<PAGE>

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

                                    FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                            ________________________

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


                   For the Fiscal Year Ended December 31, 2000


                           Commission File No. 1-13778


                         PHYSICIANS RESOURCE GROUP, INC.
             (Exact name of Registrant as specified in its charter)

             Delaware                                  76-0456864
(State or other jurisdiction of          (I.R.S. Employer Identification No.)
incorporation or organization)


901 Main Street, Suite 6000 Dallas, TX                  75202
 (Address of principal executive office)              (Zip Code)


       Registrant's telephone number, including area code: (713) 629-5777


       Title of each class           Name of each exchange on which registered
       --------------------          -----------------------------------------

 Common Stock, $.01 par value                         None

                Securities pursuant to Section 12(g) of the Act:
                                      None

         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__ No X
                                            --

         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 the Registrant's knowledge, in a definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

         The number of shares outstanding of the Registrant's common stock as of
August 31, 2001 was 30,925,109 shares.

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

                                       -1-

<PAGE>

                                     PART I

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

Overview

         General

         Physicians Resource Group, Inc. (with its subsidiaries as the context
requires, "PRG" or the "Company") was formed as a physician practice management
("PPM") company specializing in providing practice management services to
ophthalmic and optometric practices ("Eyecare Practices") and ambulatory surgery
centers ("ASCs").

         On February 1, 2000 (the "PRG Petition Date"), PRG filed a voluntary
petition for relief under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code"). On May 25, 2000, EyeCorp, Inc., a Tennessee corporation and
a wholly-owned subsidiary of the Company ("EyeCorp"), filed a voluntary petition
for relief under Chapter 11 of the Bankruptcy Code. The cases were being jointly
administered under Case No. 00-30748-RCM-11 (Jointly Administered) in the United
States Bankruptcy Court for the Northern District of Texas, Dallas Division (the
"Bankruptcy Court"). From the time the respective petitions were filed and
through December 1, 2000, PRG and EyeCorp operated their respective businesses
and managed their respective properties as debtors in possession. Subsequent to
December 1, 2000, PRG and EyeCorp have been operating as reorganized debtors.

         On October 13, 2000, PRG and EyeCorp filed their First Amended Joint
Liquidating Plan Under Chapter 11 (as modified prior to its confirmation, the
"Plan"). The Plan is a liquidating plan and does not contemplate the financial
rehabilitation of the Company or the continuation of their business (except with
respect to any physicians and practices who cure their contractual defaults and
request that the Company recommence providing management services). Many of the
Company's assets have been or are in the process of being liquidated. Funds
generated from the liquidation of assets will be paid to creditors as set forth
in the Plan. Holders of equity interests may not receive or retain any property
under the Plan with respect to their holdings unless or until all creditors have
been paid in full. On December 1, 2000, the Bankruptcy Court entered an order
confirming the Plan. (See The Plan).

     In accordance with the Plan, in December of 2000, February, March, April
and July of 2001, PRG made distributions to unsecured creditors in a combined
total of approximately $97.3 million.

         Company History

         PRG was incorporated in 1993 but did not conduct any significant
operations until its initial public offering (the "IPO") and reorganization in
June 1995, at which time the Company began operations as a provider of PPM
services to its ten (10) founding Eyecare Practices (the "Founding Practices").
PRG acquired the assets of and entered into a management services agreement
("MSA") with each Founding Practice concurrently with the consummation of PRG's
IPO of its common stock ("Common Stock").

         Acquisitions and Transactions in 1995 and 1996

         PRG made no acquisitions during 1995 other than the acquisitions of the
assets of the Founding Practices. During 1996, however, the Company acquired the
assets of 45 Eyecare Practices and 11 ASCs. Additionally, during 1996, PRG
acquired three PPM companies, which were competitors in the ophthalmic PPM
industry: EyeCorp Inc., American Ophthalmic, Inc. and EquiMed, Inc. ("EquiMed").
Through the acquisition of these three competitors, PRG acquired the assets of
88 Eyecare Practices and 24 ASCs. These acquisitions and other capital
expenditures in 1996 were funded from: (i) the net proceeds of the Company's
IPO; (ii) net proceeds of a public offering of PRG Common Stock completed in May
1996; (iii) net proceeds of an offering of 6% Convertible Subordinated
Debentures ("Debentures") consummated by PRG in December 1996; (iv) borrowings
under bank credit facilities; and (v) cash generated by operations.

         During late 1995 and early 1996, the Company established an aggregate
of $55,000,000 in credit facilities with NationsBank of Tennessee, NA
("NationsBank"). Funds available under these credit facilities as well as the
proceeds of a $30 million bridge loan were used to fund acquisitions, capital
expenditures and working capital throughout 1996.

         In May 1996, PRG completed a secondary offering of 5,750,000 shares of
PRG Common Stock at $28.50 per share (the "1996 Public Offering"). In connection
with the 1996 Public Offering, the Company sold 4,250,000 shares of

                                       -2-

<PAGE>

PRG Common Stock and 1,500,000 shares of PRG Common Stock were sold by existing
stockholders. Proceeds to the Company, net of underwriting commissions and
offering costs, were approximately $113,640,000. These proceeds were used to
retire existing indebtedness and fund acquisitions.

         As stated above, in December 1996, PRG consummated an offering of
$125,000,000 in principal amount of Debentures. The Debentures, due in 2001,
bore interest at the rate of 6% per annum payable June 1 and December 1 of each
year, were convertible into Common Stock of the Company at $25 per share at the
option of the holder, and were redeemable by the Company on or after December 6,
1999. The net proceeds to PRG of the Debenture offering were approximately
$121,679,000. Of this amount, approximately $80,000,000 was used to retire
indebtedness to NationsBank.

         Acquisitions and Transactions in 1997 and 1998

         In March 1997, PRG arranged for a new $90,000,000 credit facility with
a syndicate of banks led by NationsBank (the "NationsBank Credit Facility"), to
be used for acquisitions, capital expenditures, working capital and common stock
repurchases. The NationsBank Credit Facility was secured by the stock of and
guaranteed by the subsidiaries of PRG.

         In 1997, PRG continued to acquire the assets of additional Eyecare
Practices, but began to concentrate on in-market acquisitions i.e., acquisitions
that were combined with Eyecare Practices already affiliated with PRG. In
addition, PRG restructured the terms of its agreements with certain Eyecare
Practices, primarily a number of smaller optometry practices. The restructured
agreements resulted in either (i) the complete termination of any affiliation
with these practices or (ii) the elimination of any significant relationship, or
(iii) otherwise modified the terms of the management services relationship with
the Company. Additionally, during late 1997 and early 1998, PRG made a decision
to terminate its affiliations with a number of other affiliated Eyecare
Practices and to sell and/or dispose of the assets and liabilities associated
therewith. This decision and the effects resulting therefrom are discussed in
more detail below.

         At various times during 1997, PRG acquired the assets of 27 Eyecare
Practices and interests in three (3) ASCs. The aggregate consideration for these
acquisitions was $37,790,000 in cash, promissory notes, convertible promissory
notes and PRG Common Stock (valued at the market price on date of issuance). In
addition to these Eyecare Practice and ASC acquisitions, PRG developed two (2)
ASCs in 1997. Seventeen of these 27 Eyecare Practice acquisitions were combined
into existing Eyecare Practices already affiliated with PRG. As a consequence of
these acquisition and growth activities, as of April 1, 1998, PRG owned
interests in and/or provided management services to 130 Eyecare Practices and 48
ASCs.

         Strategic Downsizing

         During the latter half of 1997, PRG initiated a strategic review of its
assets, operations and available resources, which resulted in the Company
deciding, during the third quarter of 1997, to begin the process of terminating
its affiliations with approximately 13 Eyecare Practices and to sell and/or
dispose of certain of the assets and liabilities associated therewith. In
connection with these terminations and dispositions, PRG recorded pre-tax
charges of approximately $27,750,000 as of September 30, 1997. During the fourth
quarter of 1997 and early 1998, in conjunction with a change of executive
management, PRG identified an additional 24 Eyecare Practice affiliations to be
terminated. PRG recorded additional pre-tax charges of approximately $37,634,000
with respect to (1) the then anticipated dispositions of these Eyecare Practice
assets and liabilities, and (2) the anticipated losses on the disposition of
seven (7) small optometry practice affiliations. PRG recorded total pre-tax
charges during 1997 of approximately $65,384,000 in connection with the
disposition ofall 44 Eyecare Practices.

         Disputes with Providers

         As indicated above, most of the transactions between PRG and its
affiliated physicians were funded, in whole or in part, with PRG Common Stock.
PRG's stock price declined substantially during the last quarter of
1996 and throughout 1997 and 1998, going from a peak price of $34.375 in the
second quarter of 1996, to highs of $11.56 in the third quarter of 1997, and
$4.75 in the first quarter of 1998. As the value of PRG Common Stock began to
fall, affiliated physicians began to voice dissatisfaction with the PRG
relationship and began withholding payment of PRG's management fees and ASC
profits. In ever-increasing numbers, the Eyecare Practices excluded PRG from any
involvement in the business management of those Eyecare Practices and ASCs.
Eyecare Practices also began bringing lawsuits or commencing arbitration
proceedings against PRG. Although PRG denied the allegations of the Eyecare

                                       -3-

<PAGE>

Practices and generally asserted counterclaims to recover the amounts owed to
PRG by those Eyecare Practices and related ASCs, PRG's revenues were
substantially negatively impacted.

         Over time, the number of Eyecare Practices intentionally breaching
their MSAs by refusing to pay management fees and remit PRG's portion of ASC
profits increased, as did the number of lawsuits filed by Eyecare Practices
against PRG. PRG also continued filing counterclaims against Eyecare Practices
that had defaulted on their obligations to PRG. In other instances, PRG filed
lawsuits as plaintiffs against the defaulting parties. These lawsuits and other
controversies related to the Eyecare Practices consumed a substantial amount of
PRG's funds through legal fees and related expenses. It is expected that such
claims that still exist against PRG will be resolved through the Claims
Resolution Methodology approved by the Bankruptcy Court. (See Item 3. Legal
Proceedings. Proofs of Claim).

         March 1998 Restructuring Plan

         In March of 1998, PRG's management and Board of Directors adopted a
restructuring plan that required widespread physician acceptance and stockholder
approval to be successful. The restructuring plan involved a sale by PRG of
assets used in the operation of Eyecare Practices to the Eyecare Practices
electing to participate in the plan and the assumption by the participating
Eyecare Practices of all liabilities of PRG related thereto. This plan also
contemplated a modification of the MSAs between the Company and participating
Eyecare Practices by shortening the term of the MSA and narrowing the focus of
the management services to be provided by the Company to the Eyecare Practices.
A proposal to approve this plan was included in the proxy statement related to
the Company's 1998 Annual Stockholders Meeting (the "Proxy Statement"). However,
this proposal ultimately was not submitted to the Company's stockholders for
their approval because at the time of the stockholders' meeting, the Company's
management was negotiating with David Meyer, M.D. with respect to an alternative
restructuring proposal.

         In July 1998, the Company entered into a letter of intent with David
Meyer, M.D. which required a standstill with respect to the plan proposed in the
Proxy Statement. The letter of intent set forth a restructuring proposal (the
"July 1998 Restructuring Proposal") which contemplated the following:

         .     A tender offer for a portion of PRG's outstanding shares of
               Common Stock at a price of $5.00 per share;

         .     Settlement of disputes between PRG and its affiliated Eyecare
               Practices related to certain accounts receivable and accounts
               payable issues;

         .     Restructuring of MSAs between the Company and affiliated Eyecare
               Practices to shorten the term and limit the services to be
               provided by the Company; and

         .     The sale of PRG's interests in surgery centers previously
               wholly-owned by PRG.

         The July 1998 Restructuring Proposal was conditioned, among other
things, upon: (i) settlement of the Company's stockholder class action
litigation (See Item 3. Legal Proceedings. The Shareholder Action); (ii)
settlement of litigation between the Company and its affiliated Eyecare
Practices; (iii) receipt of financing for the tender offer; and (iv) receipt of
a fairness opinion indicating that the July 1998 Restructuring Plan was fair to
PRG's stockholders from a financial point of view. The July 1998 Restructuring
Proposal ultimately was not consummated.

         October 1998 Restructuring Plan

     In late October 1998, the Company's Board of Directors was comprised of
David Meyer, M.D., John Shepherd, M.D., David Dulaney, M.D. and Lucius E. Burch,
III (the "Restructuring Board") (See Executive Officers. Management Turnover).
At that time, the Restructuring Board was confronted with a situation in which
(i) PRG faced substantial litigation, (ii) PRG's relationships with its
affiliated Eyecare Practices had deteriorated and (iii) PRG owed approximately
$9.5 million under the NationsBank Credit Facility, and (iv) PRG was in
technical default under the NationsBank Credit Facility. The Restructuring
Board, together with PRG's management and independent consultants, engaged in
efforts to restructure PRG's business.

         To this end, a plan consisting of two essential components was
formulated to maximize the value of PRG's business and assets. The first
component of the Restructuring Board's plan was development of a program
pursuant to which PRG would, in a buyout transaction ("Buyout") with an Eyecare
Practice: (i) sell to the Eyecare Practice the assets owned by PRG that were
used in the operation of the Eyecare Practice, (ii) transfer the liabilities of
PRG related to the operations of the Eyecare Practice back to the Eyecare
Practice, (iii) collect amounts owed by the Eyecare Practice and its affiliates
to PRG, (iv) release the Eyecare Practice and affiliated physicians from further
obligations under the MSAs and related employment agreements, (v) cancel notes
and other indebtedness owed by PRG to the Eyecare Practice and

                                       -4-

<PAGE>

affiliated physicians and (vi) enter into mutual releases. The financial
advisory firm of Houlihan, Lokey, Howard & Zukin ("Houlihan") assisted PRG in
establishing and arriving at the Buyout formulas, underlying methodology and
assumptions. (See Significant Events 1999 and 2000 and Significant Liquidation
Events 2001).

         The second component of the Restructuring Board's plan involved a
search for a strategic partner to purchase certain of PRG's interests in ASCs.
On January 31, 2000, the Company entered into a definitive Acquisition Agreement
(the "Acquisition Agreement") dated January 31, 2000 between PRG and AmSurg
Corp. ("AmSurg") related to the sale by the Company of its interests in 11 ASCs,
with estimated sale proceeds of up to approximately $40 million in cash.
Additionally, as part of this agreement, AmSurg and PRG entered into a
Management Agreement (the "Management Agreement") under which, effective January
1, 2000, AmSurg began managing the operations of up to 15 surgery centers
affiliated with PRG, 11 of which were to be purchased pursuant to the terms of
the Acquisition Agreement. As of August 31, 2001, the Company's interests in
seven (7) ASCs have been sold to AmSurg. As of August 31, 2001, AmSurg no longer
managed the operations of any of the ASCs affiliated with PRG.

         The RAM Agreement

         On March 19, 1999, PRG entered into a Debenture Restructuring Agreement
(the "RAM Agreement") with Resurgence Asset Management, LLC ("RAM") which, at
the date of the RAM Agreement, owned $91.896 million principal amount of the
Debentures. Pursuant to the RAM Agreement, RAM loaned PRG $3.75 million (the
"RAM Loan") to pay interest on the Debentures that was due December 1, 1998. The
RAM Loan was secured by a pledge of the stock of PRG's subsidiaries, had a one
percent (1%) origination fee and accrued interest at 20% per annum. Also
pursuant to the RAM Agreement, the parties agreed to complete a restructuring
which would allow PRG to, inter alia, retire the indebtedness evidenced by the
Debentures for $80 million in cash or notes generated from the Buyout
transactions, $20 million in cash from the sale of ASCs and 50% of PRG's net
proceeds from certain litigation. The restructuring contemplated by the RAM
Agreement was not consummated.

