<PAGE>

                                UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                  FORM 10-Q

         [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                       SECURITIES EXCHANGE ACT OF 1934
                FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1999
                                      OR
         [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                       SECURITIES EXCHANGE ACT OF 1934
           FOR THE TRANSITION PERIOD FROM __________ TO __________

                        COMMISSION FILE NUMBER 0-19393


                             LIFEMARK CORPORATION
            (Exact name of registrant as specified in its charter)


            DELAWARE                                        36-3338328
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)


                            7600 NORTH 16TH STREET
                                  SUITE 150
                            PHOENIX, ARIZONA 85020
                   (Address of principal executive offices)
                                  (Zip Code)

                                 602-331-5100
             (Registrant's telephone number, including area code)

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

There were 4,808,068 shares of common stock outstanding as of October 1, 1999.
<PAGE>

                              TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----


Part I      FINANCIAL INFORMATION


   Item 1.  Financial Statements


            Consolidated Balance Sheets......................................3


            Consolidated Statements of Income................................4


            Consolidated Statements of Cash Flows............................5


            Notes to Unaudited Consolidated Financial Statements...........6-8


   Item 2.  Management's Discussion and Analysis of Financial Condition
            and Results of Operations.....................................8-12


Part II     OTHER INFORMATION


   Item 4.  Annual Meeting of Stockholders..................................12


   Item 6.  Exhibits and Reports on Form 8-K................................12

                                       2

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                                    LIFEMARK CORPORATION
                                 CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                               AUGUST 31,      MAY 31,
                                                                 1999           1999
                                                             ------------   ------------
<S>                                                          <C>            <C>
                                                              (UNAUDITED)
ASSETS
------
Current Assets:
  Cash and cash equivalents, including restricted
    cash of $10,254,000 and $9,713,000, respectively         $ 13,862,000   $ 13,792,000
  Short-term investments                                                -        501,000
  Accounts and notes receivable and unbilled services, net      5,747,000      5,886,000
  Deferred income taxes, net                                    1,216,000      1,213,000
  Prepaid expenses and other current assets                       619,000        882,000
                                                             ------------   ------------
    Total current assets                                       21,444,000     22,274,000

Related party notes receivable                                    565,000        568,000
Property and equipment, net                                     4,519,000      4,205,000
Performance bonds                                               4,423,000      4,203,000
Goodwill, net                                                   2,370,000      2,462,000
Other assets                                                    1,004,000      1,108,000
                                                             ------------   ------------
                                                             $ 34,325,000   $ 34,820,000
                                                             ============   ============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
  Accounts payable                                           $    480,000   $    659,000
  Accrued medical claims                                        8,461,000      8,662,000
  Risk pool payable                                               667,000        691,000
  Related party risk pool payable                                 175,000        152,000
  Accrued compensation                                          1,971,000      2,464,000
  Other accrued expenses                                        1,607,000      1,750,000
  Current portion of related party interest payable               788,000        710,000
  Current portion of long-term debt                                37,000         23,000
                                                             ------------   ------------
    Total current liabilities                                  14,186,000     15,111,000

Long-term debt                                                    445,000        211,000
Related party long-term debt                                    3,453,000      3,440,000
Deferred income taxes, net                                        124,000        155,000
                                                             ------------   ------------
    Total liabilities                                          18,208,000     18,917,000
                                                             ------------   ------------

Commitments and Contingencies                                           -              -

Stockholders' Equity:
  Common stock, $0.01 par value
    Authorized - 10,000,000 shares
    Issued and outstanding 4,808,000 shares                        48,000         48,000
  Capital in excess of par value                               16,148,000     16,148,000
  Accumulated deficit                                             (79,000)      (293,000)
                                                             ------------   ------------
    Total stockholders' equity                                 16,117,000     15,903,000
                                                             ------------   ------------
                                                             $ 34,325,000   $ 34,820,000
                                                             ============   ============
</TABLE>

              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

                                       3
<PAGE>

                              LIFEMARK CORPORATION
                       CONSOLIDATED STATEMENTS OF INCOME
                                  (UNAUDITED)


