. EQUIPMENT AND IMPROVEMENTS

   Equipment and improvements consist of:

<TABLE>
<CAPTION>
                                                                MARCH 31,
                                                         -----------------------
                                                           1998            1997
                                                         -------         -------
<S>                                                      <C>             <C>    
Computer equipment and software ..................       $ 4,701         $ 3,857
Office furniture and equipment ...................         2,879           2,794
Technical equipment ..............................         3,698           3,213
Leasehold improvements ...........................           905             836
Automobiles ......................................            37              40
                                                         -------         -------
                                                          12,220          10,740
Less accumulated  depreciation and amortization...         5,416           4,104
                                                         -------         -------
                                                         $ 6,804         $ 6,636
                                                         =======         =======
</TABLE>


6. BUSINESS ACQUISITIONS

   During fiscal 1998 and 1997, the Company acquired the businesses of several
small entities similar to that of the Company through a purchase of certain
assets and service contract rights and an assumption of certain liabilities. In
addition, the Company assumed the operating leases on the facilities of some of
these entities. The individual impact of each acquired operations on the Company
was not significant. The following is a summary of the assets acquired and
liabilities assumed at estimated fair market value:

<TABLE>
<CAPTION>
                                                              MARCH 31,
                                                     --------          --------
                                                       1998              1997
                                                     --------          --------
<S>                                                       <C>          <C>     
Accounts receivable ........................         $                 $  2,454
Inventory ..................................              494             3,009
Prepaid expenses and other .................                                350
Equipment and improvements .................              196             1,340
Goodwill ...................................            1,782             7,092
                                                     --------          --------
                                                        2,472            14,245
                                                     --------          --------
Accounts payable and accrued
liabilities ................................                             (1,693)
Loan payable ...............................                               (229)
Long-term debt .............................                             (1,366)
                                                     --------          --------
                                                                         (3,288)
                                                     --------          --------
Net assets of businesses
acquired ...................................         $  2,472          $ 10,957
                                                     ========          ========
</TABLE>


   The purchases of these businesses and intangible assets were made through
initial cash payments of approximately $1,295 (1998) and $8,298 (1997) and the
issuance of $1,177 (1998) and $2,659 (1997) in notes payable (see Note 8).


7. INCOME TAXES

   The provision for (benefit from) income taxes includes the following:

<TABLE>
<CAPTION>
                                                     YEAR ENDED MARCH 31,
                                             -----------------------------------
                                               1998          1997         1996
                                             -------       -------       -------
<S>                                          <C>           <C>           <C>    
Current:
  Federal .............................      ($2,719)      $ 1,438       $ 1,117
  State ...............................                        422           317
                                             -------       -------       -------
                                              (2,719)        1,860         1,434
                                             -------       -------       -------
Deferred:
  Federal .............................                       (176)           25
  State ...............................                        (90)           24
                                             -------       -------       -------
                                                              (266)           49
                                             -------       -------       -------
   Total provision for (benefit
    from) income taxes ................      $(2,719)      $ 1,594       $ 1,483
                                             =======       =======       =======
</TABLE>


                                       33
<PAGE>   34

   Deferred income taxes for fiscal 1998 and 1997 reflect the impact of
temporary differences between the financial statement and tax bases of assets
and liabilities. The tax effects of the temporary differences that create
deferred tax assets and liabilities at March 31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                              MARCH 31,
                                                      -------------------------
                                                        1998              1997
                                                      -------           -------
<S>                                                   <C>               <C>    
Deferred tax assets (liabilities) -- current:
  Compensation-related accruals ............          $   413           $   431
  Balance sheet reserves and other .........              145               500
  State income taxes .......................             (228)               99
  Accrued severance pay ....................              670                94
  Other deferred revenue ...................             (104)
  Bad debt reserves ........................            1,633
  Inventory  reserves ......................              509
                                                      -------           -------
     Net deferred tax assets--current ......            3,038             1,124
Deferred tax assets (liabilities)--non-current:
  Depreciation and amortization ............            1,541              (499)
  Net operating losses .....................            3,499
  State deferred tax .......................             (109)
  Valuation allowance ......................           (7,969)
                                                      -------           -------
     Total net deferred tax assets .........          $     0           $   625
                                                      =======           =======
</TABLE>