         Significant Events in 1999 and 2000

         As of the PRG Petition Date, the Company had been successful in
completing Buyouts related to approximately 45 Eyecare Practices and certain
interests in approximately 20 ASCs related to those Eyecare Practices. In
connection with these Buyouts: (i) all litigation and other disputes with the
Eyecare Practices and ASCs were resolved; (ii) approximately $17 million in
principal amount of notes payable by the Company to the Eyecare Practices or
affiliated physicians were canceled; and (iii) the MSAs between the Company and
the Eyecare Practices were terminated. Through the consummation of these Buyouts
and other sales, the Company generated approximately $60 million in cash prior
to the Petition Date, allowing the Company to retire its entire indebtedness
under the NationsBank Credit Facility (approximately $9.5 million), as well as a
portion of the indebtedness under the RAM Loan. (See The RAM Agreement). As of
December 31, 2000 and subsequent to the PRG Petition Date, the Company was
successful in completing Buyouts with 26 additional Eyecare Practices and
certain interests in 3 ASCs related to those Eyecare Practices. These
transactions generated approximately $28 million in cash.

         Significant Liquidation Events in 2001

         From December 31, 2000 through August 31, 2001, the Company
successfully completed Buyouts with 19 Eyecare Practices. These transactions
generated approximately $4.4 million in cash. In addition, the Company has sold
its interests in 4 ASCs. The ASC transactions generated approximately $7.8
million in cash.

         The Plan

         On December 1, 2000, the Bankruptcy Court entered an order confirming
the Plan. The effective date of the Plan was December 15, 2000. The Plan is a
liquidating plan and does not contemplate the financial rehabilitation of PRG
and EyeCorp or the continuation of their businesses (except with respect to any
physicians and practices who cure their contractual defaults and request that
the Company recommence providing management services). Many assets have been or
are in the process of being liquidated, and the Plan contemplates that the
remaining unliquidated assets (primarily subsidiaries of PRG and EyeCorp and
causes of action of the bankruptcy estates) will be liquidated either by PRG or
EyeCorp, as applicable, or, after the effective date of the Plan, by the
Liquidation Agent appointed pursuant to the Plan.

         Under the Plan, allowed administrative claims and allowed priority
unsecured claims will be paid in full, and allowed unsecured claims against each
of PRG and EyeCorp will be paid their pro rata share from the remaining cash and
the liquidation proceeds of the assets of the respective debtor. Holders of
equity interests may not receive or retain any

                                       -5-

<PAGE>

property under the Plan with respect to their holdings unless and until all
creditors have been paid in full. Currently the Company does not anticipate
making any distributions to holders of equity interests.

         On the effective date of the Plan, PRG and EyeCorp (through the
Liquidation Agent) placed all cash on hand into the accounts established for
each debtor. All additional net proceeds from the liquidation of retained assets
after the effective date have been placed into these accounts. The cash on
deposit in the accounts is being used to satisfy allowed claims against PRG and
EyeCorp, as applicable. The Liquidation Agent, Michael W. Yeary, manages these
funds. An Oversight Committee has also been formed and is responsible for
supervising the Liquidation Agent with respect to the performance of certain of
his responsibilities, reviewing the prosecution of debtors' causes of action, if
any, including proposed settlements, reviewing objections to and proposed
settlements of disputed claims and appointing successor Liquidation Agent(s), if
necessary. Additionally, the Oversight Committee is vested with the sole
discretion to pursue any claims or causes of action against the debtors' former
officers, directors and professionals.

         In accordance with the Plan, in December of 2000, and February, March,
April and July of 2001, PRG made distributions to unsecured creditors for a
combined total of approximately $97.3 million. Currently the Company does not
anticipate making any distributions to holders of equity interests.

Government Regulation and Supervision

         PRG filed its voluntary petition under Chapter 11 of Title 11 of the
Bankruptcy Code, 11 U.S.C. Section 101 et seq., as in effect on February 1,
2000. PRG's operations are governed by the Federal Rules of Bankruptcy Procedure
as promulgated by the United States Supreme Court under Section 2075 of Title 28
of the Bankruptcy Code and the Local Rules of the Bankruptcy Court. EyeCorp
filed its voluntary petition under Chapter 11 of Title 11 of the Bankruptcy
Code, 11 U.S.C. Section 101 et seq., as in effect on May 25, 2000. EyeCorp's
operations are governed by the rules referenced above. As required by these
rules, PRG and EyeCorp submitted monthly operating reports (unconsolidated)
through December 2000, and quarterly operating reports (unconsolidated) after
December 2000, which were also included as Exhibits to Current Reports on Form
8-K filed with the Securities and Exchange Commission ("SEC").

         The health care industry is highly regulated and that regulatory
environment may change significantly in the future. Changes in governmental and
private reimbursement policies, enactment of legislation regarding healthcare
reform at the federal or state level that significantly alters patient-provider
relationships could materially impact the results of the liquidation process. No
predictions can be made as to whether future health care reform legislation,
similar legislation or rule making will be enacted or, if enacted its effect on
PRG.

Corporate Liability and Insurance

         The provision of medical services entails an inherent risk of
professional malpractice and other similar claims. PRG does not influence or
control the practice of medicine by physicians or have responsibility for
compliance with regulatory and other requirements directly applicable to
physicians and physician groups. However, as a result of the relationship
between PRG and the Eyecare Practices, PRG may become subject to
medical malpractice actions under various theories, including agency and
successor liability. There can be no assurance that claims, suits or complaints
relating to services and products provided by the Eyecare Practices will not be
asserted against PRG in the future. PRG maintains insurance coverage that it
believes is adequate both as to risks and amounts.

         Insurance for Claims Against Directors and Officers

         PRG has purchased several insurance policies relating, in part, to
claims made against directors and officers. One such policy, covering claims
made during the period April 20, 1997 through April 20, 1998, has a $20 million
policy limit, of which the insurer contends approximately $1.43 million has been
consumed. Additional claims have been submitted to the insurer which, if paid,
will reduce the remaining coverage by the amount of the payment. Another policy
covering claims made during the period April 20, 1998 through April 20, 1999 has
a $10 million policy limit. A third policy covering claims made during the
period April 20, 1999 through December 15, 2000 also has a $10 million policy
limit.

         In general, these policies pay covered losses of the directors and
officers for claims made against them during the policy periods, when and to the
extent that PRG indemnified the directors and officers. The policies pay covered
losses of PRG for claims arising from either (i) securities claims first made
against PRG or (ii) claims first made against directors and officers, but only
when and to the extent that PRG has indemnified the directors and officers for
such loss pursuant to law, common or statutory, or contract, or the charter or
bylaws of the Company. PRG's bylaws and

                                       -6-

<PAGE>

certificate of incorporation provide an indemnity for officers and directors for
certain types of claims. After PRG and EyeCorp filed for bankruptcy protection,
certain former officers and directors and certain members of current management
filed proofs of claim, asserting alleged rights for such indemnification. No
ruling has been made on those claims.

         As a result of the Company's bankruptcy filing, the insurer under the
policies declined to make any further payments under the policies without an
order of the Bankruptcy Court authorizing such payments. On December 1, 2000,
the Bankruptcy Court issued an order authorizing the insurer to distribute up to
an additional $1 million in policy proceeds. If and when that amount is
distributed, the Bankruptcy Court may need to issue further orders.

         The Company has purchased additional directors and officers and
miscellaneous professional liability insurance effective December 1, 2000. The
policy limit is $10,000,000 and the coverages are effective for two years.

Employees

         As of August 31, 2001, PRG had approximately 12 full-time and part-time
employees, who were employed at PRG's corporate offices. PRG believes that its
relationship with its employees is satisfactory.

Executive Officers

         The following table sets forth certain information concerning the
executive officers of PRG as of August 31, 2001.

         Name               Age    Position
         ----               ---    --------

         Michael Yeary      47     Chief Restructuring Officer, Director and
                                   Liquidation Agent
         Karen Nicolaou     43     Controller and Director of Claims Resolution

         Michael Yeary served as Chief Operating Officer and President of PRG
from October, 1998 until February 2000. Since February 1, 2000, he has served as
PRG's President and Chief Restructuring Officer, and currently serves as the
Liquidation Agent. Additionally, since March 16, 2000, Mr. Yeary has served as
PRG's sole director. From February 1996 until February 1998, Mr. Yeary served as
Regional Vice President of PRG for South Texas and Louisiana. From January 1,
1998 until March 30, 1998, Mr. Yeary served as the Interim Accounting Manager of
PRG in addition to his other duties. From 1989 to February 1996, he was the
Chief Financial Officer for Mann Berkeley Eye Center in Houston, Texas. From
1981 to 1989, Mr. Yeary served as the Executive Vice President, Chief Financial
Officer for the Tomasco Group, a real estate development and investment company
with operations in industries related to commercial real estate, manufacturing
and oil and gas. Previously, Mr. Yeary served in a variety of capacities in
retail and public accounting with Deloitte and Touche, LLP. Mr. Yeary is a
Certified Public Accountant and received his B.B.A. in Accounting from Lamar
University.  He was also a Director of Humble National Bank.

         Karen Nicolaou has served as the Corporate Controller of PRG since
September 1998, and also currently serves as Director of Claims Resolution. From
July 1998 until September 1998, Ms. Nicolaou served as PRG's Corporate Budget
and Special Projects Manager. Ms. Nicolaou served as the Controller of Mission
Critical Software, Inc., a start-up software development company, from November
1996 until July 1998. From May 1993 until November 1996, Ms. Nicolaou worked as
an Independent CPA. Ms. Nicolaou was employed by Energy Insurance International,
Inc., an insurance brokerage firm, from June 1988 until February 1993, serving
in such positions as Controller and Vice President-Technical Applications. Ms.
Nicolaou is a Certified Public Accountant and received her B.B.A. in Accounting
from The University of Texas.


         Management Turnover

         During 1997 and 1998, PRG experienced significant turnover in its
executive ranks. For example: Richard Owen, the Company's President, resigned
effective October 31, 1997. Peter Dorflinger, Mr. Owen's successor, left the
Company in November 1998. Emmett E. Moore, the Company's Chairman of the Board
and Chief Executive Officer, resigned from the Company on November 19, 1997.
Richard Gilleland, who succeeded Mr. Moore as the Company's Chairman of the
Board and Chief Executive Officer, resigned from his position in October 1998.
Mark Kingston, the Company's Chief Development Officer, left the Company in
March 1998 and Richard D'Amico, the Company's General Counsel, left the Company
in June 1998. David Real, the Company's Chief Financial Officer (who was hired
in March 1997), resigned effective December 31, 1997. Pamela Westbrook, Mr.
Real's successor as Chief Financial Officer who

                                       -7-

<PAGE>

was hired in March 1998, resigned effective October 2, 1998, and Ann Chaney, who
succeeded Ms. Westbrook as Chief Financial Officer resigned in November 1998.

         In January 1998, the number of members of the Board of Directors of the
Company was reduced from fourteen to five. Additionally, in late October 1998,
the membership of PRG's Board of Directors again changed substantially. On
October 30, 1998, PRG's then-current Board of Directors appointed a number of
new directors, including David Meyer, M.D., David Dulaney, M.D. and John
Shepherd, M.D., and then resigned. Drs. Meyer, Dulaney and Shepherd resigned
from the Board of Directors on March 16, 2000. Currently, Michael W. Yeary
serves as the sole director of the Company.

Factors That Could Affect Future Performance

         This report contains certain forward-looking statements about the
business and financial condition of the Company, including various statements
contained in "Management's Discussion and Analysis of Financial Condition and
Result of Operations" and "Business." The actual results of the Company's
operations could differ materially from any forward-looking statements contained
in this report. Factors that would materially affect future performance include
the willingness of affiliated practices to participate in the settlement process
provided for in the Plan, and the progress of the litigation described under
"Legal Proceedings."

         PRG and EyeCorp filed the Plan on October 13, 2000. The Plan was
confirmed by the Bankruptcy Court on December 1, 2000. The Plan is a liquidating
plan and does not contemplate the financial rehabilitation of the Company or the
continuation of their business (except with respect to any physicians and
practices who cure their contractual defaults and request that the Company
recommence providing management services). Many of the Company's assets have
been or are in the process of being liquidated, and the Plan contemplates that
the remaining assets will be liquidated.

         Funds generated from the liquidation of assets are being paid to
creditors as set forth in the Plan. Holders of equity interests may not receive
or retain any property under the Plan with respect to their holdings unless and
until all creditors have been paid in full. In accordance with the Plan, in
December of 2000, and February, March, April and July of 2001, PRG made
distributions to unsecured creditors for a combined total of approximately $97.3
million. Currently the Company does not anticipate making any distributions to
holders of equity interests.

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

         In addition to its remaining practice facilities, as of August 31,
2001, PRG operated and leased corporate offices in Houston, Texas.

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

         Litigation Against Former Officers and Directors

         As of December 31, 2000, several lawsuits were pending against PRG and
former officers and directors of PRG brought by some of PRG's shareholders.
These litigations include a putative class action brought under the federal
securities laws (the "Shareholder Action") and a derivative action brought
against two of the Company's directors.

         The Shareholder Action

         The Shareholder Action is comprised of the following six (6) putative
class actions that were originally filed against PRG and four of its former
officers and directors in late 1997 and 1998 in the Bankruptcy Court:

         Jeffrey Schiller and Diversified Investment Holdings LP, On Behalf of
Themselves and All Others Similarly Situated v. Physicians Resource Group, Inc.,
et al.; Civil Action No. 3-97CV3158-R (filed on December 23, 1997)("Schiller");

         City of Philadelphia, By and Through its Board of Pensions and
Retirement, On Behalf of Itself and all Others Similarly Situated v. Physicians
Resource Group, Inc., et al.; Civil Action No. 3-98CV0459-P (filed on February
20, 1998)("City of Philadelphia");

                                       -8-

<PAGE>

         William J. Rutherford, On Behalf of Himself and All Others Similarly
Situated v. Physicians Resource Group, Inc., et al.; Civil Action No.
3-98CV0395-G (filed on February 3, 1998)("Rutherford");

         Howard Longman, On Behalf of Himself and All Others Similarly Situated
v. Physicians Resource Group, Inc.; Civil Action No. 3-97CV3102-P (filed on
December 18, 1997)("Longman");

         Regina Peltz, On Behalf of Herself and All Others Similarly Situated v.
Physicians Resource Group, Inc., et al.; Civil Action No. 3-97CV3176-D (filed on
December 29, 1997)("Peltz"); and

         Bob E. Hall, On Behalf of Himself and All Others Similarly Situated v.
Physicians Resource Group, Inc., et al.; Civil Action No. 3-98CV0264-R(filed on
February 3, 1998) ("Hall").

         These cases all raise claims under Section 10(b) of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and Rule 10b-5 promulgated
thereunder. The plaintiffs seek compensatory damages, legal interest and
attorneys' fees. The procedural history of these cases is complex because of the
number of cases at issue, the theories of liability raised, the number of
plaintiffs' counsel involved, and the unique requirements of the Private
Securities Litigation Reform Act of 1995.