                                                  THREE MONTHS ENDED
                                           --------------------------------
                                            AUGUST 31,          AUGUST 31,
                                               1999                1998
                                           ------------        ------------

Revenues                                   $ 23,609,000        $ 19,244,000
                                           ------------        ------------

Direct cost of operations                    17,850,000          14,300,000
Marketing, sales and administrative           5,535,000           4,387,000
                                           ------------        ------------

Total costs and expenses                     23,385,000          18,687,000
                                           ------------        ------------

Operating income                                224,000             557,000
                                           ------------        ------------

Interest income                                 255,000             253,000
Interest expense                               (100,000)            (90,000)
                                           ------------        ------------

   Net interest income                          155,000             163,000
                                           ------------        ------------

Income before income taxes                      379,000             720,000

Provision for income taxes                      165,000             298,000
                                           ------------        ------------

Net income                                 $    214,000        $    422,000
                                           ============        ============


Net income per share - basic               $       0.04        $       0.09
                                           ============        ============

Weighted average common shares
   outstanding - basic                        4,808,000           4,694,000
                                           ============        ============


Net income per share - assuming dilution   $       0.04        $       0.08
                                           ============        ============


Weighted average common shares
   outstanding - assuming dilution            4,865,000           6,044,000
                                           ============        ============

        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

                                       4
<PAGE>

                              LIFEMARK CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

                                                        THREE MONTHS ENDED
                                                   --------------------------
                                                      AUGUST        AUGUST
                                                        31,           31,
                                                       1999          1998
                                                   -----------    -----------
Cash flows from operating activities:
   Net income                                      $   214,000    $   422,000
   Adjustments to reconcile net income to net
      cash provided (used) by operating activities:
   Bad debt expense                                      7,000              -
   Depreciation and amortization                       536,000        560,000
   Loss on sale of property and equipment                7,000              -
   Deferred income taxes                               (34,000)         1,000
   Interest on long-term debt                           78,000         41,000
   Changes in assets and liabilities:
      Accounts receivable and unbilled services        132,000     (1,454,000)
      Prepaid expenses and other current assets        263,000        (55,000)
      Accounts payable                                (179,000)      (330,000)
      Accrued medical claims                          (201,000)       825,000
      Risk pool payable                                (24,000)       (21,000)
      Related party risk pool payable                   23,000         (6,000)
      Accrued compensation                            (493,000)      (214,000)
      Accrued expenses                                (143,000)       (14,000)
      Other assets                                     104,000       (134,000)
                                                   -----------    -----------
Net cash provided (used) by operating activities       290,000       (379,000)
                                                   -----------    -----------
Cash flows from investing activities:
   Purchase of property and equipment                 (767,000)      (265,000)
   Proceeds from sale of property and equipment         12,000         32,000
   Proceeds from maturity/sale of short-term
      investments                                      501,000          3,000
   Proceeds from related party notes receivable          3,000        131,000
   Purchases of assets securing performance bond      (220,000)      (100,000)
                                                   -----------    -----------
Net cash used in investing activities                 (471,000)      (199,000)
                                                   -----------    -----------

Cash flows from financing activities:
   Proceeds from (payments on) long-term debt          251,000       (167,000)
   Proceeds from common stock issuance                       -        111,000
                                                   -----------    -----------
Net cash provided (used) by financing activities       251,000        (56,000)
                                                   -----------    -----------

Net increase in cash and cash equivalents               70,000       (634,000)
Cash and cash equivalents, beginning of period      13,792,000     12,764,000
                                                   -----------    -----------
Cash and cash equivalents, end of period           $13,862,000    $12,130,000
                                                   ===========    ===========

        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

                                       5
<PAGE>

                              LIFEMARK CORPORATION
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS
---------------------------

In management's  opinion,  the  accompanying  unaudited  consolidated  financial
statements  contain  all  adjustments   (consisting  of  only  normal  recurring
adjustments)  considered  necessary for a fair  statement of the results for the
interim periods presented. The results of operations for the period ended August
31, 1999 are not  necessarily  indicative  of the results to be expected for the
full year.  The  interim  consolidated  financial  statements  should be read in
conjunction with the Lifemark Corporation ("Lifemark" or "Company") consolidated
financial  statements and notes thereto  included in the Company's Form 10-K for
the year ended May 31, 1999.