   The differences between Federal income tax computed at the statutory rate and
the actual tax provisions are shown as follows:

<TABLE>
<CAPTION>
                                                      1998        1997       1996
                                                     -----        ----       ---- 
<S>                                                  <C>          <C>        <C>  
Provision (benefit) at statutory rate ........       (34.0%)      34.0%      34.0%
State income tax, net of Federal benefit .....        (5.2)        5.6        6.6
Permanent differences ........................         3.5         1.1        0.3
Valuation allowance ..........................        26.6
                                                     -----        ----       ---- 
Effective tax rate ...........................        (9.1%)      40.7%      40.9%
                                                     =====        ====       ==== 
</TABLE>

    As of March 31, 1998, the Company had net operating loss carryforwards of
approximately $8,048 for Federal income tax reporting purposes and $7,149 for
state income tax reporting purposes. These loss carryforwards expire in 2013 and
2003, respectively.


                                       34
<PAGE>   35

8. LONG-TERM DEBT AND NOTES PAYABLE

   Long-term debt at March 31, 1998 and 1997 consists of the following:

<TABLE>
<CAPTION>
                                                             1998         1997
                                                           -------      -------
<S>                                                        <C>          <C>    
Notes payable (unsecured) bearing interest at 7%,            
 due May 1, 1997 and 1998 ............................     $   250      $ 1,000
Noninterest-bearing  notes  payable (unsecured),             
 due in five annual installments of $30 commencing
 July 27, 1997 .......................................         120          150
Capital lease obligations with interest rates
 ranging from 11.9% to 16.0%, payable over
 42 months  from the start of the lease ..............         307          597
Noninterest-bearing note payable (unsecured),              
 due in annual installments over five years; commenced
 February, 1998 ......................................         450
Other ................................................          20          252
                                                           -------      -------
                                                             1,147        1,999
Less current portion .................................        (649)        (853)
                                                           -------      -------
Long-term debt .......................................     $   498      $ 1,146
                                                           =======      =======
</TABLE>

   Notes payable comprise amounts due for acquisitions of certain companies and
notes acquired as a result of acquisitions. The notes bear interest ranging from
0% to prime plus 1% and are all payable within one year from date of issue. The
imputed interest expense on the non interest-bearing notes is not material to
results of operations.

   The expected future installments under long-term debt, for the years ending
March 31, are as follows:

<TABLE>
<S>                                              <C>   
                        1999...................  $  649
                        2000...................     275
                        2001...................     143
                        2002...................      80
                                                 ------
                                                 $1,147
                                                 ======
</TABLE>

9. COMMITMENTS AND CONTINGENCIES

   The Company leases its facilities and certain equipment under noncancelable
operating leases. Certain of these leases include renewal provisions at the
option of the Company. Rent expense amounted to $1,827 (1998), $1,515 (1997) and
$1,052 (1996).

   Aggregate minimum lease commitments under noncancelable operating lease
agreements, exclusive of adjustments for taxes and other expenses, for the years
ending March 31, are as follows:

<TABLE>
<S>                                                 <C>    
                           1999...................  $ 1,919
                           2000...................    1,579
                           2001...................    1,132
                           2002...................      982
                           2003...................      903
                           Thereafter.............    4,792
                                                    -------
                                                    $11,307
                                                    =======
</TABLE>

   A lease for the Company's primary facility commenced August 1996 and expires
in January 2009. The lease is for a 76,000 square foot facility in Chatsworth,
California, which houses the corporate offices, operations for group purchasing
and operations for the equipment maintenance division. The other leases contain
renewal options, and management expects that, in the normal course of business,
such leases will be renewed or replaced by other leases upon expiration.