         The six (6) class actions were originally filed in two groups. The
first group comprised the Schiller, City of Philadelphia, and Rutherford actions
(collectively the "Schiller Action"), and the second included the Longman,
Peltz, and Hall actions (collectively the "Longman Action"). In essence,
plaintiffs in the Schiller Action allege claims of corporate mismanagement and a
failure to disclose the same under the federal securities laws. These claims
fall into four categories: (i) statements/omissions concerning PRG's ability to
do business (including the competency of its accounting department, the ability
to integrate acquired Eyecare Practices, management expertise, the viability of
PRG's business plan, etc.); (ii) predictions of PRG's earnings and growth; (iii)
statements/omissions concerning PRG's accounting policies (improper revenue
recognition, etc.); and (iv) statements/omissions concerning the value of PRG's
acquisition of EyeCorp and EquiMed in 1996. The alleged class period in the
Schiller Action runs from September 15, 1995, when PRG announced the acquisition
of EyeCorp, until March 27, 1997, the date on which PRG announced that due to a
decline in its stock price the Company would not be able to maintain its
acquisition pace.

         The plaintiffs in the Longman Action claim that when PRG filed a
counterclaim for fraud against EquiMed in an arbitration proceeding in June
1997, PRG knew that the Eyecare Practices it had previously acquired from
EquiMed in late 1996 were overvalued and would have to be written-down but that
PRG delayed doing so in order to continue to appear to be a fast growing company
and an attractive acquisition candidate. The Longman Action class period
extended from June 1997 to November 19, 1997, when PRG announced a loss for the
third quarter that included a pre-tax charge of $27.8 million for future Eyecare
Practice closings and $4 million to establish a reserve for accounts receivable.

         In July 1998, after a motion to consolidate the Schiller Action and the
Longman Action was denied, the Schiller Action plaintiffs filed their first
amended complaint to include the allegations and the alleged class contained in
the Longman Action. The factual allegations in the amended Schiller Action now
cover an alleged 26 month class period from September 15, 1995 to November 19,
1997.

         The six (6) putative class actions are assigned to Judge Sam Lindsay.
In April 1999, Judge Lindsay granted lead plaintiff status to Robert Alpert
("Alpert"), a major shareholder of PRG and a member of the Equity Committee, who
selected Milberg Weiss Bershad Hynes & Lerach as class counsel. On behalf of all
of the defendants, PRG moved to dismiss the operative amended complaint.

         In November 1998, the Schiller Action plaintiffs filed a separate
lawsuit under the 1934 Act against Arthur Andersen LLP ("Andersen") in the
United States District Court for the Northern District of Texas, Dallas
Division, styled Jeffrey Schiller and Diversified Investment Holdings LP, On
Behalf of Themselves and All Others Similarly Situated v. Arthur Andersen & Co.
LLP; Civil Action No. 3-98CV2753-R (the "Andersen Action"). The Schiller Action
plaintiffs then moved to consolidate the Andersen Action with the Shareholder
Action, while also requesting leave of court in the Shareholder Action to file a
second amended complaint. The Bankruptcy Court granted the Schiller Action
plaintiffs' request for leave to file a second amended complaint on September
22, 2000. At the same time, the Bankruptcy Court denied PRG's motion to dismiss
the first amended complaint, without prejudice to PRG refiling its motion to
dismiss directed to the second amended complaint.

         After confirmation of the Plan, the Bankruptcy Court issued an order
lifting the automatic stay and allowed the resumed prosecution of the Schiller
Action against the Company, except that the stay remains in effect with respect
to any

                                       -9-

<PAGE>

effort to collect any judgment, if any, rendered as a result. The
Schiller Action plaintiffs have filed their third amended complaint, and the
Company has filed its motion to dismiss, which is fully briefed and awaiting on
ruling by the court.

         Derivative Action

         In 1999, Robert Alpert (who was also appointed lead plaintiff in the
Shareholder Action) brought a derivative suit in Texas State Court styled Robert
Alpert, on behalf of Physicians Resource Group, Inc., v. Physicians Resource
Group, Inc., Dr. David Meyer and Lucius E. Burch, III, Cause No. 1999-20229, in
the 152nd Judicial District Court of Harris County, Texas (the "Derivative
Suit"). In the Derivative Suit, Alpert sought to prosecute, on behalf of PRG,
certain claims Alpert asserted PRG had against Dr. Meyer and Mr. Burch. At the
time the suit was brought, Dr. Meyer and Mr. Burch were members of the Board of
Directors of PRG.

         In general, the Derivative Suit asserted that Dr. Meyer and Mr. Burch
received excessive fees from PRG and were appointed to the Board of Directors in
violation of PRG's governing corporate documents. Other allegations in the
Derivative Suit include that (i) Buyouts unfairly favored PRG physicians, (ii)
Dr. Meyer's Eyecare Practice breached its obligations to PRG under its MSA and
(iii) Dr. Meyer was liable for damages for the un-consummated tender offer
contemplated by the July 1998 Restructuring Proposal.

         In response, on May 19, 1999, PRG's Board of Directors appointed a
subcommittee of the Board of Directors composed of the remaining directors who
were not the targets of the Derivative Suit to act as a Special Litigation
Committee ("SLC") and to commence an independent, disinterested and impartial
review of Alpert's claims in order to determine whether it was in PRG's best
interest to pursue the same. The Board of Directors gave the SLC full power and
authority to make that decision.

         The members of the SLC were PRG directors Dr. John Shepherd and Dr.
David Dulaney. The SLC retained the Dallas law firm of Munsch, Hardt, Kopf, Harr
and Dinan, P.C. ("Munsch Hardt") to serve as special independent counsel and to
help conduct a thorough, independent and impartial review and investigation of
Alpert's claims. In so doing, Munsch Hardt, among other things, requested and
reviewed documents it felt were pertinent to the issues in question, gathered
affidavits from third parties, and interviewed Alpert, the individual
defendants, PRG's senior management, and approximately 16 individuals who either
appeared to have relevant information or who were identified by Alpert. In
addition, the SLC also independently investigated and gathered information on
its own.

         Under Texas law, the disposition of a derivative lawsuit is governed by
Article 5.14 of the Texas Business Corporation Act (Vernon Supp. 1999). Because
PRG is a Delaware corporation, certain aspects of the application of Article
5.14 require reference to Delaware law as well. After reviewing the relevant
statutory provisions, PRG concluded that if the SLC, acting independently and
with due care in conducting a reasonable, good faith investigation, concluded
that pursuit of the Derivative Suit was not in the best interest of PRG, then
the court was required to dismiss the Derivative Suit.

         On November 1, 1999, after considering the facts gathered in the
investigation, the allegations advanced in the Derivative Suit, the legal claims
asserted in the Derivative Suit, the various defenses available to the
defendants, and the costs and benefits to PRG of continuing the litigation, the
SLC unanimously determined that pursuit of the Derivative Suit would not be in
the best interests of PRG. Accordingly, on December 21, 1999, PRG filed a motion
to dismiss the Derivative Suit pursuant to Article 5.14 of the Texas Business
Corporation Act. If granted, said motion to dismiss would result in the
dismissal of the Derivative Suit with prejudice as to Mr. Burch and without
prejudice as to Dr. Meyer. Alpert did not respond to or oppose the motion to
dismiss, which was set for hearing on February 4, 2000.

         On February 1, 2000, PRG filed its voluntary bankruptcy petition, which
triggered the Bankruptcy Code's automatic stay. Under the terms of the
bankruptcy plan confirmed by the bankruptcy court, the authority to administer
claims against former officers and directors of the Company passed to the
Oversight Committee created under the Plan. Thus, with the confirmation of the
Plan, the Oversight Committee assumed administrative control over the Derivative
Suit, although any proceeds from the suit would inure to the benefit of PRG. The
Oversight Committee has hired new counsel who have substituted into the case on
behalf of PRG. The previously filed motion to dismiss has not been presented to
the court or ruled upon, and control over it now rests with the Oversight
Committee.

         Recently, the Oversight Committee filed suit on behalf of PRG and
certain of its subsidiaries against Dr. Meyer and Mr. Burch in the United States
Bankruptcy Court for the Northern District of Texas, Dallas Division. The suit
seeks recovery of allegedly voidable transfers of cash and property. Any
recovery from the suit would belong to PRG and/or its subsidiaries.

                                       -10-

<PAGE>

         Patent Action

         On June 27, 1997, the Company and John Taboada ("Taboada") entered into
an Exclusive License Agreement (the "License Agreement") pursuant to which
Taboada granted the Company an exclusive license to make, use, sell, offer to
sell, and sublicense a certain patent related to refractive procedures. At the
time the License Agreement was entered into, the patent was held of record by
VISX, Inc. and was the subject of litigation among Taboada, VISX, Inc., Pillar
Point Partners and Summit Technology, Inc. The grant of the rights under the
License Agreement was conditioned upon Taboada's success in the litigation. The
Company and Taboada contemporaneously entered into a Reimbursement Agreement
(the "Reimbursement Agreement") with Wolin, Ridley & Miller, LLP pursuant to
which PRG agreed to reimburse the attorney fees incurred by Taboada in the
litigation in exchange for which PRG would be entitled to a portion of the
proceeds, if any, obtained by Taboada in the litigation. On May 3, 2000, Taboada
settled the litigation by renouncing his claims of ownership of the patent in
exchange for a cash settlement payment. Following the approval of a release
pursuant to which the Company, Taboada, and Wolin, Ridley & Miller LLP released
each other from any and all claims relating to the License Agreement and the
Reimbursement Agreement, PRG received approximately $5.5 million of the
settlement proceeds.

         Malpractice Claims

         In the normal course of business, certain of the affiliated Eyecare
Practices and, in some instances, PRG or its subsidiaries, have been named in
lawsuits alleging medical malpractice. The Eyecare Practices and the Company are
insured with respect to medical malpractice risks on a claims-made basis. The
Company believes its insurance coverage is sufficient.

         Proofs of Claim

         In response to the bankruptcy filings of PRG and EyeCorp, proofs of
claim have been filed against each respective debtor. Analyzing the potential
exposure posed by these proofs of claim is difficult for a number of reasons, in
part because some of the claims do not state a specific monetary amount but
instead are either contingent or unliquidated.

         With respect to those claims that do state a specific monetary amount,
PRG has identified a number to which it has no objection and which will be
allowed by the Bankruptcy Court. Among the ranks of general unsecured creditors,
the total amount of proofs of claim that state a specific monetary sum as to
which the debtors do not object is approximately $135 million.

         Many proofs of claim have been filed against PRG and EyeCorp by Eyecare
Practices having MSAs with the debtors. Many of these have been settled by the
Eyecare Practice paying money to PRG. The approximate total of all of the
discrete monetary amounts asserted by the Eyecare Practices in the remaining
proofs of claims in excess of $60 million. However, several of the Eyecare
Practices have filed proofs of claim that contend additional sums are owed,
above and beyond the specifically pleaded monetary amount. The debtors have
objected to all of the claims filed by the Eyecare Practices and are pursuing
counterclaims against the Eyecare Practices. In the event the debtors and the
Eyecare Practices are unable to resolve their differences by settlement, the
Bankruptcy Court has entered a Claims Resolution Methodology that will
procedurally govern the disposition of the claims and counterclaims asserted
among and between them. Although the debtors intend to pursue these claims
vigorously, due, in part, to their relatively undeveloped state, it cannot be
predicted with certainty what their outcome will be or whether the debtors will
suffer a net benefit or a net loss as a result of these claims and
counterclaims.

         On January 30, 2001, Dr. David Meyer filed an Application for Allowance
of Administrative Expense in the Bankruptcy Court (the "Application"). In the
Application, Dr. Meyer sought recovery of $6,952,281.50 from PRG. Dr. Meyer
characterized his claim as an administrative claim. The Oversight Committee
objected to the Application and filed a motion asking the Bankruptcy Court to
set a reserve for the disputed claim pending its ultimate disposition. On
February 28, 2001, the Bankruptcy Court set a reserve of $200,000 for Dr.
Meyer's claim in the Application. The Bankruptcy Court ordered that, unless on
or before May 1, 2001, the claim is finally resolved or another court order is
issued, the reserve would automatically decline to $50,000 on May 1, 2001. To
date, the claim has not been resolved.

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

         None.

                                       -11-

<PAGE>

                                     PART II

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

Market Information.

         The Common Stock was initially offered to the public on June 23, 1995
at a price of $13.00 per share and was listed on the New York Stock Exchange
("NYSE") under the symbol "PRG." The Common Stock traded on the NYSE until
November 16, 1998, when the NYSE informed the Company that it had suspended
trading in the Company's Common Stock. Thereafter, the Common Stock traded in
the over-the-counter market. The following table sets forth the high and low
sales prices by quarter for the Company's most recent four fiscal years and as
reported by the NYSE (at and prior to November 16, 1998) and, subsequently, as
quoted in the over-the-counter market.

                                                        High          Low
                                                    ------------  ------------
          Fiscal Year ended December 31, 1998

          1/st/ Quarter                              $  4  3/4     $ 3 1/16
          2/nd/ Quarter                                 5  7/8       3 9/16
          3/rd/ Quarter                                 4 13/16        7/8
          4/th/ Quarter                                 1  3/4         1/32

          Fiscal Year ended December 31, 1999

          1/st/ Quarter                                 2             19/64
          2/nd/ Quarter                                 1  7/8         1/8
          3/rd/ Quarter                                 1  1/4         1/2
          4/th/ Quarter                                    3/8         5/16

          Fiscal Year ended December 31, 2000

          1/st/ Quarter                                   13/32        3/32
          2/nd/ Quarter                                   17/64        1/64
          3/rd/ Quarter                                    1/16        1/64
          4/th/ Quarter (through December 29, 2000)       21/32        1/64


     On August 31, 2001, there were 340 record holders of Common Stock.

Dividend Policy

         PRG has not paid any cash dividends since its inception and will not
pay cash dividends in the future. At this time, PRG does not anticipate a
distribution to holders of equity interests in the Company. Only holders of
record of the Company's equity interests on October 13, 2000 are entitled to
distributions, if any, under the Plan. Thirty days after December 1, 2000, all
equity interests in the Company were canceled. From and after that day, equity
interests in the Company represent only a right to receive payment, if any,
under the Plan.

                                       -12-

<PAGE>

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

         PRG was incorporated in 1993, but did not conduct any significant
operations prior to the IPO in June of 1995. The PRG historical financial data
for each of the years in the five-year period ended December 31, 2000 presented
below reflects actual results of continuing operations, asset liquidation, and
financial position of PRG (including the acquisitions accounted for as pooling
of interests) and has been derived from and should be read in connection with
the PRG consolidated financial statements and notes thereto included elsewhere
herein.