NOTE 2 - NET INCOME PER SHARE
-----------------------------
Basic net income per share is computed by  dividing  net income by the  weighted
average number of common shares  outstanding  during each period. Net income per
share  assuming  dilution is computed  by  dividing  net income by the  weighted
average  number of common  shares  outstanding  during the period  after  giving
effect to dilutive  stock options and warrants and adjusted for dilutive  common
shares assumed to be issued on conversion of the Company's convertible loans.

The following is the  computation  of the  reconciliation  of the numerators and
denominators  of net income  per common  share - basic and net income per common
share assuming  dilution in accordance  with  Statement of Financial  Accounting
Standards No. 128, "Earnings Per Share".
<TABLE>
<CAPTION>

                                                                          THREE MONTHS ENDED
                                            -----------------------------------------------------------------------------
                                                       AUGUST 31, 1999                          AUGUST 31, 1998
                                            --------------------------------------  -------------------------------------

                                               Income        Shares      Per Share    Income        Shares      Per Share
                                             (Numerator)  (Denominator)    Amount   (Numerator)  (Denominator)    Amount
                                            ------------  -------------  ---------  -----------  -------------  ---------
<S>                                          <C>          <C>            <C>        <C>          <C>            <C>
Net income per common share:
  Income available to common stockholders   $    214,000      4,808,000  $    0.04  $   422,000      4,694,000  $    0.09
Effect of dilutive securities:
  Stock options and warrants                           -         57,000                       -        494,000
  Convertible notes                                    -              -                  40,000        856,000
                                            ------------  -------------             -----------  -------------

Net income per common share,
  assuming dilution:
  Income available to common
    stockholders and assumed conversions    $    214,000      4,865,000  $    0.04  $   462,000      6,044,000  $    0.08
                                            ============  =============  =========  ===========  =============  =========
</TABLE>

                                       6

<PAGE>

NOTE 3 - RESTRICTIONS ON FUND TRANSFERS
---------------------------------------

Certain  of  the  Company's   operating   subsidiaries   are  subject  to  state
regulations,  which  require  compliance  with  certain  net worth,  reserve and
deposit requirements.  To the extent the operating subsidiaries must comply with
these regulations, they may not have the financial flexibility to transfer funds
to  the  parent  organization,  Lifemark.  Net  assets  of  subsidiaries  (after
inter-company eliminations) which, at August 31, 1999, may not be transferred to
Lifemark  by  subsidiaries  in the form of  loans,  advances  or cash  dividends
without the consent of a third party are referred to as "Restricted Net Assets".
Total Restricted Net Assets of these operating  subsidiaries were $10,391,000 at
August 31,  1999,  with  deposit and reserve  requirements  (performance  bonds)
representing $4,423,000 of the Restricted Net Assets and net worth requirements,
in excess of  deposit  and  reserve  requirements,  representing  the  remaining
$5,968,000.

NOTE 4 - BUSINESS SEGMENTS
--------------------------

The Company's business segments consist of management  services,  long-term care
health services and acute care health services.  The management services segment
is engaged in the business of  administering  risk-based  managed care plans and
programs in seven states. Long-term care health services is comprised of Ventana
Health Systems, Inc. ("Ventana"), which is a long-term care Medicaid health plan
operating  in seven  counties in Arizona,  and  Lifemark  At Home,  Inc.,  which
provides in-home personal,  respite,  companionship  and homemaking  services to
recipients in Arizona.  Acute care health  services  consists of Arizona  Health
Concepts,  Inc. ("AHC"),  an acute care Medicaid health plan currently operating
in two counties in Arizona.