   The Company is also involved from time to time in various legal proceedings
incident to the normal conduct of its business. Based upon communication with
legal counsel, in the opinion of management, the disposition of all such
proceedings will not have a material adverse affect on the Company's financial
position, results of its operations or liquidity.

   A number of class action lawsuits have been recently filed in various courts
against the Company, certain of its present and former Officers and Directors
and others. No discovery on these cases has begun. In addition, the Company was
recently informed that it is subject to a formal investigation by the Securities
Exchange Commission. Management is unable to predict at this time the final
outcome of these matters or whether the resolution of these matters will
materially affect the Company's results of operations, cash flows or financial
position.


                                       35
<PAGE>   36

10. PENSION AND PROFIT SHARING PLANS

   The Company maintains profit sharing and salary deferral plans qualified
under Sections 401(a) and 401(k), respectively, of the Internal Revenue Code. As
of January 1, 1996, the employees of the Company were transferred from the
multi-employer plans to new plans, which are solely for the benefit of the
employees of the Company. The provisions of the new plans are identical to the
prior plans. These plans cover all employees who meet the eligibility
requirements of the plans. The total expenses charged to operations relating to
these plans were $1,293 (1998), $1,004 (1997) and $627 (1996).

11. SHAREHOLDERS' EQUITY

   Preferred Stock -- On January 16, 1996, the Company was reincorporated in the
state of Delaware, and in connection therewith, the shareholders and the Board
of Directors of the Company adopted and approved the authorization of 2,000,000
shares of preferred stock at a par value of $0.01 per share.

   Common Stock --On February 16, 1996, the Company closed its initial public
offering of its common stock. Of the 3,000,000 shares sold at $9 per share in
the offering, 2,000,000 were sold by the Company, and 1,000,000 were sold by
HASC and Hospital Council Coordinated Programs, Inc. (the "Selling
Shareholders"). The Company did not receive any proceeds from the sale of shares
by the Selling Shareholders. On March 6, 1996, the underwriters purchased
450,000 common shares at $9 per share to cover over-allotment. The proceeds to
the Company from the sale of 2,450,000 shares amounted to $19,950, which was net
of underwriters discounts and offering expenses of approximately $2,100.

   On November 27, 1996, the Company completed a second public offering of its
common stock. Of the 1,760,000 shares sold at $20 per share in the offering,
1,500,000 were sold by the Company and 260,000 were sold by HASC and Hospital
Council Coordinated Programs, Inc. The Company did not receive any proceeds from
the sale of shares by the Selling Shareholders. The remaining 852,000 shares
held by the Selling Shareholders at the date of the secondary were not eligible
for sale until February 16, 1998. On December 18, 1996, the underwriters
purchased 239,000 common shares at $20 per share to cover over-allotment.
Certain officers sold a total of 25,000 stock options at the same time. The
proceeds to the Company from the sale of 1,739,000 shares amounted to $32,257,
which was net of underwriters discounts and offering expenses of approximately
$2,400. At March 31, 1998, the Company had 75,000 warrants outstanding to
purchase the Company's common stock at $10.80 per share. These warrants were
issued to the underwriter in connection with the second public offering.

12. STOCK OPTION PLANS

   1995 Stock Option Plan -- The Board of Directors and shareholders of the
Company have adopted and approved a 1995 stock option plan (the "1995 Plan")
pursuant to which certain officers, directors and other key employees of the
Company are eligible to receive nonqualified options to purchase the Company's
common stock. The maximum number of shares of common stock that may be issued
pursuant to options granted under the 1995 Plan is 600,000. As of March 31,
1998, there were outstanding options to purchase 453,000 shares of common stock
(net of cancellations and sales by optionees). The weighted average exercise
price of the foregoing options is at $12.41 per share, which represents the fair
market value on the date of the grant.