<TABLE>
<CAPTION>
                                                                       PRG Historical
                                                                    Year Ended December 31,
                                                 -------------------------------------------------------------

Statement of Operations Data:                      1996         1997         1998         1999          2000

                                                 ---------    ---------    ---------    ---------    ---------
<S>                                              <C>          <C>          <C>          <C>          <C>
Revenues .....................................   $ 248,293    $ 411,640    $ 354,108    $  83,940    $  40,174
                                                 ---------    ---------    ---------    ---------    ---------
Costs and expenses:
  Salaries, wages and benefits ...............     115,200      207,254      176,808       33,181       12,766
  Pharmaceuticals and supplies ...............      30,919       52,392       46,158       15,195        7,240
  General and administrative .................      62,353      103,055      105,253       44,000       24,584
  Depreciation and amortization ..............      11,192       24,841       26,000        7,885        2,574
  Interest expense ...........................       2,808       13,148       12,385        9,232          899
  Interest (income) ..........................      (1,504)      (1,601)        (907)      (1,300)      (4,500)
  Executive severance expenses ...............          --          750          912           --           --
  Patent litigation defense costs ............         353        2,730          798          989          555
  Asset valuation losses (recovery) ..........          --       76,706      347,857       (6,040)          --
  Loss (Gain) on sale of assets ..............          --           --       25,276       (7,447)     (40,276)
  Merger transaction expenses ................      12,030           --           --           --           --
                                                 ---------    ---------    ---------    ---------    ---------
    Total costs and expenses .................     233,351      479,275      740,540       95,695        3,842
                                                 ---------    ---------    ---------    ---------    ---------
Income (loss) before income taxes ............      14,942      (67,635)    (386,432)     (11,755)      36,332
Provision (benefit) for income taxes .........       7,770      (26,312)     (66,867)          --           --
                                                 ---------    ---------    ---------    ---------    ---------
Net income (loss) ............................   $   7,172    $ (41,323)   $(319,565)   $ (11,755)   $  36,332
                                                 =========    =========    =========    =========    =========
Net Income (loss) per basic share:
  Net income (loss) ..........................   $    0.29    $   (1.39)   $  (10.73)   $   (0.39)   $    1.21
                                                 =========    =========    =========    =========    =========
Number of shares used in net income (loss)
  Per basic share calculation ................      24,596       29,751       29,773       29,805       29,993
                                                 =========    =========    =========    =========    =========
Net Income (loss) per diluted share:
  Net income (loss) ..........................   $    0.28    $   (1.39)   $  (10.73)   $   (0.39)   $    1.21
                                                 =========    =========    =========    =========    =========
Number of shares used in net income(loss)  per
  diluted share calculation...................      25,365       29,751       29,773       29,805       29,993
                                                 =========    =========    =========    =========    =========
</TABLE>

<TABLE>
<CAPTION>
                                                                          As of December 31,
Balance Sheet Data:                                      1996         1997        1998         1999          2000
                                                      ----------   ----------  -----------  ----------    ---------

<S>                                                   <C>          <C>         <C>          <C>          <C>
Working capital (deficit) ....................         $ 103,559   $  72,260   $ (72,700)   $ (71,788)   $ (33,723)
Total assets .................................           581,534     533,986     150,497       99,596       39,053
Long-term debt, net of current portion .......           148,988     147,902       1,662           --           --
Stockholders' equity (deficit) ...............           310,673     267,465     (49,535)     (67,912)     (34,114)
</TABLE>

<TABLE>
<CAPTION>
        Consolidated Quarterly Data (unaudited):                               Year Ended December 31, 1999
                                                               -----------------------------------------------------
                                                                      Fourth       Third       Second       First
        Description                                                   Quarter     Quarter     Quarter      Quarter
        -----------                                                 ----------   ----------  ---------   -----------
                                                                             (in 000's except per share amounts)
        <S>                                                         <C>          <C>        <C>          <C>
        Total revenues .......................                       $ 8,743     $ 20,055   $  24,886    $ 30,256
        Net income (loss) before taxes .......                       $ 3,414     $ 15,519   $ (26,529)   $ (4,159)
        Net income (loss) ....................                       $ 3,414     $ 15,519   $ (26,529)   $ (4,159)
        Net income (loss) per share                                  $  0.11     $   0.52   $   (0.89)   $  (0.14)
           (basic and diluted) ...............

<CAPTION>
                                                                              Year Ended December 31, 2000
                                                                ----------------------------------------------------
                                                                     Fourth        Third     Second        First
        Description                                                  Quarter      Quarter    Quarter      Quarter
        -----------                                                 ----------  ----------  ----------   -----------
                                                                             (in 000's except per share amounts)
        <S>                                                         <C>         <C>         <C>          <C>
        Total revenues .......................                       $ 6,269     $ 8,358     $15,238       $10,309

        Net income (loss) before taxes........                       $14,169     $11,342     $ 9,763       $ 1,059
        Net income (loss) ....................                       $14,169     $11,342     $ 9,763       $ 1,059

        Net income (loss) per share
          (basic and diluted) ................                       $  0.47     $  0.38     $  0.33       $. 0.03
</TABLE>

                                      -13-


<PAGE>

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

      The following discussion and analysis should be read in conjunction with
the financial statements and related notes contained elsewhere herein.

Overview

      PRG was incorporated in 1993, but conducted no significant operations
until the IPO and reorganization in June of 1995. PRG is a PPM company and was
formed to provide various administrative services to Eyecare Practices and ASCs.
In fulfilling its obligations under the MSAs, the Company paid the operating
costs and expenses on behalf of the Eyecare Practices. As a result, the
operating costs and expenses previously incurred by the Eyecare Practices were
reflected in the operating expenses of PRG. The revenues recorded by the Company
reflect a combination of (i) management fees earned under its MSAs and (ii)
medical services related to patient charges, in the case of its controlled
Eyecare Practices, ASCs and optical dispensaries.

Company History

      The Company, during the latter half of 1997 and early 1998, re-evaluated
its strategic position and initiated (1) a review of its affiliated Eyecare
Practice relationships in light of available resources, market penetration,
geographic coverage and current Company strategy and (2) a comprehensive review
of its due from affiliates balances. These reviews resulted in a decision by the
Company to begin the process of termination of its affiliations with
approximately 44 Eyecare Practices (18 of which had actually been terminated as
of December 31, 1997 through sale, disposition or disassociation) and a
conclusion that certain portions of its due from affiliates balance might not be
realized. This decision and conclusion resulted in the Company incurring
combined pre-tax charges of $76,706,000 through December 31, 1997.

      In 1998, the Company continued the process of terminating its affiliations
with the 44 Eyecare Practices identified during the strategic review undertaken
in 1997. In addition, certain negative factors, including market position and
demographics, deteriorating physician relations, disappointing operating
results, and declining stock prices, contributed to the destabilization of the
Company's relationship with other affiliated Eyecare Practices. These factors
were caused by or may have been exacerbated by weak economic conditions in some
market areas, declining government and managed care payments, and other factors,
many of which were outside the control of the Company. In 1998, additional
affiliated Eyecare Practices attempted to unilaterally terminate their MSAs. In
ever-increasing numbers, the Eyecare Practices excluded PRG from any involvement
in the business management aspect of those Eyecare Practices and ASCs. The
Eyecare Practices also began bringing lawsuits or commencing arbitration
proceedings against PRG. Although PRG denied the allegations of the Eyecare
Practices and generally asserted counterclaims to recover the amounts owed to
PRG by those Eyecare Practices, PRG's revenues were substantially negatively
impacted. As a result, the Company incurred pre-tax charges of $347,857,000
during 1998. This had a material adverse effect on the Company's financial
condition and results of operations and raised substantial doubt about the
Company's ability to continue as a going concern.

      Other events that occurred during 1998 that severely impacted the
Company's operating environment include:

 . During a single ten month period, two Chief Financial Officers were appointed
  and resigned.
 . The President appointed in late 1997 resigned in November 1998.
 . The Company's principal bank lender informed the Company that PRG was in
  technical default of its bank loan agreement.
 . On November 16, 1998, the NYSE halted trading in the Common Stock of PRG and
  subsequently made application to the SEC to delist the issue.
 . Subsequent to and partially as a result of employee resignations, lack of
  adequate financial information from certain affiliated Eyecare Practices, and
  the Company's inability to timely engage another audit firm (see Item 9), the
  Company did not timely file all reports required to be filed by Section 13 or
  15(d) of the 1934 Act for the years ending 1998, 1999 or 2000.

      In late October 1998, the Restructuring Board was confronted with a
situation in which (i) PRG faced substantial litigation, (ii) PRG's
relationships with its affiliated Eyecare Practices had deteriorated and (iii)
PRG owed approximately $9.5 million and was in technical default under the
NationsBank Credit Facility. The Restructuring Board, together with PRG's
management and independent consultants, engaged in efforts to restructure PRG's
business.

                                      -14-

<PAGE>

         To this end, a plan consisting of two essential components was
formulated to maximize the value of PRG's business and assets. The first
component of the Restructuring Board's plan was development of a program
pursuant to which PRG would in a Buyout with an Eyecare Practice (i) sell to the
Eyecare Practice the assets owned by PRG that were used in the operation of the
Eyecare Practice, (ii) transfer the liabilities of PRG related to the operations
of the Eyecare Practice back to the Eyecare Practice, (iii) collect amounts owed
by the Eyecare Practice and its affiliates to PRG, (iv) release the Eyecare
Practice and affiliated physicians from further obligations under the MSAs and
related employment agreements, (v) cancel notes and other indebtedness owed by
PRG to the Eyecare Practice and affiliated physicians and (vi) enter into mutual
releases. In establishing and arriving at the Buyout formulas and underlying
methodologies and assumptions, PRG was assisted and advised by the financial
advisory firm of Houlihan.

         The second component of the Restructuring Board's plan involved a
search for a strategic partner to purchase certain of PRG's interests in ASCs.
On January 31, 2000 the Company entered into a definitive Acquisition Agreement
with AmSurg related to the sale by the Company of its interests in 11 ASCs, with
estimated sale proceeds of up to approximately $40,000,000 in cash.
Additionally, as part of this agreement, AmSurg and PRG entered into a
Management Agreement under which, effective January 1, 2000, AmSurg began
managing the operations of up to 15 surgery centers affiliated with PRG, 11 of
which were to be purchased pursuant to the terms of the Acquisition Agreement.
As of August 31, 2001, the Company's interests in six (6) ASCs have been sold to
AmSurg. As of August 31, 2001, AmSurg no longer managed any of the operations of
the ASCs affiliated with the Company.

         On January 29, 1999, the Company repaid $2,600,000 of the amounts
outstanding under the amended credit facility. The remaining balance was
acquired by another bank. The outstanding balance of $6,900,000 was paid off in
full in March 1999 with the proceeds from the sale of various Eyecare Practice
assets.

         On March 19, 1999, PRG entered into the RAM Agreement with RAM on
behalf of itself and the funds that it manages which, at the date of the RAM
Agreement, owned $91.896 million principal amount of the Debentures. Pursuant to
the RAM Agreement, RAM loaned PRG $3.75 million to pay interest on the
Debentures that was due December 1, 1998. On July 29, 1999, the Company repaid
the RAM loan.

         In April of 1999 PRG and AmSurg executed a letter of intent for the
purchase by AmSurg of a portion of PRG's ownership interests in 11 of its
practice-based ophthalmology ASCs. The Company continued to experience losses
and negative cash flow from operations during fiscal 1999.

         On July 1, 1999, American Surgery Centers of Las Vegas, Ltd., operator
of the Sahara Lindell Surgical Center ("SLSC"), and American Surgery Centers of
Las Vegas, Inc., a wholly owned subsidiary of American Ophthalmic, Inc. and
general partner of SLSC, filed voluntary bankruptcy petitions. On December 24,
1999, the assets of SLSC were sold and SLSC settled approximately $3.3 million
in debt outstanding to the center's major creditor. During September and October
of 2000, the ASC of Las Vegas, Inc. distributed the remaining assets and the
dismissal of the case is pending.

         On February 1, 2000, PRG filed a voluntary bankruptcy petition.

         On May 25, 2000, EyeCorp filed a voluntary bankruptcy petition.

         The Plan filed by PRG and EyeCorp with and confirmed by the Bankruptcy
Court is a liquidating plan and does not contemplate the financial
rehabilitation of the Company and EyeCorp or the continuation of their
businesses (except with respect to any physicians and practices who cure their
contractual defaults and request that the Company recommence providing
management services). Many of the Company's assets have been or are in the
process of being liquidated, and the Plan contemplates that the remaining
unliquidated assets will be liquidated. Funds generated from the liquidation of
assets will be paid to creditors as set forth in the Plan. Holders of equity
interests may not receive or retain any property under the Plan with respect to
their holdings unless and until all creditors have been paid in full.

         On December 1, 2000, the Bankruptcy Court entered an order confirming
the Plan. The effective date of the Plan was December 15, 2000. In accordance
with the Plan, in December 2000, February, March, April and July 2001, the
Company made distributions to unsecured creditors totaling approximately $97.3
million. Currently the Company does not anticipate any distributions to holders
of equity interests.


                                      -15-

<PAGE>

Results of Operations - Historical

         For the year ended December 31, 2000, the historical statement of
operations data includes the operations of interests in surgery centers through
the date of disposition, if applicable. Revenues have not been recognized by the
Company for those practices which either allege breaches of MSAs or have
attempted to unilaterally terminate their MSAs ("non-reporting").

         The Company incurred a number of significant statement of operations
charges during the latter half of 1998. During the third and fourth quarters of
1998, PRG recorded estimated charges for the dispositions or effective
terminations of practice affiliations of $347,857,000 which included $41,509,565
for the estimated uncollectability of certain accounts receivable. These charges
have been included in "Asset valuation losses" in the accompanying statement of
operations for the year ended December 31, 1998. Additionally, the Company
incurred, during the fourth quarter of 1998, an expense of $912,000 for future
payments to its former Chairman of the Board and Chief Operating Officer in
connection with termination agreements. The charge-off of the future payments to
the former Chairman of the Board and Chief Operating Officer is included in a
separate line item on the accompanying statement of operations for the year
ended December 31, 1998.

         The Company continued to experience losses and negative cash flow from
operations during fiscal 1999. The Company recorded a loss of $11,755,000 at
December 31, 1999. Throughout 1999, the Company aggressively pursued the plan
formulated by the Restructuring Board. Accordingly, the Company closed Buyouts
with 48 practices during 1999 and sold interests in 22 surgery centers. The
Company recognized a gain on the sale of these assets of $7,447,000. The gain
can be attributed to those practices that were fully reserved in 1998 and which
subsequently closed Buyouts in 1999. The Company also recognized an asset
valuation recovery of $6,040,000 for practice relationships that were deemed
fully impaired in 1998 based upon management's analysis of future cash flows and
the related operating environment in 1998 and 1999. The operating environment of
the Company had substantially disintegrated by the end of 1999, and on February
1, 2000, PRG filed a petition for voluntary bankruptcy. For additional
discussion regarding the bankruptcy filing and filing of the Plan under Chapter
11 (see Item 1. "Business. The Plan").

         Mann Frankfort Stein and Lipp CPAs LLP, ("MFSL"), independent public
accountants have audited the Company's consolidated financial statements at and
for the years ended December 31, 1999 and 2000. Management has made available to
MFSL all of the Company's financial records and related data. MFSL was appointed
as the principal independent public accountants by the Board of Directors on
March 12, 1999 following the resignation of its predecessor independent public
accountants, Arthur Andersen on November 13, 1998.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

         Revenues. Revenues were $40,174,000 for the year ended December 31,
         2000 compared to $83,940,000 for the year ended December 31, 1999, a
         decrease of $43,766,000 or 52.1%. The primary reason for the decrease
         was the significant number of Eyecare Practices and ASCs that
         consummated Buyouts during 2000. No revenues have been recognized in
         2000 for the non-reporting Eyecare Practices.

         Costs and Expenses. Costs and expenses were $3,842,000 for the year
         ended December 31, 2000 versus $95,695,000 for the comparable period in
         1999. This significant decrease of $91,971,000 was primarily due to the
         number of consummated Buyouts in 2000. Additionally, no operating costs
         and expenses incurred by any Eyecare Practices are reflected in the
         operating expenses of PRG in 2000 as the remaining Eyecare Practices
         have not reported to PRG for any of 2000. Costs and expenses decreased
         as a percentage of revenues (from 114.0% in 1999 to 9.56% in 2000).

         Salaries, Wages and Benefits. Salaries, wages and benefits were
         $12,766,000 during 2000 compared to $33,181,000 for the year ended
         December 31, 1999, a decrease of $20,415,000 or 61.5%. The decrease is
         primarily attributable to the resignation of employees who returned to
         work for Eyecare Practices which either consummated Buyouts during 2000
         or unilaterally purported to terminate their relationship with PRG. As
         a percentage of revenues, salaries, wages and benefits decreased from
         39.5% of revenues in 1999 to 31.8% of revenues in 2000.