Information concerning operations by business segment follows:
<TABLE>
<CAPTION>


                                                   For the Three Months Ended August 31, 1999
                                         ---------------------------------------------------------------

                                           Management    Long-Term Care     Acute Care
                                            Services     Health Services  Health Services      Totals
                                         -------------   --------------   --------------    ------------
<S>                                      <C>             <C>              <C>               <C>
Total revenues from reportable segments  $  12,511,000   $    8,085,000   $    4,764,000    $ 25,360,000
Intersegment revenues                       (1,399,000)        (352,000)               -      (1,751,000)
                                         -------------   --------------   --------------    ------------
  Total consolidated revenues            $  11,112,000   $    7,733,000   $    4,764,000    $ 23,609,000
                                         =============   ==============   ==============    ============

Interest income                          $      64,000   $      130,000   $       64,000    $    258,000
Intersegment interest income                         -           (3,000)               -          (3,000)
Interest expense                              (103,000)               -                -        (103,000)
Intersegment interest expense                    3,000                -                -           3,000
                                         -------------   --------------   --------------    ------------
  Net interest income (expense)          $     (36,000)  $      127,000   $       64,000    $    155,000
                                         =============   ==============   ==============    ============

Depreciation and amortization            $     536,000   $            -   $            -    $    536,000
                                         =============   ==============   ==============    ============
Segment income (loss) before taxes       $     199,000   $      362,000   $     (182,000)   $    379,000
Income tax (expense) benefit                   (96,000)        (138,000)          69,000        (165,000)
                                         -------------   --------------   --------------    ------------
  Net income                             $     103,000   $      224,000   $     (113,000)   $    214,000
                                         =============   ==============   ==============    ============

Expenditures for capital assets          $     767,000   $            -   $            -    $    767,000
                                         =============   ==============   ==============    ============

Segment total assets                     $  24,560,000   $   12,798,000   $    6,416,000    $ 43,774,000
Intersegment assets                         (8,935,000)        (210,000)        (304,000)     (9,449,000)
                                         -------------   --------------   --------------    ------------
  Total assets                           $  15,625,000   $   12,588,000   $    6,112,000    $ 34,325,000
                                         =============   ==============   ==============    ============
</TABLE>

                                       7
<PAGE>


<TABLE>
<CAPTION>
                                                  For the Three Months Ended August 31, 1999
                                         ---------------------------------------------------------------

                                           Management    Long-Term Care     Acute Care
                                            Services     Health Services  Health Services      Totals
                                         -------------   --------------   --------------    ------------
<S>                                      <C>             <C>              <C>               <C>

Total revenues from reportable segments  $   9,855,000   $    6,880,000   $    3,931,000    $ 20,666,000
Intersegment revenues                       (1,152,000)        (270,000)               -      (1,422,000)
                                         -------------   --------------   --------------    ------------
  Total consolidated revenues            $   8,703,000   $    6,610,000   $    3,931,000    $ 19,244,000
                                         =============   ==============   ==============    ============

Interest income                          $      49,000   $      121,000   $       93,000    $    263,000
Intersegment interest income                         -          (10,000)               -         (10,000)
Interest expense                              (100,000)               -                -        (100,000)
Intersegment interest expense                   10,000                -                -          10,000
                                         -------------   --------------   --------------    ------------
  Net interest income (expense)          $     (41,000)  $      111,000   $       93,000    $    163,000
                                         =============   ==============   ==============    ============

Depreciation and amortization            $     560,000   $            -   $            -    $    560,000
                                         =============   ==============   ==============    ============

Segment income before taxes              $      99,000   $      552,000   $       69,000    $    720,000
Income tax expense                             (57,000)        (214,000)         (27,000)       (298,000)
                                         -------------   --------------   --------------    ------------
  Net income                             $      42,000   $      338,000   $       42,000    $    422,000
                                         =============   ==============   ==============    ============

Expenditures for capital assets          $     265,000   $            -   $            -    $    265,000
                                         =============   ==============   ==============    ============

Segment total assets                     $  21,953,000   $   11,008,000   $    7,947,000    $ 40,908,000
Intersegment assets                         (7,901,000)        (572,000)         (33,000)     (8,506,000)
                                         -------------   --------------   --------------    ------------
  Total assets                           $  14,052,000   $   10,436,000   $    7,914,000    $ 32,402,000
                                         =============   ==============   ==============    ============
</TABLE>