   The 1995 Plan is administered by a committee of the Board composed solely of
two or more non-employee directors (the "Committee") or the Board of Directors
may approve the grant options.

   Under the 1995 Plan, key employees and nonemployee directors are eligible to
be granted options under the 1995 Plan if so selected by the Committee in its
absolute discretion. The number of shares subject to an option and the term and
conditions, including the purchase price per share of common stock subject to
each options, shall be set by the Committee; provided, however, that the
exercise price shall not be less than the fair market value of the common stock
as of the date the option is granted. No options granted under the 1995 Plan may
be exercised after the expiration of ten years from the date it was granted.
Options granted to key employees vest in accordance with the following schedule:
(i) 25% upon the date of grant, (ii) 50% upon the first anniversary of the date
of grant, (iii) 75% upon the second anniversary of the date of grant, and (iv)
100% upon the third anniversary of the date of grant. Options granted to
nonemployee directors are at all times 100% vested.

   Options granted under the 1995 Plan are generally nontransferable. In the
event of certain mergers, consolidations, a sale of all or substantially all of
the assets of the Company or a liquidation involving the Company, all granted or
awarded options will immediately vest in the optionee. At the time of the second
public offering in November 1996, each options holder was automatically vested
in 50% of the nonvested portion of any options previously awarded. The 1995 Plan
may be terminated at any time by the Board.

   At March 31, 1998, 1997 and 1996, 328,813, 377,813 and 142,500 options,
respectively, were exercisable under the 1995 Plan.


                                       36
<PAGE>   37
   1996 Stock Option Plan -- On November 7, 1996 the Board of Directors of the
Company adopted the 1996 Stock Option Plan (the "1996 Plan"), pursuant to which
certain officers, non-employee directors and other key employees of the Company
are eligible to receive nonqualified options to purchase the Company's common
stock. The 1996 Plan is administered by a committee of the Board composed solely
of two or more non-employee directors (the "Committee") or the Board of
Directors may approve the grant options. The maximum number of shares of common
stock that may be issued pursuant to options granted under the 1996 Plan is
300,000. The weighted average exercise price of the foregoing options is at
$15.46 per share, which represents the fair market value on the date of the
grant.

   Under the 1996 Plan, officers, other managerial employees ("Key Employees")
and nonemployee directors are eligible to be granted options if so selected by
the Committee or the Board of Directors in its absolute discretion. The number
of shares subject to an option and the term and conditions, including the
purchase price per share of common stock subject to each option, shall be set by
the Committee; provided, however, that the exercise price shall not be less than
the fair market value of the common stock as of the date the option is granted.
Unless otherwise determined by the Committee, options issued to Key Employees
vest 25% upon the date of grant and on each of the first, second and third
anniversary dates of the grant. Unless otherwise determined by the Committee,
options issued to non-employee directors are at all times 100% vested. No option
granted under the 1996 Plan may be exercised after the expiration of ten years
from the date it was granted.


                                       37
<PAGE>   38

   Options granted under the 1996 Plan are generally nontransferable. In
the event of certain mergers, consolidations, a sale of all or substantially all
of the assets of the Company or a liquidation involving the Company, all granted
options will immediately vest in the optionee. The 1996 Plan may be terminated
at any time by the Board.

   At March 31, 1998, 186,250 options were exercisable under the 1996 Plan.