         Pharmaceuticals and Supplies. Expenses for pharmaceuticals and supplies
         were $7,240,000 in 2000 compared to $15,195,000 for the year ended
         December 31, 1999, a decrease of $7,955,000 or 52.4%. Expenses
         continued to decrease in 2000 as the result of Buyouts in 2000.
         Pharmaceuticals and supplies as a percent of revenues did not change
         significantly between 1999 (18.1%) and 2000 (18.0%) because 2000
         revenues decreased correspondingly with bought-out and non-reporting
         practices.

                                      -16-

<PAGE>

         General and Administrative. General and administrative expenses were
         $24,584,000 for the year ended December 31, 2000 compared to
         $44,000,000 for the year ended December 31, 1999, a decrease of
         $19,416,000 or 44.1%. The increase in general and administrative
         expenses as a percent of revenues between 1999 (52.4%) and 2000 (61.2%)
         was due to a reduction in revenues for a significant number of
         practices consummating buyouts and an increase in legal expenses
         related to the bankruptcy filings and consummation of numerous sales
         transactions during 2000.

         Depreciation and Amortization. Depreciation and amortization expenses
         were $2,574,000 for the year ended December 31, 2000 compared to
         $7,885,000 for the year ended December 31, 1999, a decrease of
         $5,311,000 or 67.4%. As a percentage of revenues, depreciation and
         amortization decreased minimally during 2000 (9.4% of revenues in 1999
         vs. 6.4% of revenues in 2000) as reductions in assets were in line with
         reductions in revenues.

         Interest Expense. Interest expense was $899,000 for the year ended
         December 31, 2000 compared $9,232,000 for the year ended December 31,
         1999, a decrease of $8,333,000. In accordance with the provisions of
         the U.S. Bankruptcy Code, interest on pre-petition indebtedness stops
         accruing at the time a voluntary petition is filed. This abatement of
         interest precipitated a substantial decrease in interest expense from
         1999 to 2000. Another factor for the decrease was the number of
         practices consummating Buyouts during 1999 and 2000 with associated
         debt either paid off as the result of the Buyout or acquired by the
         practice, thus reducing the outstanding debt and the associated
         interest expense.

         Interest Income. Interest income was $4,500,000 for the year ended
         December 31, 2000 compared to $1,300,000 for the year ended December
         31, 1999, an increase of $3,200,000. The large increase is due to the
         substantial increase in funds available for investment precipitated by
         numerous successful Buyout transactions.

         Asset Valuation Recovery. The Company did not recognize an asset
         valuation recovery in 2000. The Company recognized an asset valuation
         recovery of $6,040,000 in 1999. This recovery resulted from the sale of
         assets in 1999 in excess of 1998 estimated values. The increase
         occurred because Eyecare Practices that had previously been identified
         in 1998 as fully impaired consummated Buyouts during 1999.

         Patent Litigation Defense Costs. Patent litigation defense costs were
         $555,000 in 2000 as compared to $989,000 in 1999. The decrease is
         attributable to the completion of the Company's defense of the patent
         litigation process in 2000. This litigation resulted in a favorable
         settlement for the Company in May of 2000.

         Gain on Sale of Assets. During 2000, PRG consummated 35 Buyouts with
         practices and sold certain interests in 12 surgery centers at a gain of
         $40,276,000. The gain occurred for those practices sold in 2000 that
         were previously identified as fully impaired at year end 1998. The
         Company recognized a gain of $7,447,000 on the sale of assets for 48
         practices consummating Buyouts and certain interests in 22 surgery
         centers in 1999.

         Provision (Benefit) for Income Taxes. The 2000 tax provision resulted
         from additional deferred tax assets that were again fully reserved for
         in accordance with Financial Accounting Standards No. 109 ("FAS 109").

    Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

         Revenues. Revenues were $83,940,000 for the year ended December 31,
         1999 compared to $354,108,000 for the year ended December 31, 1998, a
         decrease of $270,168,000 or 76.3%. The primary reason for the decrease
         was the significant number of Eyecare Practices that either consummated
         Buyouts during 1999 or that unilaterally ceased paying management
         service fees during 1998.

         Costs and Expenses. Costs and expenses were $95,695,000 for the year
         ended December 31, 1999 versus $740,540,000 for the comparable period
         in 1998. This decrease of $644,845,000 was attributable primarily to
         the recognition of the associated expense for impairment of assets in
         1998. Many related expense categories in 1999 were significantly
         decreased in comparison to 1998 primarily due to the number of
         consummated Buyouts in 1999. Costs and expenses decreased as a
         percentage of revenues (from 209.1% in 1998 to 114.0% in 1999).

         Salaries, Wages and Benefits. Salaries, wages and benefits were
         $33,181,000 during 1999 compared to $176,808,000 for the year ended
         December 31, 1998, a decrease of $143,627,000 or 81.2%. The decrease is
         primarily attributable to the resignation of employees who returned to
         work for Eyecare Practices which either consummated Buyouts during 1999
         or that unilaterally purported to terminate their relationship with
         PRG. As a

                                      -17-

<PAGE>

         percentage of revenues, salaries, wages and benefits decreased from
         49.9% of revenues in 1998 to 39.5% of revenues in 1999.

         Pharmaceutical and Supplies. Expenses for pharmaceuticals and supplies
         were $15,195,000 in 1999 compared to $46,158,000 for the year ended
         December 31, 1998, a decrease of $30,963,000 or 67.1%. This decrease
         was primarily the result of the number of affiliated practices that
         purported to unilaterally terminate their relationship with PRG during
         the second half of 1998. Expenses continued to decrease in 1999 for
         Eyecare Practices sold in 1999. Pharmaceuticals and supplies as a
         percent of revenues did not change significantly between 1998 (13.0%)
         and 1999 (18.1%) because 1999 revenues decreased correspondingly with
         bought-out and non-paying Eyecare Practices.

         General and Administrative. General and administrative expenses were
         $44,000,000 for the year ended December 31, 1999 compared to
         $105,253,000 for the year ended December 31, 1998, a decrease of
         $61,253,000 or 58.2%. General and administrative expenses increased
         significantly as a percent of revenues at 29.7% and 52.4% for 1998 and
         1999, respectively. The increase was due to the number of Eyecare
         Practices consummating Buyouts in 1999.

         Depreciation and Amortization. Depreciation and amortization expenses
         were $7,885,000 for the year ended December 31, 1999 compared to
         $26,000,000 for the year ended December 31, 1998, a decrease of
         $18,115,000 or 69.7%. This substantial decrease is attributable to
         related Buyouts by Eyecare Practices during 1999. As a percentage of
         revenues, depreciation and amortization increased minimally during 1999
         (7.3% of revenues in 1998 vs. 9.4% of revenues in 1999) as certain
         adjustments were made to both depreciable lives and amortization
         periods during the year.

         Interest Expense. Interest expense was $9,232,000 for the year ended
         December 31, 1999 compared to $12,385,000 for the year ended December
         31, 1998, a decrease of $3,153,000. Interest expense decreased because
         the revolving credit facility was paid off in March 1999. (See Note 9
         "Long-Term Obligations"). Another factor for the decrease was the
         number of Eyecare Practices consummating Buyouts during 1999 with
         associated debt either paid off as the result of the Buyout or acquired
         by the Eyecare practice, thus reducing the outstanding debt and the
         associated interest expense.

         Interest Income. Interest income was $1,300,000 for the year ended
         December 31, 1999 compared to $907,000 for the year ended December 31,
         1998, an increase of $393,000. The increase is due to the Company
         successfully consummating several Buyouts during 1999, which generated
         proceeds available for investing.

         Asset Valuation Recovery. The Company recognized an asset valuation
         recovery of $6,040,000 in 1999. This recovery resulted from the sale of
         assets in 1999 in excess of 1998 estimated values. The increase
         occurred because Eyecare Practices that had previously been identified
         in 1998 as fully impaired consummated Buyouts during 1999.

         Patent Litigation Defense Costs. The modest increase from 1998 in the
         patent litigation defense costs (from $798,000 in 1998 to $989,000 in
         1999) is attributable to an increase in legal fees connected with the
         Company's defense of the patent litigation process as compared from
         1998 to 1999. This litigation resulted in a favorable settlement for
         the Company in May of 2000.

         Loss (Gain) on Sale of Assets. During 1999, PRG consummated Buyouts
         with 48 Eyecare Practices and sold certain interests in 22 surgery
         centers at a gain of $7,447,000. The gain occurred for those Eyecare
         Practices sold in 1999 that were previously identified as fully
         impaired at year end 1998. The Company recognized a loss of $25,276,000
         on the sale of assets for 9 Eyecare Practices consummating Buyouts in
         1998.

         Provision (Benefit) for Income Taxes. The 1999 tax provision resulted
         from additional deferred tax assets that were again fully reserved for
         in accordance with Financial Accounting Standards No. 109 ("FAS 109").
         This compares to an income tax benefit in 1998 of $66,867,000 or 17.3%
         of loss before income tax that is less than the 35% statutory rate
         primarily due to the effect of nondeductible asset valuation losses.
         The 1998 benefit arose from the write-off of the deferred tax liability
         recorded in connection with intangible assets related to acquisitions
         of certain practice relationships and interests in surgery centers. The
         remaining net deferred asset was fully reserved (valuation allowance)
         as per the requirements of FAS 109.

                                      -18-

<PAGE>

         Liquidity and Capital Resources

         Cash, Working Capital and Debt

                  As of December 31, 1999, cash was $43,315,000 and the working
         capital deficit was $71,789,000. The working capital deficit was caused
         primarily by the Debentures being classified as current liabilities
         (See "Credit Facilities" below). Overall indebtedness both short and
         long term was $131,883,000.

                  As of December 31, 2000, cash had decreased to $23,330,000 and
         working capital had decreased to a deficit of $33,723,000. The decrease
         in cash was primarily attributable to the reduction of debt. Working
         capital as compared to 1999 improved due to the reduction of
         outstanding bank debt and accounts payable. Overall indebtedness both
         short and long term had decreased to $51,007,000 due to both debt paid
         off or retired in connection with sale of Eyecare Practices in 2000 and
         payments made to the bondholders.

         Credit Facilities

                  In March 1997, PRG arranged a new $90,000,000 credit facility
         with a syndicate of banks led by its prior bank lender, to be used for
         acquisitions, capital expenditures, working capital and Common Stock
         repurchases. The new credit facility was secured by the stock of the
         subsidiaries of PRG and guaranteed by such subsidiaries. PRG borrowed
         approximately $8,000,000 under the facility in early October of 1997 to
         finance certain acquisitions but went into technical default subsequent
         thereto. The $90,000,000 facility was subsequently terminated and a new
         $14,000,000 facility was established with the lead bank from its
         $90,000,000 facility. PRG had borrowed $12,248,000 from its new
         facility as of December 31, 1997. The amended facility required that
         the balance outstanding be paid down to $9,500,000 by September 30,
         1998, with the remainder to be repaid on December 31, 1998. The
         facility was guaranteed by Lucius Burch, Dr. David Meyer and Robert
         Alpert. The consideration paid to these individuals in return for their
         guarantees was approximately $1,676,0000.

                  The facility was paid down to $9,500,000 by September 30,
         1998. On December 31, 1998, PRG was in technical default on the
         $9,500,000 facility with its lead bank and the debt was subsequently
         purchased by another bank in late January 1999. The debt was then
         retired in full in March 1999 with proceeds from the sale of various
         Eyecare practice assets.

                  On March 19, 1999, PRG entered into the RAM Agreement with
         RAM, which then owned or managed approximately $92 million principal
         amount of the Debentures. PRG's overall restructuring would involve (i)
         the sale of Eyecare practice assets and interests in surgery centers to
         its affiliated Eyecare Practices and a concurrent termination of MSAs
         and execution of mutual releases between PRG and such Eyecare Practices
         and (ii) the sale of certain interests in surgery centers to a
         strategic partner.

                  Under the terms of the RAM Agreement with RAM, the holders of
         the $125 million principal amount of PRG's Debentures would receive (i)
         $100 million principal amount in cash and/or notes from the
         restructuring of PRG's relationships with its affiliated Eyecare
         Practices and the sale to a strategic partner of certain interests in
         surgery centers and (ii) an interest in the net proceeds of certain
         patent litigation. PRG had agreed to pay $3.75 million in interest that
         was due on the Debentures on December 1, 1998. In connection with the
         RAM Agreement, RAM loaned to PRG $3.75 million. The loan was evidenced
         by a secured promissory note, which bore interest at the rate of 20%
         per annum and was due and payable in its entirety on September 30,
         1999. Interest on the note was payable monthly beginning May 1, 1999.
         There was no prepayment penalty for early retirement of the note. The
         note was secured by a pledge of an interest in various of its
         subsidiaries. The $3.75 million note was paid off July 1999.

                  In July 1999, RAM notified PRG that RAM believed that there
         had been a material breach by PRG regarding a representation related to
         certain litigation discussed in the RAM Agreement, which RAM believed
         provided it the right to terminate the RAM Agreement. RAM also
         questioned whether PRG used reasonable efforts to complete the
         restructuring by September 30, 1999. PRG believes that it had used its
         reasonable efforts to complete the restructuring. The restructuring was
         not completed by September 30, 1999.

                  In fiscal 1999, PRG completed sales of assets used in
         connection with the operation of 48 medical practices and certain
         interests in 22 ASCs. In connection with those sales, all litigation
         and other disputes with these affiliated medical practices and surgery
         centers were resolved, approximately $17 million in principal

                                      -19-

<PAGE>

         amount of notes payable by PRG to the affiliated medical practices were
         cancelled and the management services agreements between PRG and the
         affiliated medical practices were terminated.

                  As of August 31, 2001, PRG made  distributions to unsecured
         creditors with a combined total of  approximately  $97.3 million (see
         Item 1. "Business.  The Plan").

         Liquidity

                  PRG and EyeCorp filed the Plan on October 13, 2000. The Plan
         is a liquidating plan as it does not contemplate the financial
         rehabilitation of the Company or the continuation of their businesses
         (except with respect to any physicians and practices who cure their
         contractual defaults and request that the debtors recommence providing
         management services). Many of the Company's assets have been or are in
         the process of being liquidated, and the Plan contemplates that the
         remaining unliquidated assets will be liquidated.

                  As discussed previously, the Company had a working capital
         deficit of approximately $34 million at December 31, 2000. The Company
         was able to generate adequate cash flow to meet its needs in fiscal
         1999 and 2000 through the sale of various assets. Throughout 1999, PRG
         continued to experience further losses and negative cash flows from
         operations, and on February 1, 2000, the Company filed a voluntary
         petition under Chapter 11 of the Bankruptcy Code.

         Inflation

                  To date, inflation has not had a material effect on the
         combined results of operations of the Eyecare Practices.

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

         Financial Statements and Supplementary Data are included herein on
         pages F-1 through F-19.

                                      -20-

<PAGE>

                                    PART III

ITEM 9.  DIRECTOR AND EXECUTIVE OFFICERS OF PRG
         --------------------------------------

         The name, age, position and term of the executive officers of the
Company is set forth under the heading "Executive Officers" on page 8 under Item
1 of this report. The following chart sets forth the name, age, position and
term of each director of the Company.