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

INTRODUCTION

Lifemark  Corporation  ("Lifemark"  or the  "Company"),  formerly  Managed  Care
Solutions, Inc., is involved in a variety of health care programs, many of which
serve  indigent  and  Medicaid  populations.  Two  subsidiaries  of the Company,
Ventana Health  Systems,  Inc.  ("Ventana")  and Arizona Health  Concepts,  Inc.
("AHC"),  derive  substantially all of their revenues through contracts with the
Arizona  Health  Care Cost  Containment  System  Administration  ("AHCCCSA")  to
provide specified long-term and primary care health services,  respectively,  to
qualified members.  The contract periods expire September 30, 2000 and September
30, 2002 for Ventana and AHC,  respectively.  Each  contract  provides for fixed
monthly premiums, based on negotiated per capita enrollee rates. Ventana and AHC
subcontract  with  nursing  homes,  hospitals,  physicians,  and  other  medical
providers within Arizona to care for members.

The  Company  also  provides  contract  management  services to county and state
governmental  units and other  health care  organizations.  The Company has nine
contracts  with  multi-year  terms  that  contemplate  continued  renewals,  for
services, which expire at various dates through the year 2002.

                                       8

<PAGE>


RESULTS OF OPERATIONS

Consolidated revenues for the three-month period ended August 31, 1999 increased
23% over the same period of the  previous  year to  $23,609,000.  Direct cost of
operations  increased 25% over the comparable period of the previous fiscal year
to  $17,850,000.  Direct cost of operations,  as a percentage of revenue was 76%
for the three-month  period ended August 31, 1999 versus 74% for the same period
of the prior fiscal year. The increase in both revenues and direct  expenses was
due to growth in enrollment  in certain  plans covered by management  contracts,
coupled with growth in membership of Ventana and AHC.

MANAGEMENT  SERVICES.  Revenues for the three-month period ended August 31, 1999
related to fees generated from management  services of health plans and programs
increased 28% to $11,112,000  from  $8,703,000 for the comparable  period of the
prior fiscal year. The increase is primarily due to enrollment  increases in the
Community  Choice  Michigan,  Rio Grande HMO and AlohaCare plans, as well as the
acquisition of AdviNet,  Inc. in March 1999. The Company also  renegotiated  its
administrative  service  agreement  with  AlohaCare.   The  one-year  agreement,
effective August 1, 1999, provides for higher revenues for Lifemark.

Direct cost of operations for the three-month  periods ended August 31, 1999 and
1998 included $6,805,000 and $5,345,000, respectively, related to fees generated
from  management  services  of health  plans and  programs.  The direct  cost of
operations for management  services as a percentage of related revenue  remained
constant at 61% for the three-month periods ended August 31, 1999 and 1998.

LONG-TERM  CARE HEALTH  SERVICES.  Long-term  care health or personal  services,
which  consist of  operations  of Ventana and Lifemark At Home,  Inc.  (formerly
Community  Health USA, Inc.),  generated  revenues of $7,733,000 and $6,610,000,
for the three-month periods ended August 31, 1999 and 1998, respectively,  which
represents a 17% increase. The increase in fiscal year 2000 is primarily related
to an increase in average  monthly  membership  for Ventana  from  approximately
1,200 for the three-month  period ended August 31, 1998 to  approximately  1,400
for the  three-month  period  ended  August 31, 1999,  coupled  with an  average
increase of  approximately  4% in the  capitation  rate received by Ventana from
AHCCCSA.

Direct cost of  operations  related to  long-term  care health  services for the
three-month  periods  ended  August  31,  1999  and  1998  were  $6,543,000  and
$5,387,000,  respectively.  The primary reason for the increase is the growth in
membership  in Ventana.  Direct cost of  operations  as a percentage  of related
revenue were 85% and 82% for the  three-month  periods ended August 31, 1999 and
1998,  respectively.  The increase is  primarily  due to a  significant  rise in
pharmacy costs for Ventana resulting from a terminated  capitation contract with
a  pharmaceutical  company  and an  increase  in  hospital  and adult  care home
expenses as a result of current  patient mix. The Company is unable to determine
if future patient mixes would significantly  differ from the current patient mix
to yield lower operating costs.