   Information regarding these option plans for the years ended March 31, 1998,
1997 and 1996 is as follows:

<TABLE>
<CAPTION>
                                                       1998                          1997                  1996
                                           ---------------------------    --------------------------      -------
                                                      WEIGHTED-AVERAGE              WEIGHTED-AVERAGE
                                           SHARES      EXERCISE PRICE     SHARES     EXERCISE PRICE       SHARES
                                           -------    ----------------    -------    ---------------      -------
<S>                                        <C>             <C>            <C>              <C>            <C>
    Options outstanding,  beginning of     
     year..............................    492,500         12.15          465,000          9.00
      Options granted.................     265,000         15.46          125,000         21.43           465,000
      Options exercised...............         ---                        (90,000)         9.00
      Options forfeited...............     (39,500)        10.12           (7,500)         9.00
                                           -------                        -------                         -------
    Options outstanding, end of year..     718,000         13.48          492,500         12.15           465,000
                                                      ================               ===============
    Options price range, end of year..                $10.87 to $19.63               $9.00 to $26.00
    Option  price range for  exercised                                                    
    shares............................                                                    $9.00
    Options  price range for forfeited                $ 9.00 to $17.83                    $9.00
    shares............................                                              
      Options available for grant,                                                  
       end of year....................      45,000                        310,000                         135,000
                                           =======                        =======                         =======
    Weighted-average fair value of                                                  
    options granted during the year...                     $15.46                        $24.56
</TABLE>          
        

   The fair value of options at date of grant was estimated using the
Black-Scholes model with the following weighted-average assumptions:

   The following table summarizes information about fixed-price stock options
outstanding at March 31, 1998:

<TABLE>
<CAPTION>
                                     OPTIONS OUTSTANDING                         OPTIONS EXERCISABLE
                         -----------------------------------------------   ------------------------------
                           NUMBER      WEIGHTED-AVERAGE                       NUMBER
                         OUTSTANDING       REMAINING         WEIGHTED      EXERCISABLE   WEIGHTED-AVERAGE
RANGE EXERCISE PRICES    AT 3/31/98    CONTRACTUAL LIFE   EXERCISE PRICE    AT 3/31/98    EXERCISE PRICE
---------------------    -----------   ----------------   --------------   -----------   ----------------
<S>                        <C>             <C>                <C>             <C>             <C>   
$9.00 ..............       333,000         8 years            $ 9.00          258,500         $ 9.00
$11.69 to $26.00 ...       385,000         10 years           $17.30          256,563         $16.27
</TABLE>


   The fair value at date of grant for stock options granted during the years
ended March 31, 1998, 1997 and 1996 was $10.00, $17.20 and $18.23,
respectively.

<TABLE>
<CAPTION>
                                                 MARCH 31,
                                           -------------------- 
                                            1998           1997
                                           -----          ----- 
<S>                                         <C>              <C>
               Expected life years          9.69             10
               Interest rate .....          5.67%          6.85%
               Volatility ........         62.85%         25.50%
</TABLE>

   Stock-based compensation costs would not have affected the pre-tax loss for
the year ended March 31, 1998 and reduced the pre-tax income by $248 ($149 after
tax or $0.03 per share) for the year ended March 31, 1997.


                                       38
<PAGE>   39

13. BUSINESS SEGMENTS

   The Company currently provides services to the health care industry through
two principal business segments. The COHR MasterPlan provides equipment
sales and maintenance to hospitals and other health care providers. The
Purchase Connection is a group purchasing organization that negotiates pricing
for its membership with manufacturers and distributors. General corporate
expenses are classified as Corporate. Identifiable assets are those used in the
Company's operations in each segment as estimated by management based upon
factors such as revenue generated, number of personnel and space occupied by
each segment. Information concerning the Company's business segments in fiscal
1998, 1997 and 1996 is as follows:



<TABLE>
<CAPTION>
                                   EQUIPMENT      PURCHASING
                                    SERVICES        SERVICES     CORPORATE          TOTAL
                                   ---------       ---------     ---------        ---------
                                                        (IN THOUSANDS)
<S>                                  <C>               <C>        <C>               <C>     
1998
Revenues .......................   $  81,655       $  20,489                      $ 102,144
Operating income (loss) ........     (16,370)          6,275      $ (20,636)        (30,731)
Identifiable assets ............      35,082           5,659         15,843          56,584
Depreciation and amortization...       1,111             327            741           2,179
Capital expenditures ...........       1,090              43          1,046           2,179