                   Name           Age                    Position
                   ----           ---                    --------
         Michael W. Yeary         47          Director, President and Chief
                                              Restructuring Officer

         Michael Yeary served as Chief Operating Officer and President of PRG
from October, 1998 until February 2000. Since February 1, 2000, he has served as
PRG's President and Chief Restructuring Officer. Additionally, since March 16,
2000, Mr. Yeary has served as PRG's sole director. Finally, from December 15,
2000, he has served as the Liquidation Agent for the Company. From February 1996
until February 1998, Mr. Yeary served as Regional Vice President of PRG for
South Texas and Louisiana. From January 1, 1998 until March 30, 1998, Mr. Yeary
served as the Interim Accounting Manager of PRG in addition to his other duties.
From 1989 to February 1996, he was the Chief Financial Officer for Mann Berkeley
Eye Center in Houston, Texas. From 1981 to 1989, Mr. Yeary served as the
Executive Vice President, Chief Financial Officer for the Tomasco Group, a real
estate development and investment company with operations in industries related
to commercial real estate, manufacturing and oil and gas. Previously, Mr. Yeary
served in a variety of capacities in retail and public accounting with Deloitte
and Touche, LLP. Mr. Yeary is a Certified Public Accountant and received his
B.B.A. in Accounting from Lamar University. He was also a Director of Humble
National Bank.


                                      -21-

<PAGE>

ITEM 10. EXECUTIVE COMPENSATION
         ----------------------

         The following table sets forth a summary of the compensation paid by
PRG for services rendered in all capacities to PRG during 1998, 1999 and 2000 to
the Named Executive Officers.

<TABLE>
<CAPTION>
                                                                                         Long-term Compensation

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

                                                   Annual Compensation                   Awards               Payouts


                                                                     Other        Restricted   Securities       LTIP    Health
    Name and Principal               Year   Salary($)     Bonus($)   Annual          Stock     Underlying     Payouts  Insurance
         Position                                                  Compensation    Awards($)     Options        ($)     Premiums
                                                                      ($)                                                 ($)
  -------------------------------------------------------------------------------------------------------------------------------
  <S>                                <C>    <C>           <C>      <C>            <C>           <C>            <C>      <C>
  Daniel Chambers                    1998    175,000            -      -             -             -             -         2,072
                                     1999    157,179      102,519      -             -             -             -         2,229
                                     2000     90,000       25,000      -             -             -             -         3,459
  -------------------------------------------------------------------------------------------------------------------------------
  Lane Edenburn, Vice                1998     94,062            -      -             -             -             -         2,070
  President *                        1999    142,019      127,060      -             -             -             -         2,251
                                     2000    262,500      102,083      -             -             -             -         4,540
  -------------------------------------------------------------------------------------------------------------------------------
  Karen Nicolaou, Controller         1998     40,122            -      -             -             -             -         2,622
  and Director of Claims             1999    110,000       93,331      -             -             -             -         2,251
  Resolution                         2000    140,000      352,834      -             -             -             -         3,720
  -------------------------------------------------------------------------------------------------------------------------------
  Michael W. Yeary, President,       1998    174,985       60,000      -             -             -             -         2,048
  Chief Restructuring Officer,       1999    226,250      202,581      -             -             -             -         2,251
  and Liquidation Agent              2000    450,000      880,168      -             -             -             -         3,505
</TABLE>


  *  Mr. Edenburn is no longer employed by the Company.



                                      -22-

<PAGE>

Option Grants During 1998

The following table presents information regarding 1998 grants of options to
purchase shares of Common Stock for each of the Named Executive Officers (there
were no options granted during 1999 or 2000):

<TABLE>
<CAPTION>
                                      Individual Grants                              Alternative to (f) and (g):
                                                                                          Grant date value
       -----------------------------------------------------------------------------
             Name              Number     % of Total
                                 of        Options
                             Securities   Granted to     Exercise
                             Underlying   Employees      or Base       Expiration       Grant date Present
                             Options      in Fiscal       Price           Date                Value
                             Granted(#)     Year        ($/Sh)/(2)/
       ----------------      ----------  ------------  -------------  ------------     --------------------
       <S>                   <C>         <C>           <C>            <C>              <C>
       Daniel Chambers         20,000        1.26         $ 4.00        06/23/03             $0.00 (2)
                               52,500        3.32         $ 2.75        08/27/03             $0.00 (2)

       Lane Edenburn       (1)  7,500         .47         $4.938        06/06/03             $0.00 (2)
                                5,000         .32         $ 2.75        08/24/03             $0.00 (2)

       Karen G. Nicolaou        7,500         .47         $ 2.75        08/27/03             $0.00 (2)

       Michael Yeary           50,000        3.16         $ 4.00        06/23/03             $0.00 (2)
                               52,500        3.32         $ 2.75        08/27/03             $0.00 (2)
                               60,000        3.79         $ 4.50        01/08/03             $0.00 (2)
                               40,000        2.53         $ 4.93        06/04/03             $0.00 (2)
</TABLE>

(1)  Individual is no longer employed by the Company; therefore, all stock
     options granted to said individual will expire in accordance with the terms
     of the stock option plan.

(2)  Upon confirmation of the Plan, outstanding options were reduced to a
     potential claim in bankruptcy. Option holders may not receive or retain any
     property under the Plan with respect to their holdings unless or until all
     creditors have been paid in full.

                                      -23-

<PAGE>

Aggregated Option Exercises During 2000 and Year End 2000 Option Values

The following table presents information regarding options exercised in 2000,
and the value of options outstanding at December 31, 2000 for each of the Named
Executive Officers:

<TABLE>
<CAPTION>
                                                       Number of Securities            Value of Unexercised
                                                      Underlying Unexercised           In-the-Money Options
                                                       Options at FY-End(#)               at FY-End($)/(1)/
                                                  ------------------------------- --------------------------------
                          Shares
                          Acquired      Value
        Name                on        Realized($)   Exercisable   Unexercisable    Exercisable      Unexercisable
                          Exercise
                            (#)
---------------------    ----------  ------------  ------------- ---------------  -------------    ---------------
<S>                      <C>         <C>           <C>           <C>              <C>              <C>
Daniel Chambers              0          $0.00          72,500          0               $0 (2)           $0

Lane Edenburn    (1)         0          $0.00          20,000          0               $0 (2)           $0

Karen G. Nicolaou            0          $0.00           7,500          0               $0 (2)           $0

Michael W. Yeary             0          $0.00         202,500          0               $0 (2)           $0
</TABLE>

     (1)  Individual is no longer employed by the Company; therefore, all stock
          options granted to said individual will expire in accordance with the
          terms of the stock option plan.

     (2)  Upon confirmation of the Plan, outstanding options were reduced to a
          potential claim in bankruptcy. Option holders may not receive or
          retain any property under the Plan with respect to their holdings
          unless or until all creditors have been paid in full.

Compensation of Directors

          Subsequent to October 1998, no members of PRG's Board of Directors
received compensation for their service as directors of PRG. All directors of
PRG have been reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board of Directors or committees thereof, and for other expenses
incurred in their capacity as directors of PRG.

Employment Agreements

          As of December 31, 2000, PRG was a party to employment agreements with
three key employees: Michael W. Yeary, President and Chief Restructuring
Officer; Karen Nicolaou, Controller; and Lane Edenburn, General Counsel.

          The Employment Agreement between Mr. Yeary and the Company (the "Yeary
Employment Agreement") was dated January 31, 2000 and provided for a term of 18
months, a base salary of $450,000 per year and incentive bonuses payable as
follows: (i) $125,000 on January 31, 2000; (ii) $150,000 on July 31, 2000; (iii)
$150,000 on January 31, 2001; and (iv) $150,000 on July 31, 2001. The Yeary
Employment Agreement provided that if it was terminated by the Company without
"Cause" (as defined in the Yeary Employment Agreement) prior to the expiration
of its term, Mr. Yeary would be entitled to receive salary and bonuses payable
under the Yeary Employment Agreement for the remainder of the term of the Yeary
Employment Agreement.

          Mr. Yeary has also been named the Company's Liquidation Agent. In his
capacity as Liquidation Agent, Mr. Yeary received salary and bonuses payable
under the Yeary Employment Agreement through its term. From August 2, 2001 until
February 1, 2002, Mr. Yeary will receive compensation at an annualized rate that
is equal to one-half (1/2) his annual compensation (including bonuses and
benefits) payable under the Yeary Employment Agreement. Beginning February 1,
2002, the Oversight Committee may elect to pay Mr. Yeary in his capacity as
Liquidation Agent either one-half (1/2) the annualized compensation provided for
in the Yeary Employment Agreement or an hourly rate of $400 plus reasonable
out-of-pocket expenses in the performance of his duties to the Company.

          Mr. Yeary, in his capacity as Liquidation Agent, will receive an
incentive bonus, which he may, in his discretion, share with other employees
assisting him in the Company's liquidation. This bonus will be 10% of each
distribution payable to the holders of the Indenture Trustee's Claim in excess
of the sum of (i) $105,481,023.29 and (ii) the amount of all interest actually
earned by PRG from February 1, 2000 through the December 21, 2000 or any

                                      -24-

<PAGE>

subsequent Distribution Date under the Plan. Additionally, Mr. Yeary was
entitled to a bonus on cash distributions to the holder of the Indenture
Trustee's Claim as follows:

          Distribution Made By     Bonus as Percentage of      Actual Bonus
          --------------------       Amount Distributed        Distributed
                                     ------------------        -----------

          December 22, 2000                1.00%                $ 804,670

          February 15, 2001                0.50%                $   7,432

          April 1, 2001                    0.25%                $  35,055

     The Employment Agreement between Ms. Nicolaou and the Company (the
"Nicolaou Employment Agreement") was dated January 31, 2000 and provided for a
term of 18 months, a base salary of $140,000 per year and incentive bonuses
payable as follows: (i) $70,000 on January 31, 2000; (ii) $70,000 on July 31,
2000; (iii) $70,000 on January 31, 2001; and (iv) $100,000 on July 31, 2001. The
Nicolaou Employment Agreement provided that if it was terminated by the Company
without "Cause" (as defined in the Nicolaou Employment Agreement) prior to the
expiration of its term, Ms. Nicolaou would be entitled to receive salary and
bonuses payable under the Nicolaou Employment Agreement for the remainder of the
term of the Nicolaou Employment Agreement. From August 2, 2001 until December
31, 2001, Ms. Nicolaou will receive compensation at an annualized rate that is
equal to one-half (1/2) her annual compensation (including bonuses and benefits)
payable under the Nicolaou Employment Agreement.

     The Employment Agreement between Mr. Edenburn and the Company (the
"Edenburn Employment Agreement") was dated January 31, 2000 and provided for a
term of 12 months, a base salary of $175,000 per year and incentive bonuses
payable as follows: (i) $87,500 on January 31, 2000; (ii) $87,500 on July 31,
2000; and (iii) $100,000 on January 31, 2001, unless the Company elected to
extend the term of the Edenburn Employment Agreement for an additional six month
period beyond January 31, 2001. The Edenburn Employment Agreement was not
extended beyond January 31, 2001. Mr. Edenburn is no longer employed by the
Company.

                                      -25-

<PAGE>

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
            --------------------------------------------------------------

         The following table sets forth information with respect to beneficial
ownership of Common Stock as of December 31, 2000 by (i) all persons known to
PRG to be the beneficial owner of 5% or more of the Common Stock, (ii) the sole
director of PRG, (iii) each of the President and the two executive officers
other than the President (the "Named Executive Officers"); and (iv) all PRG
directors and executive officers as a group. Holdings of persons other than the
Named Executive Officers are based on information contained in Schedule 13D's
filed with the Company and the SEC. All persons listed have sole voting and
investment power with respect to their shares unless otherwise indicated.

<TABLE>
<CAPTION>
                                                                               Amount and Nature
                                                                                 Of Beneficial          Percent
           Name of Beneficial Owner or Number of Persons in Group                 Ownership             Of Class
           ------------------------------------------------------                 ---------             --------
    <S>                                                                          <C>                   <C>
    David Meyer, M.D ........................................................     2,497,249 (1)          8.27%

    Alpert Companies ........................................................     1,648,600 (2)         5.443%

    Michael W. Yeary ........................................................         3,366 (3)             *

    Karen Nicolaou ..........................................................             0 (4)             *

    Lane Edenburn ...........................................................             0 (5)             *

    All directors and executive officers as a group (3 persons) .............         3,366 (3)(4)(5)       *
</TABLE>

_______________

* Less than 1%.

(1)      Includes 770,000 shares held by a general partnership in which Dr.
         Meyer is a partner.

(2)      The Amendment to Schedule 13D dated December 23, 1998 filed these by
         entities with the SEC indicates that these shares are beneficially
         owned by Robert Alpert and certain entities affiliated with Robert
         Alpert. The address listed in the Amendment to Schedule 13D dated
         December 23, 1998 lists the address of Robert Alpert and these entities
         as Three Allen Center, 333 Clay, Suite 4515, Houston, Texas 77002.

(3)      Does not include options held by Mr. Yeary to purchase a total of
         202,500 shares of Common Stock at prices ranging from $4.00 to $4.938
         per share

(4)      Does not include options held by Ms. Nicolaou to purchase 7,500 shares
         of Common Stock at a price of $2.75 per share.

(5)      Does not include options held by Mr. Edenburn to purchase a total of
         20,000 shares of Common Stock at prices ranging from $2.75 to $4.938
         per share. Mr. Edenburn is no longer employed by the Company.

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
            ----------------------------------------------

Buyout Transactions

         On January 28, 2000, EyeCorp and PRG completed the sale to the
Vitreoretinal Foundation, P.L.L.C. ("VRF"), RME Associates and certain
associated physicians, of the practice assets of VRF, certain real estate
associated with VRF and a 35% equity interest in Ridge Lake ASC General
Partnership, a partnership formed to own and operate Ridge Lake ASC. The
consideration for the transactions consisted of cash in the amount of $1,248,349
and a promissory note in the original principal amount of $1,282,183. The
promissory note extends for a three-year term commencing January 28, 2000 and
accrues interest at 10% per annum. The first payment on the note was due on
February 1, 2000. The note is secured by a lien on all VRF practice assets and a
negative pledge of the 35% interest in Ridge Lake ASC General Partnership
purchased in this transaction. In addition, the note is guaranteed by the
individual VRF practice physicians, including Dr. Meyer. The note is currently
in default for nonpayment and notice of default and acceleration has been
provided to both VRF and the guarantors. As of December 31, 2000, this note and
the accumulated accrued interest have been fully reserved and reflected as bad
debt expense in the consolidated Statement of Operations. In connection with the
transaction, the liabilities of the VRF were assumed by the VRF, the MSA was
terminated, the VRF granted to EyeCorp a right of first refusal to develop an
ASC and all parties entered into mutual releases. The purchase price was

                                      -26-

<PAGE>

determined in accordance with the methodology developed by Houlihan, and
Houlihan opined that the consideration received by PRG in connection with assets
purchase price, the real estate purchase price and the Ridge Lake ASC equity
interest purchase price was fair to the Company and its shareholders from a
financial point of view. In connection with this transaction, EyeCorp also
issued to VRF an option, exercisable on or before February 28, 2000, to purchase
the remaining 65% equity interest in the Ridge Lake ASC and the Van Dyck ASC
General Partnership. VRF did not exercise either option. Additionally, VRF had
options, exercisable on or before December 31, 2000, to purchase 14% of
EyeCorp's Ridge Lake ASC ownership interest and 14 % of EyeCorp's Van Dyck ASC
ownership interest exercisable for an all cash purchase price of $1,010,240 and
$208,476, respectively. The VRF did not exercise either of these options. Dr.
David Meyer is a shareholder of VRF and RME Associates. Dr. Meyer served as
Chairman of the Board of Directors in 1998 and 1999 and resigned as a member of
the Board of Directors on March 16, 2000.