ACUTE CARE HEALTH SERVICES.  Acute care health  services,  which consists of the
operations of AHC,  generated an increase in revenues of 21% to  $4,764,000  for
the three-month  period ended August 31, 1999 from $3,931,000 for the comparable
prior year  period.  The  increase  is due to an  increase  in  average  monthly
membership from approximately  8,300 to 9,600 for the three-month  periods ended
August  31,  1998 and 1999,  respectively,  along with an  average  increase  of
approximately 6% in the capitation rate received by AHC from AHCCCSA.

Direct  cost of  operations  related  to  acute  care  health  services  for the
three-month  periods  ended  August  31,  1999  and  1998  were  $4,503,000  and
$3,582,000, respectively. The principal reason for the increase is the growth in
enrollment for AHC. Direct cost of operations as a percentage of related revenue
were 95% and 91% for the  three-month  periods  ended  August 31, 1999 and 1998,
respectively.  The increase is due to higher utilization of health care services
by AHC members,  specifically for inpatient  services.  The company is unable to
determine if future  utilization  of healthcare  services  would differ from the
current utilization to yield lower operating costs.

MARKETING,  SALES  AND  ADMINISTRATIVE.   Marketing,  sales  and  administrative
expenses as a percentage  of  consolidated  revenue for the  three-month  period
ended August 31, 1999 remained at 23%,  which is consistent  with the comparable
period of the prior year. Marketing,  sales and administrative  expenses for the
three-month    period     ended    August  31,  1999   include   the  obligation

                                       9
<PAGE>

to make severance payments pursuant to the terms of an employment agreement with
Michael D. Hernandez, the Company's former Chief Executive Officer. In addition,
marketing,  sales and administrative expenses include consulting fees related to
management reorganization and process redesign intended to improve the Company's
service delivery system. The Company does not anticipate  significant consulting
fees related to this initiative in the future.

INTEREST  INCOME.    Interest  income  for   the   three-month    period   ended
August 31, 1999 was $255,000 versus $253,000 for the same period of the previous
year.

INTEREST EXPENSE. Interest expense was $100,000 for the three-month period ended
August 31, 1999 as compared  to $90,000 for the  comparable  period of the prior
fiscal year.  Interest expense is primarily  attributable to outstanding secured
convertible term loans in an aggregate  principal amount of $3,300,000 issued by
the Company in October 1996,  along with an interim funding  agreement  obtained
during the fourth quarter of fiscal year 1999.

INCOME  TAXES.  The  income  tax  expense  was  $165,000  and  $298,000  for the
three-month periods ended August 31, 1999 and 1998, respectively.  The effective
tax rates were 44% and 41%.  These  rates  were higher than  the statutory rates
for the respective periods, primarily due to the amortization  of non-deductible
goodwill expenses.

NET INCOME.  Net income for the  three-month  periods  ended August 31, 1999 and
1998 was  $214,000  and  $422,000,  respectively.  The  primary  reason  for the
decrease in profitability are the increases in direct expenses of the  long-term
care and acute care health service segments.

LIQUIDITY AND CAPITAL RESOURCES

The  Company's  cash  and  cash   equivalents   increased  to  $13,862,000  from
$12,130,000  for the  corresponding  period of the prior fiscal year.  Operating
activities  generated  $290,000 for the three-month period ended August 31, 1999
versus  using  $379,000  in the same period of the  previous  fiscal  year.  The
primary  source of cash for the  three-month  period  ended  August 31, 1999 was
earnings before  non-cash  charges  partially  offset by the decrease in accrued
compensation.  The primary use of cash for the  three-month  period ended August
31, 1998 was an increase in accounts  receivable as a result of delay in receipt
of management fees from the State of Indiana.