1997
Revenues .......................   $  66,012       $  20,209                      $  86,221
Operating income (loss) ........       2,549           6,650      $  (6,073)          3,126
Identifiable assets ............      45,135           4,896         35,048          85,079
Depreciation and amortization...         876             325            163           1,364
Capital expenditures ...........       1,698             214            645           2,557

1996
Revenues .......................   $  48,160       $  18,094                      $  66,254
Operating income (loss) ........       2,409           6,941      $  (5,850)          3,500
Identifiable assets ............      19,523           3,771         21,178          44,472
Depreciation and amortization...         558             214             66             838
Capital expenditures ...........       1,182             193             52           1,427
</TABLE>


14. QUARTERLY INFORMATION 1998 AND 1997 (UNAUDITED)



<TABLE>
<CAPTION>
                                           QUARTER ENDED FISCAL YEAR 1998
                                -----------------------------------------------------
                                JUNE 30,    SEPTEMBER 30,   DECEMBER 31,     MARCH 31,
                                  1997           1997           1997           1998
                                --------       --------       --------       --------
                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                             <C>            <C>            <C>            <C>     
Net revenues .............      $ 24,811       $ 25,964       $ 24,422       $ 26,947
Gross margin .............         7,663          7,962          3,815          2,836
Operating loss ...........          (855)          (832)        (9,453)       (19,591)
Net loss .................      $   (355)      $   (399)      $(10,655)      $(15,929)
                                ========       ========       ========       ========
Net loss per share:
  Basic ..................      $  (0.06)      $  (0.06)      $  (1.66)      $  (2.48)
                                ========       ========       ========       ========
  Dilutive ...............      $  (0.06)      $  (0.06)      $  (1.66)      $  (2.48)
                                ========       ========       ========       ========
</TABLE>


                                       39
<PAGE>   40

   For the fourth quarter ended March 31, 1998, the Company reported a net 
loss of $15.9 million, including pre-tax special charges of $7.3 million. The
loss before special charges include write down of $2.5 million in inventory,
$1.0 million additional bad debt provisions and continuing losses at the
Company's MasterPlan operations. As discussed in Note 3, special charges
recorded in the fourth quarter included additional goodwill and other asset
write-offs and continuing legal and accounting costs incurred during the fourth
quarter relating to a special review of the Company's operations conducted at
the direction of the Board of Directors.

<TABLE>
<CAPTION>
                                          QUARTER ENDED FISCAL YEAR 1997
                                --------------------------------------------------
                                JUNE 30,    SEPTEMBER 30,  DECEMBER 31,   MARCH 31,
                                  1996          1996          1996          1997
                                --------      --------      --------      --------
                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                             <C>           <C>           <C>           <C>     
Net revenues ................   $ 20,465      $ 21,205      $ 20,153      $ 24,398
Gross margin ................      7,346         7,848         6,620         7,056
Operating income (loss) .....      1,328         1,725           762          (689)
Net income (loss) ...........   $    931      $  1,064      $    574      $   (243)
                                ========      ========      ========      ========
Net income (loss) per share:
  Basic .....................   $   0.20      $   0.23      $   0.11      $  (0.04)
                                ========      ========      ========      ========
  Dilutive ..................   $   0.20      $   0.22      $   0.10      $  (0.04) 
                                ========      ========      ========      ========
</TABLE>


                                       40
<PAGE>   41

                                   SCHEDULE V

                                   COHR, INC.