         Effective April 30, 1999, PRG completed the sale to John R. Shepherd,
M.D., LTD. ("Shepherd Practice"), and certain physicians, of the practice assets
associated with the Shepherd Practice and a 35% equity interest in PRG Nevada
Surgicenter, L.L.C. ("Shepherd ASC") for cash consideration of $1,951,820. In
connection with the transaction, the liabilities of the Shepherd Practice were
assumed by the Shepherd Practice, the MSA was terminated, the Shepherd Practice
and the associated physicians granted to PRG a right of first refusal to develop
an ASC and a general release was entered into by all parties. The purchase price
for the Shepherd Practice Assets and the equity interest in the Shepherd ASC was
determined in accordance with the methodology developed by Houlihan, and
Houlihan opined that the consideration received by the Company was fair from a
financial point of view. Dr. Shepherd served on the Board of Directors of the
Company in 1998 and 1999 and resigned as a member of the Board of Directors on
March 16, 2000.

         Effective April 30, 1999, PRG completed the sale to Barnet Dulaney,
P.L.L.C. ("Barnet Dulaney") and certain physicians of the practice assets and
ASC profits interest associated with the Barnet Dulaney practice for cash
consideration of $2,712,000. In connection with the transaction, the liabilities
of Barnet Dulaney were assumed by Barnet Dulaney, the MSA was terminated, Barnet
Dulaney and its associated physicians granted to PRG a right of first refusal to
develop an ASC and all parties entered into a general release. The purchase
price for the Barnet Dulaney practice assets and the termination of the MSA was
determined in accordance with the methodology developed by Houlihan, and
Houlihan opined that the consideration received by the Company was fair from a
financial point of view. Mr. Dulaney served on the Board of Directors of the
Company in 1998 and 1999 and resigned as a member of the Board of Directors on
March 16, 2000.

Certain Indebtedness

         In July, 1997, the Company loaned $500,000 at an interest rate of 8% to
Dr. Kenneth Westfield to provide funds to Dr. Westfield to purchase the practice
of a retiring physician practicing in his market (also a PRG affiliate). The
loan was repayable in two equal installments of $250,000 in January and July of
1998. The loan was repaid as part of the Buyout transaction effected by Dr.
Westfield with the Company. Dr. Westfield served as a member of the Board of
Directors in 1997 and resigned as a member on January 24, 1998.

         In November, 1997, the Company replaced its $90,000,000 revolving
credit facility with a $14,000,000 revolving credit facility. As of December 31,
1997, outstanding borrowings under the facility were $12,248,000. The amended
facility required the balance outstanding to be paid down to $9,500,000 by
September 30, 1998, with the remainder to be paid on December 31, 1998. The
facility bore interest at LIBOR plus 2.5% (8.5% at December 31, 1997), with such
interest being repayable, in its entirety, on December 31, 1998. Mr. Burch,
David Meyer, M.D, and Robert Alpert guaranteed the amended facility. Dr. Meyer
served as a member of the Board of Directors in 1997 and resigned as a member on
January 24, 1998. Dr. Meyer again served as a member of the Board of Directors
from October 30, 1998 to March 16, 2000. Total compensation to Mr. Burch, Dr.
Meyer, and Robert Alpert for these guaranties was $752,258, $785,941, and
$137,546, respectively.

                                      -27-

<PAGE>

Management Service Agreements

         PRG was a party to certain MSAs with affiliated practices in which
certain former directors have or had an ownership interest. Service fees accrued
to PRG in 1997 by such affiliated practices in which certain directors had an
ownership interest were as follows: Alan C. Baum, M.D. (TEI & Assoc.)
$1,652,110; Charles D. Fritch, M.D. (Fritch Eye Care Center) $227,609; Bruce E.
Herron, M.D. (Eye Clinic, P.C.) $809,300; James E. McDonald, M.D. (McDonald Eye
Associates, P.A.) $136,345; Joseph C. Noreika, M.D. (TPZ, Inc.) $129,393; David
M. Schneider, M.D. (David M. Schneider, M.D., Inc.) $568,184; P. Harold Wallar,
M.D. (Inland Eye Institute Medical Group, Inc.) $98,395; Kenneth C. Westfield,
M.D. (Westfield Eye Center) $43,595; David Meyer, M.D. (Vitreoretinal
Foundation) $1,609,048; James W. Rayner, M.D. (Rayner Eye Clinic) $921,531; and
Joe E. Ellis, O.D. (Primary Eye Care, P.S.C.) $9,675. Drs. Fritch, Herron,
McDonald, Noreika, Schneider, Wallar, Westfield, Meyer, Rayner and Ellis served
as members of the Board of Directors in 1997 and resigned as members on January
24, 1998.

         During the course of the Company's 1997 review of its due from
affiliates balance, approximately $1,584,000, $468,000 and $242,000 of
receivables due in connection with the payment of service fees from the
practices of Drs. Meyer, Schneider and Noreika, respectively, were re-evaluated
and subsequently reserved or written off. Drs. Meyer, Schneider and Noreika
served as members of the Board of Directors in 1997 and resigned as members on
January 24, 1998.

Sale of Preferred Stock

         During 1997, the Board of Directors approved a transaction pursuant to
which (i) PRG sold to Emmett E. Moore 200,000 shares of Series B Convertible
Preferred Stock (the "Preferred Shares") for an aggregate purchase price of
$2,225,000, and (ii) the purchase of the Preferred Shares was funded by a loan
from the Company to Mr. Moore. The intent of the sale of Preferred Shares to Mr.
Moore was to align his interests with those of the Company's stockholders by
providing Mr. Moore a significant equity interest in the Company. The principal
of the loan is non-recourse and the interest payable with respect to the loan is
recourse. This loan transaction was contingent on stockholder approval, which
was obtained in May of 1997. During 1997, Mr. Moore was Chairman of the Board of
Directors and Chief Executive Officer of the Company. However, his employment
with the Company was terminated on November 17, 1997. This loan is in default.

                                      -28-

<PAGE>

                                     PART IV

ITEM 13.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
            ----------------------------------------------------------------

<TABLE>
<S>                                                                                                  <C>
(a)   1.    Index to Financial Statements

            The following Financial Statements are included herein:

            Independent Auditors' Report ........................................................    F-2

            Consolidated Balance Sheets as of December 31, 1999 and 2000 ........................    F-3

            Consolidated Statements of Operations for the three years ended December 31, 2000....    F-4

            Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the three
                years ended December 31, 2000 ...................................................    F-5

            Consolidated Statements of Cash Flows for the three years ended December 31, 2000....    F-6

            Notes to Consolidated Financial Statements ..........................................    F-7
</TABLE>

      2.    Index to Financial Schedules.

            No schedules are included because of the absence of conditions
            under which they are required or because information is disclosed
            in the financial statements or notes thereto.

      3.    Exhibits

            The exhibits filed as a part of this report are listed under
            "Exhibits" at subsection (c) of this Item.

(b)   REPORTS ON FORM 8-K:

      The following reports on Form 8-K were filed on behalf of the Company
      during the last quarter of the period covered by this report.

               None.

(c)   EXHIBITS

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

         2.1    --     Modified First Amended Joint Liquidating Plan. (13)

         2.2    --     Order of Court Confirming Modified First Amended Joint
                       Liquidating Plan. (13)

         2.3    --     Acquisition  Agreement by and among PRG and each of the
                       entities  listed on the  signature  pages as Sellers and
                       AmSurg as Buyer dated January 31, 2000. (15)(5)

         3.1    --     Second Restated Certificate of Incorporation of PRG. (7)

         3.2    --     Certificate of Designations, Preferences, Rights and
                       Limitations of Class A Preferred Stock of PRG. (1)

         3.3    --     Third Amended and Restated Bylaws of PRG. (3)

         4.1    --     Form of Warrant Certificate. (1)

                                    -29-

<PAGE>

         4.2      --       Form of certificate evidencing ownership of Common
                           Stock of PRG. (1)

         4.3      --       Rights Agreement dated as of April 19, 1996 between
                           PRG and Chemical Mellon Shareholder Services. (6)

         10.1     --       PRG Amended and Restated 1995 Stock Option Plan.
                           (3)(4)

         10.2     --       PRG 1995 Health Care Professionals Stock Option Plan.
                           (1)

         10.3     --       Employment Agreement between PRG and Emmett E. Moore.
                           (12)(4)

         10.4     --       Employment Agreement between PRG and Richard M. Owen.
                           (12)(4)

         10.6     --       Form of Registration Rights Agreement. (1)

         10.7     --       Form of Registration Rights Agreement. (1)

         10.8     --       Form of Registration Rights and Stockholders
                           Agreement. (1)

         10.9     --       Form of Registration Rights Agreement dated as of
                           March 7, 1996, by and among PRG and the former
                           stockholders of EyeCorp. (3)

         10.10    --       Employment Agreement between PRG and Michael W.
                           Yeary. (14)(4)

         10.11    --       Employment Agreement between PRG and Karen G.
                           Nicolaou. (14)(4)

         10.12    --       Employment Agreement between PRG and Lane Edenburn.
                           (14)(4)

         10.13    --       Form of Indenture, dated as of December 11, 1996,
                           between PRG and U.S. Trust Company of New York, NA.
                           (7)

         10.14    --       Form of Registration Rights Agreement, dated as of
                           December 6, 1996, between PRG, and Smith Barney,
                           Inc., Alex Brown & Sons Incorporated, Salomon
                           Brothers, Dillon Reed & Co., Inc. and Volpe Welty &
                           Company. (7)

         10.15    --       Loan Agreement for $90,000,000 Revolving Credit Loan
                           dated March 14, 1997, between PRG and NationsBank,
                           Agent the Banks Signatory Hereto. (9)

         10.16    --       PRG Employee Stock Purchase Plan. (8)

         10.17    --       Employment Agreement between PRG and Richard
                           Gilleland. (4)(11)

         10.18    --       Employment Agreement between PRG and Peter
                           Dorflinger. (4)(11)

         10.19    --       Employment Agreement between PRG and Pamela
                           Westbrook. (4)(11)

         10.20    --       Employment Agreement between PRG and Ann Chaney.
                           (4)(14)

         10.21    --       First Amended and Restated Loan Agreement for
                           $20,000,000 Revolving Credit Loan dated November
                           1997, between PRG and NationsBank. (11)

         10.22    --       PRG 401(K) Plan. (10)

         10.23    --       Management Services Agreement between PRG and AmSurg,
                           dated January 1, 2000. (14)

         10.24    --       First Amendment to First Amended and Restated Loan
                           Agreement dated April 30, 1998 between PRG and
                           NationsBank. (14)

         10.25    --       Termination Agreement with Peter Dorflinger. (14)

                                      -30-

<PAGE>

         10.26    --    Termination Agreement with Richard Gilleland. (14)

         21.1     --    Subsidiaries. (3)

         24.1     --    Power of Attorney (contained on the signature page of
                        this report).

         27.0     --    Financial Data Schedule. (9)

(1)      Previously filed as an exhibit to the Company's Registration Statement
         on Form S-1 (No. 33-91440) and incorporated herein by reference.
(2)      Previously filed as an exhibit to the Company's Registration Statement
         on Form S-4 (No. 333-00230) and incorporated herein by reference.
(3)      Previously filed as an exhibit to the Company's annual report on Form
         10-K for the year ending December 31, 1995, and incorporated herein by
         reference.
(4)      Management contract or compensatory plan or arrangement, which is being
         identified as such pursuant to Item 14(a)3 of Form 10-K.
(5)      Schedules and similar attachments to this Exhibit have not been filed
         herewith, but the nature of their contents is described in the body of
         this Exhibit. The Company agrees to furnish a copy of any such omitted
         schedules and attachments to the Commission upon request.
(6)      Previously filed as an exhibit to the Company's Registration Statement
         on Form S-1 (no.333-3852) and incorporated herein by reference.
(7)      Previously filed as an exhibit to the Company's Registration Statement
         on Form S-4 (333-19185) and incorporated herein by reference.
(8)      Previously filed as an exhibit to the Company's Registration Statement
         on Form S-8 (No. 333-15547) and incorporated herein by reference.
(9)      Previously filed as an exhibit to the Company's Annual Report on Form
         10-K for the year ending December 31, 1996 and incorporated herein by
         reference.
(10)     Previously filed as an exhibit to the Company's Current Report on Form
         8-K dated May 15, 1997 and incorporated herein by reference.
(11)     Previously flied as an exhibit to the Company's Annual Report for the
         year ending December 31, 1997 and incorporated herein by reference.
(12)     Previously filed as an exhibit to the Company's Quarterly report on
         Form 10-Q for the quarter ending March 31, 1997, and incorporated
         herein by reference.
(13)     Previously filed as an exhibit to the Company's Current Report on Form
         8-K dated December 14, 2000 and incorporated herein by reference.
(14)     Previously filed as an exhibit to the Company's Annual Report on Form
         10-K for the years ended December 31, 1998 and December 31, 1999 and
         incorporated herein by reference.
(15)     Previously filed as an exhibit to the Company's Current Report on Form
         8-K dated February 15, 2000 and incorporated herein by reference.

                                      -31-

<PAGE>

                                   SIGNATURES

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

                                                PHYSICIANS RESOURCE GROUP, INC.


November 6, 2001                            By: /s/ Michael Yeary
                                                -------------------------------
                                                Michael Yeary
                                                Director and Chief Restructuring
                                                Officer

November 6, 2001                            By: /s/ Karen Nicolaou
                                                --------------------------------
                                                Karen Nicolaou
                                                Controller and Director of
                                                Claims Resolution (Principal
                                                Accounting and Financial
                                                Officer)

                                      -32-

<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                             <C>
PHYSICIANS RESOURCE GROUP, INC.:

     Independent Auditors' Report .........................................................................      F-2

     Consolidated Balance Sheets as of December 31, 1999 and 2000 .........................................      F-3

     Consolidated Statements of Operations for the three years ended December 31, 2000 ....................      F-4

     Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the three years
          ended December 31, 2000 .........................................................................      F-5

     Consolidated Statements of Cash Flows for the three years ended December 31, 2000 ....................      F-6

     Notes to Consolidated Financial Statements ...........................................................      F-7
</TABLE>

                                       F-1

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Physicians Resource Group, Inc.:


We have audited the accompanying consolidated balance sheets of Physicians
Resource Group, Inc. (a Delaware corporation) and subsidiaries as of December
31, 2000 and 1999, and the related consolidated statements of operations,
changes in stockholders' equity (deficit) and cash flows for each of the years
in the three-year period ended December 31, 2000. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Physicians Resource Group, Inc. and subsidiaries at December 31, 2000 and 1999,
and the consolidated results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 2000, in conformity
with accounting principles generally accepted in the United States.

The accompanying consolidated financial statements have been prepared on a going
concern basis. As discussed in Note 2 of the Notes to Consolidated Financial
Statements, on February 1, 2000, the Company filed a voluntary petition for
relief under Chapter 11 of Title 11 of the United States Bankruptcy Code.
Additionally, on May 25, 2000, EyeCorp, Inc., a wholly owned subsidiary of the
Company, filed a voluntary petition for relief under Chapter 11 of Title 11 of
the United States Bankruptcy Code. On December 1, 2000 the Bankruptcy Court
entered an order confirming the First Amended Joint Liquidating Plan Under
Chapter 11 (the "Plan"). The Plan contemplates the ultimate liquidation of the
Company. As such, the Company will not continue as a going concern and the
recoverability of the carrying amounts of its assets is uncertain. These
financial statements do not include any adjustments that might result from the
ultimate liquidation of the Company.



/s/ Mann Frankfort Stein & Lipp CPAs, L.L.P.