Investing  activities used $471,000 for the three-month  period ended August 31,
1999 as compared to $199,000  for the same period of the  previous  fiscal year.
During the  three-month  period ended August 31, 1999, cash was used to purchase
$767,000 of fixed assets and to increase  assets  securing  performance bonds by
$220,000,  partially  offset  by  cash generated from the maturity of short-term
investments of $501,000.  The primary use of funds during the three-month period
ended  August 31, 1998 was the purchase of $265,000 of fixed  assets,  partially
offset by payments received on notes receivable.

Financing  activities generated $251,000 for the three-month period ended August
31, 1999 versus  using  $56,000  for the same period of the prior  fiscal  year.
Funds  received  pursuant to an interim  funding  agreement with a bank were the
primary source of cash for the current period.  For the three-month period ended
August 31, 1998,  principal  payments on long-term  debt were the primary use of
funds,  partially offset by proceeds received from common stock issuance related
to stock option exercises.

Certain  of  the  Company's   operating   subsidiaries   are  subject  to  state
regulations,  which  require  compliance  with net worth,  reserve  and  deposit
requirements.  To the extent the operating  subsidiaries  must comply with these
regulations,  they may not have the financial  flexibility  to transfer funds to
Lifemark.  Net assets of subsidiaries (after inter-company  eliminations) which,
at August 31, 1999, may not be transferred  to Lifemark by  subsidiaries  in the
form of loans,  advances or cash dividends  without the consent of a third party
are referred to as "Restricted Net Assets". Total Restricted Net Assets of these
operating  subsidiaries  was  $10,391,000  at August 31, 1999,  with deposit and
reserve  requirements   (performance  bonds)  representing   $4,423,000  of  the
Restricted  Net Assets  and net worth  requirements,  in excess of  deposit  and
reserve requirements,  representing the remaining $5,968,000.  Funds provided by
Ventana to Lifemark under loan  agreements  totaled  $77,000 at August 31, 1999.
Ventana  provided  these  loans in the  normal  course of  operations.  All such
agreements  were  pre-approved  as  required  by the  Arizona  Health  Care Cost
Containment System Administration.

                                       10

<PAGE>

The Company believes that its existing capital resources and cash flow generated
from  future  operations  will  enable  it to  maintain  its  current  level  of
operations and its planned operations, including capital expenditures, in fiscal
year 2000.


YEAR 2000 ISSUES

Many  existing  computer  systems  may not  recognize  and  process  dates after
December 31, 1999.  Therefore,  certain  hardware and software,  including  that
utilized by the Company, may have to be modified and/or reprogrammed to properly
function in the year 2000 and beyond.  The  Company's  year 2000  committee  has
assessed all internal-use hardware, software, non-information systems equipment,
procedures and business  processes.  An inventory of the Company's  hardware and
software has been  obtained.  There were several  computer  systems that did not
properly  recognize the year 2000.  Therefore,  the Company has replaced several
older  critical  systems  and plans to modify  the  remaining  systems  prior to
December 31,1999. The year 2000 committee continues to research year 2000 issues
with vendors, clients and state agencies.

The  Company's  operations  continue  to rely on  automated  systems and systems
applications.  The internally  developed software ("MC1") used to process claims
and pay  providers is in the final stages of testing.  To date,  the Company has
certified  the  MC1  system  for  five  health  plans  as year  2000  compliant.
Furthermore,  the  Company  has tested  its  hardware  and is in the  process of
testing software to assess the  representations  of Oracle Corporation and other
vendors, who claim their hardware and software to be year 2000 compliant.

The  Company  realizes  there are outside  influences  relative to its year 2000
efforts,  over  which it has  little  or no  control.  The year  2000  committee
continues  to  communicate  with  State  agencies  to  assess  their  year  2000
readiness.  The  Company has been  notified by certain  states that they may not
assess all of their year 2000 problems  prior to December 31, 1999.  The Company
is unable to determine  the effect,  if any,  that such problems may have on the
Company.  However,  the Company  will  attempt to  minimize  the impact of other
parties' failure to resolve year 2000 problems.