                        VALUATION AND QUALIFYING ACCOUNTS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                      BALANCE AT     CHARGED TO     CHARGED TO                   BALANCE AT
                                      BEGINNING       COSTS AND       OTHER                          END
              DESCRIPTION             OF PERIOD       EXPENSES       ACCOUNTS    DEDUCTIONS(1)    OF PERIOD
              -----------              -------        -------        -------        -------       ------- 
<S>                                    <C>            <C>            <C>            <C>           <C>     
Allowance for Doubtful Accounts:
  Year Ended March 31, 1996 ....       $  (773)       $  (205)                      $   143       $  (835)
  Year Ended March 31, 1997 ....       $  (835)       $  (600)       $   (68)       $    13       $(1,490)
  Year Ended March 31, 1998 ....       $(1,490)       $(5,614)                      $ 2,872       $(4,232)
</TABLE>



(1) Represents accounts receivable written off against the allowance for
doubtful accounts.


                                       41
<PAGE>   42

                                   SIGNATURES

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

Dated: June 29, 1998

                                       By:
                                           -------------------------------------
                                           President and Chief Executive Officer

   Pursuant to the requirement 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 indicated.

<TABLE>
<CAPTION>
                    NAME                                       TITLE                        DATE

<S>                                                <C>                                  <C> 
---------------------------------------------             President, Chief              June 29, 1998
                Raymond List                       Executive Officer and Director
                                                   (Principal Executive Officer)

---------------------------------------------              Executive Vice               June 29, 1998
               Daniel F. Clark                        President, Finance and
                                                      Chief Financial Officer
                                                     (Principal Accounting and
                                                         Financial Officer)

---------------------------------------------                 Director                  June 29, 1998
              Lynn P. Reitnouer

---------------------------------------------                 Director                  June 29, 1998
             Stephen W. Gamble

                                                              Director                  June 29, 1998
--------------------------------------------- 
              Louis A. Simpson

---------------------------------------------                 Director                  June 29, 1998
             Ronnie J. Messenger

---------------------------------------------                 Director                  June 29, 1998
             Frederick C. Meyer

---------------------------------------------                 Director                  June 29, 1998
               James D. Barber
</TABLE>


                                       42
<PAGE>   43

                           COHR INC. AND SUBSIDIARIES

                               INDEX TO EXHIBITS

ITEM (14)

<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                                        DESCRIPTION
<S>       <C>
  3.1*    Certificate of Incorporation of Registrant

  3.2*    By-laws of Registrant

  4.1*    Form of Warrant to be issued to the Representatives of the Underwriters

  4.2*    Form of Registration Rights Agreement between Registrant, Healthcare
          Association of Southern California ("HASC") and Hospital Council
          Coordinated Programs, Inc.

  4.3*    Specimen Stock Certificate

 10.1*    Form of Indemnity Agreement entered into between Registrant and executive
          officers and directors

 10.2*    Employment Agreement between Registrant and Paul Chopra, effective
          January 1, 1996 10.4* Form of 1995 Stock Option Plan of Registrant and
          Form of Nonstatutory Option Grant Under the Plan

 10.8**   Office Lease between TCEP II properties and Registrant dated May 8,
          1996

 10.9***  1996 Stock Option Plan of Registrant, as amended and restated on June
          17, 1997

 10.10    Form of Nonstatutory Option Grant Under the 1996 Stock Option Plan of
          Registrant

 10.11    Employment Agreement between Registrant and David Roesler

 10.12    Employment Agreement between Registrant and Ed Gravell

 10.13    Employment Agreement between Registrant and Aviva Truesdell

 10.14    Employment Agreement between Registrant and Joe Strange

 10.15    Employment Agreement between Registrant and Daniel Clark

 27.1     Financial Data Schedule

 99.1     Press Release dated June 2, 1998

 99.2     Press Release dated June 11, 1998
</TABLE>

----------

   * Incorporated by reference from Registrant's Statement on Form S-1,
     Registration No. 33-80635.

  ** Incorporated by reference from Registrant's Annual Report for the fiscal
     year ended March 31, 1996 on Form 10-K.

 *** Incorporated by reference from Registrant's Quarterly Report for the fiscal
     quarter ended June 30, 1997 on Form 10-Q.

                                       43