The Company has spent  approximately  $114,000 to date  preparing  and analyzing
year  2000  issues.  It  anticipates  year  2000  costs to  reach  approximately
$250,000. There can be no assurances that the Company's current systems or those
acquired in the future do not or will not contain  undetected defects associated
with year 2000 issues that may result in material costs to the Company.

The Company is currently  in the process of  finalizing  a  contingency  plan to
address  issues  that may  arise  due to the lack of  systems  being  year  2000
compliant.  The contingency plan encompasses the Company's year 2000 efforts and
will contain general procedures to deal with year 2000 problems.

Although the Company  expects its critical  systems to be compliant by year-end,
there is no guarantee that these results will be achieved. A worst case scenario
might include one or more of the Company's systems being non-compliant.  Such an
event could result in a material disruption to the Company's operations.


FORWARD-LOOKING INFORMATION

This  report   contains  both   historical  and   forward-looking   information.
Forward-looking  statements  include,  but are not limited to, discussion of the
Company's strategic goals, new contracts,  possible expansion of existing plans,
expected increase in certain expenses,  and cash flow. These statements speak of
the  Company's  plans,  goals  or  expectations  and  refer  to  estimates.  The
forward-looking   statements  may  be   significantly   impacted  by  risks  and
uncertainties,  and are made  pursuant  to the  safe  harbor  provisions  of the
Private  Securities  Litigation Reform Act of 1995 (the "Reform Act"). There can
be no assurance that anticipated  future results will be achieved because actual
results  may differ  materially  from  those  projected  in the  forward-looking
statements.  Readers are cautioned that a number of factors, which are described
herein,  could adversely  affect the Company's  ability to obtain these results.
These include the effects of either federal or state health care reform or other
legislation;  changes  in  reimbursement  system  trends,  the  ability  of care
providers  (including  physician  practice  management  groups)  to comply  with

                                       11

<PAGE>

current  contract  terms;  and renewal of the Company's  contracts  with various
state and other governmental entities.  Such factors also include the effects of
other general  business  conditions,  including  but not limited to,  government
regulation,   competition  and  general  economic  conditions.   The  cautionary
statements  made  pursuant to the Reform Act herein and elsewhere by the Company
should not be construed as exhaustive or as any admission regarding the adequacy
of  disclosures  made by the Company prior to the  effective  date of the Reform
Act. The Company  cannot always  predict what factors would cause actual results
to differ materially from those indicated by the forward-looking  statements. In
addition,  readers  are urged to  consider  statements  that  include  the terms
"believes", "belief", "expects", "plans", "objectives", "anticipates", "intends"
or the like to be uncertain and forward-looking.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to the risk of fluctuating interest rates in the ordinary
course of business on certain  assets and  liabilities  including  cash and cash
equivalents,  short-term  investments  and long-term  debt. The Company does not
expect changes in interest  rates to have a significant  effect on the Company's
operations, cash flow or financial position.


PART II - OTHER INFORMATION


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

The following  matters were  submitted to a vote of security  holders during the
Company's Annual Meeting of Stockholders held September 13, 1999:

DESCRIPTION OF MATTER                Votes Cast For       Authority Withheld
                                     --------------       ------------------
ELECTION OF DIRECTORS

Rhonda E. Brede                         4,280,475              17,337
Richard C. Jelinek                      4,280,408              17,404
John G. Lingenfelter                    4,280,569              17,243
William G. Brown                        4,280,541              17,271
Henry M. Kaldenbaugh                    4,280,641              17,171
Risa Lavizzo-Mourey                     4,280,641              17,171


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits

               (27) Financial data schedule.

          (b)  Reports on Form 8-K

               None

                                       12
<PAGE>


SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                        LIFEMARK CORPORATION

                        By:    /S/ RHONDA E. BREDE
                               ----------------------------------------------
                               Rhonda E. Brede, President and Chief Operating
                               Officer
                               (Principal Executive Officer)

                        By:    /S/ MICHAEL J. KENNEDY
                               --------------------------------------------
                               Michael J. Kennedy, Vice President and Chief
                               Financial Officer
                               (Principal Financial and Accounting Officer)

                        Dated: October 12, 1999

                                       13
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