Houston, Texas
June 22, 2001

                                       F-2

<PAGE>

                PHYSICIANS RESOURCE GROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                           (000's, Except Share Data)

<TABLE>
<CAPTION>
                                                                                                     December 31,
                                                                                               -----------------------
ASSETS                                                                                             1999         2000
                                                                                                ---------    ---------
<S>                                                                                             <C>          <C>
CURRENT ASSETS:
     Cash and cash equivalents ..............................................................   $  43,315    $  23,330
     Income tax receivable ..................................................................           8            8
     Prepaid expenses and other .............................................................       2,667          932
     Assets held for disposition, net of an allowance of $226,486 in 1999 and
        $118,453 in 2000 ....................................................................      48,525       14,073
                                                                                                ---------    ---------
          Total current assets ..............................................................      94,515       38,343

PROPERTY AND EQUIPMENT, net .................................................................       1,342          604
INTANGIBLE ASSETS, net ......................................................................       3,603           --
OTHER NONCURRENT ASSETS, net ................................................................         136          106
                                                                                                ---------    ---------
          TOTAL ASSETS ......................................................................   $  99,596    $  39,053
                                                                                                =========    =========

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
     Current portion of long-term debt (includes obligations to affiliates) .................   $ 131,883    $  51,007
     Due to affiliates ......................................................................      22,797       13,703
     Accounts payable and accrued expenses ..................................................      11,623        7,356
                                                                                                ---------    ---------
          Total current liabilities .........................................................     166,303       72,066

OTHER LONG-TERM LIABILITIES .................................................................       1,205        1,101
                                                                                                ---------    ---------
          Total Liabilities .................................................................     167,508       73,167
                                                                                                ---------    ---------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT:
     Common Stock, $.01 par value, 100,000,000 shares authorized, 29,993,335 shares issued
          (see Note 10) .....................................................................         309          309
     Convertible preferred stock, $.01 par value 10,000,000 shares authorized, 200,000
          shares issued (see Note 10) .......................................................           2            2
     Additional paid-in capital .............................................................     294,529      291,995
     Accumulated deficit ....................................................................    (358,722)    (322,390)
     Treasury stock, at cost, 327,301 shares ................................................      (4,030)      (4,030)
                                                                                                ---------    ---------
          Total stockholders' deficit .......................................................     (67,912)     (34,114)
                                                                                                ---------    ---------
          TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT .......................................   $  99,596    $  39,053
                                                                                                =========    =========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-3

<PAGE>

                PHYSICIANS RESOURCE GROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                        (000's, Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                          For the Year Ended December 31,
                                                        -----------------------------------
                                                          1998         1999          2000
                                                        ---------    ---------    ---------
<S>                                                     <C>          <C>          <C>
REVENUES:

   Management services ...............................  $ 226,932    $  14,936    $       -
   Medical services ..................................    114,793       60,792       28,886
   Other .............................................     12,383        8,212       11,288
                                                        ---------    ---------    ---------

        Total revenues ...............................    354,108       83,940       40,174
                                                        ---------    ---------    ---------

COSTS AND EXPENSES:

   Salaries, wages and benefits ......................    176,808       33,181       12,766
   Pharmaceuticals and supplies ......................     46,158       15,195        7,240
   General and administrative ........................    105,253       44,000       24,584
   Depreciation and amortization .....................     26,000        7,885        2,574
   Interest expense ..................................     12,385        9,232          899
   Interest income ...................................       (907)      (1,300)      (4,500)
   Asset valuation losses (recovery) .................    347,857       (6,040)           -
   Executive severance expenses ......................        912            -            -
   Patent litigation defense costs ...................        798          989          555
   Loss (Gain) on sale of assets .....................     25,276       (7,447)     (40,276)
                                                        ---------    ---------    ---------

        Total costs and expenses .....................    740,540       95,695        3,842
                                                        ---------    ---------    ---------

INCOME (LOSS) BEFORE INCOME TAXES ....................   (386,432)     (11,755)      36,332

PROVISION (BENEFIT) FOR INCOME TAXES .................    (66,867)           -            -
                                                        ---------    ---------    ---------

NET INCOME (LOSS) ....................................  $(319,565)   $ (11,755)   $  36,332
                                                        ---------    ---------    ---------

NET INCOME (LOSS) PER BASIC AND DILUTED SHARE ........  $  (10.73)   $   (0.39)   $    1.21
                                                        =========    =========    =========

   WEIGHTED AVERAGE NUMBER OF SHARES ISSUED ..........     29,773       29,805       29,993
                                                        =========    =========    =========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-4

<PAGE>

                PHYSICIANS RESOURCE GROUP, INC. AND SUBSIDIARIES

      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                   For the Three Years Ended December 31, 2000
                           (000's, Except Share Data)

<TABLE>
<CAPTION>
                                                                                          Additional
                                       Common Stock               Preferred Stock           Paid-In       Accumulated
                                 --------------------------   -------------------------
                                   Shares         Amount         Shares       Amount        Capital         Deficit
                                 -----------    -----------   -----------   -----------   -----------     -----------
<S>                              <C>            <C>           <C>           <C>           <C>            <C>
BALANCES, December 31, 1997 ..    29,927,000    $       299       200,000   $         2   $   299,974    $   (27,402)
  Receipt of common stock in
    conjunction with
    dispositions
    and transaction
    restructuring.............            --             --            --            --            --             --
  Sale of preferred stock ....            --             --            --            --            --             --
  Exercise of stock options ..        66,435              1            --            --           469             --
  Sale of entities ...........            --             --            --            --           735             --
  Net loss ...................            --             --            --            --            --       (319,565)
                                 -----------    -----------   -----------   -----------   -----------    -----------
BALANCES, December 31, 1998 ..    29,993,435            300       200,000             2       301,178       (346,967)
  Receipt of common stock in
  conjunction with
  dispositions and transaction
  restructuring...............          (100)             9            --            --            --             --
  Restructure of Investments
  in subsidiaries ............            --             --            --            --        (6,649)            --
  Net loss ...................            --             --            --            --            --        (11,755)
                                 -----------    -----------   -----------   -----------   -----------    -----------
BALANCES, December 31, 1999 ..    29,993,335            309       200,000             2       294,529       (358,722)
  Sale of entities ...........            --             --            --            --        (2,534)            --
  Net income .................            --             --            --            --            --         36,332
                                 -----------    -----------   -----------   -----------   -----------    -----------
BALANCES, December 31, 2000 ..    29,993,335    $       309       200,000   $         2   $   291,995    $  (322,390)
                                 ===========    ===========   ===========   ===========   ===========    ===========

<CAPTION>
                                                                    Note
                                                                 Receivable         Total
                                                                    from        Stockholders'
                                        Treasury Stock           Preferred          Equity
                                  -------------------------
                                     Shares          Amount      Stock Sale        (Deficit)
                                  -----------    -----------    -----------    -------------
<S>                               <C>            <C>            <C>            <C>
BALANCES, December 31, 1997 ..    $   227,000    $    (3,183)   $    (2,225)   $   267,465
  Receipt of common stock in
    conjunction with
    dispositions
    and transaction
    restructuring.............        101,795           (865)            --           (865)
  Sale of preferred stock ....             --             --          2,225          2,225
  Exercise of stock options ..             --             --             --            470
  Sale of entities ...........             --             --             --            735
  Net loss ...................             --             --             --       (319,565)
                                  -----------    -----------    -----------    -----------
BALANCES, December 31, 1998 ..        328,795         (4,048)            --        (49,535)
  Receipt of common stock in
  conjunction with
  dispositions and transaction
  restructuring...............         (1,494)            18             --             27
  Restructure of Investments
  in subsidiaries ............             --             --             --         (6,649)
  Net loss ...................             --             --             --        (11,755)
                                  -----------    -----------    -----------    -----------
BALANCES, December 31, 1999 ..        327,301         (4,030)            --        (67,912)
  Sale of entities ...........             --             --             --         (2,534)
  Net income .................             --             --             --         36,332
                                  -----------    -----------    -----------    -----------
BALANCES, December 31, 2000 ..        327,301    $    (4,030)   $        --    $   (34,114)
                                  ===========    ===========    ===========    ===========
</TABLE>

        The accompanying notes are an integral part of these consolidated
                              financial statements.

                                       F-5

<PAGE>

                PHYSICIANS RESOURCE GROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (000's)

<TABLE>
<CAPTION>
                                                                                    For the Year Ended December 31,
                                                                                  -----------------------------------
                                                                                     1998         1999         2000
                                                                                  ---------    ---------    ---------
<S>                                                                               <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss) ..........................................................   $(319,565)   $ (11,755)   $  36,332
   Adjustments to reconcile net income (loss) to net cash provided by (used in)
     operating activities--
     Depreciation and amortization ............................................      26,000        7,885        2,574
     Change in Assets Held for Disposition, net ...............................     (90,435)      52,381       34,452
     Change in deferred taxes .................................................     (66,411)          --           --
     Changes in assets and liabilities, net of effects of acquisitions
        And disassociations--
          Accounts payable and accrued expenses ...............................      (9,411)      (2,744)      (4,266)
          Other liabilities, due to affiliates, long-term debt ................      19,033       (3,671)      (9,199)
          Property and Equipment, net .........................................      33,989        9,546         (605)
          Intangible assets, net ..............................................     323,904        5,992        2,435
          Accounts receivable, net and due from affiliates ....................      66,400       10,978           --
          Pharmaceuticals and supplies ........................................       5,065          654           --
          Prepaid expenses and other ..........................................      11,093       (1,872)       1,765
                                                                                  ---------    ---------    ---------
             Net cash provided by (used in) operating activities ..............        (338)      67,394       63,488
                                                                                  ---------    ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to property and equipment, net of effects of acquisitions ........      (2,732)      (1,002)         (63)
                                                                                  ---------    ---------    ---------
          Net cash used in investing activities ...............................      (2,732)      (1,002)         (63)
                                                                                  ---------    ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from the issuance of common stock from offerings, net of
     Offering costs ...........................................................           1            9           --
   Proceeds from long-term debt ...............................................       2,442        4,002           --
   Payments and settlements on long-term debt .................................      (5,977)     (14,985)     (74,835)
   Repayments & settlements on obligations to affiliates ......................        (159)     (21,774)      (8,575)
   Purchase of treasury stock .................................................        (864)          17           --
   Write-off of note receivable from 1997 sale of preferred stock .............       2,225           --           --
                                                                                  ---------    ---------    ---------
          Net cash used in financing activities ...............................      (2,332)     (32,731)     (83,410)
                                                                                  ---------    ---------    ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..........................      (5,402)      33,661      (19,985)
CASH AND CASH EQUIVALENTS, beginning of year ..................................      15,056        9,654       43,315
                                                                                  ---------    ---------    ---------
CASH AND CASH EQUIVALENTS, end of year ........................................   $   9,654    $  43,315    $  23,330
                                                                                  =========    =========    =========
SUPLEMENTAL CASH FLOW INFORMATION:
   Interest paid ..............................................................   $   6,585    $   4,162    $   5,667
</TABLE>

   The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       -6-

<PAGE>

                PHYSICIANS RESOURCE GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     BASIS OF PRESENTATION, BUSINESS AND ORGANIZATION:

   PRG Formation

       Physicians Resource Group, Inc. ("PRG" or "the Company"), a Delaware
corporation, and subsidiaries were formed to provide physician practice
management services to ophthalmic and optometric practices (the "Eyecare
Practices"). The Company was formed in November of 1993, but had no substantive
operations prior to June of 1995. PRG earned revenues by providing management,
marketing, financial resources and other services to the Eyecare Practices, ASCs
and optical dispensaries. The Company also earned revenue by owning certain
interests in optical dispensaries and ASCs. The Company conducted the practice
of medicine through its subsidiaries located in states that allow the corporate
practice of medicine (comprising seven Eyecare Practices), and the Company's
financial statements are prepared on a consolidated basis to include all of the
Company's wholly-owned subsidiaries including these seven Eyecare Practices.

   1997 Practice Acquisitions

       During 1997, PRG acquired certain assets and liabilities of 27 Eyecare
Practices and three related ASCs, all of which were accounted for as purchases.
As consideration for these acquisitions, PRG paid $23,026,000 in cash, issued
promissory notes of $756,000, issued convertible promissory notes of $13,398,000
and issued 43,000 shares of Common Stock ("Common Stock"). The convertible
promissory notes were convertible at the option of the holder to PRG Common
Stock at the end of two years at varying prices ranging from $12.38 to $18.73
per share. The PRG Common Stock issued in connection with these acquisitions had
a market value at the respective closing dates of between $12.38 and $17.40 per
share. Also during 1997, the Company developed two ASCs at a development cost of
approximately $720,000.

   1997 Practice Disassociations

       PRG initiated, during the latter half of 1997, a review of its affiliated
Eyecare Practice relationships. As a result of such review, the Company decided
during the third quarter of 1997 to begin the process of terminating its
affiliations with 44 practices and to sell and/or dispose of certain assets and
liabilities associated therewith. In connection with this process, the Company
recorded pre-tax charges of approximately $76,706,000 in 1997 in anticipation of
losses to be incurred in such sales and dispositions. The charges are associated
with (1) the anticipated future disposition of these practice assets and
liabilities and (2) the effective termination of its affiliation with the 7
smaller optometry practices which resulted in either the complete termination of
any affiliation with the practice or the virtual elimination of any significant
relationship. These 44 Eyecare Practices contributed revenues of $35,544,000 and
income before taxes of $3,330,517 during 1997.

       In addition to the 44 practices discussed above, the assets of one
Eyecare Practice and related ASC were returned to the original owner for 125,000
shares of Common Stock.

   1998 Practice Acquisitions and Dispositions

       No additional Eyecare Practices were acquired during 1998. Following on
the review initiated during 1997, eighteen Eyecare Practices were sold.

   1999 Practice Dispositions

       During 1999, the Company sold 45 Eyecare Practices which generated
approximately $56 million in proceeds, 5 ASCs which generated approximately $11
million in proceeds and interests in 15 ASCs which generated approximately $4
million in proceeds.


                                       F-7

<PAGE>

   2000 Practice Dispositions

       During 2000, the Company sold 38 Eyecare Practices which generated
approximately $22 million in proceeds and interests in 14 ASCs which generated
approximately $37 million in proceeds.

2.     CURRENT OPERATING ENVIRONMENT:

       In 1998, the Company continued the process of terminating its
affiliations with the 44 Eyecare Practices identified during the strategic
review undertaken in 1997. In addition, certain negative factors, including
market position and demographics, deteriorating physician relations, decline in
stock price and disappointing operating results, contributed to the
destabilization of the Company's relationship with other affiliated Eyecare
Practices. These factors have been caused by or may have been exacerbated by
weak economic conditions in some market areas, declining government and managed
care payments, poor financial performance and other factors, many of which are
outside the control of the Company. In 1998, certain additional affiliated
Eyecare Practices purported to unilaterally terminate their Management Service
Agreements ( "MSAs"). In ever-increasing numbers, the Eyecare Practices excluded
PRG from any involvement in the business management aspect of those Eyecare
Practices and ASCs. The Eyecare Practices also began bringing lawsuits or
commencing arbitration proceedings against PRG and/or its subsidiaries. Although
PRG and its subsidiaries denied the allegations of the Eyecare Practices and
generally asserted counterclaims to recover the amounts owed to PRG and its
subsidiaries by those Eyecare Practices, PRG's revenues were substantially
negatively impacted. As a result, the Company incurred pre-tax charges of
$347,857,000 during 1998. This had a material adverse effect on the Company's
financial condition and results of operations and raised substantial doubt about
the Company's ability to continue as a going concern.

       Concurrent with the destabilization of the Company's relationship with
certain affiliated Eyecare Practices, numerous other events occurred to
contribute to the operating decline experienced by the Company. As of December
31, 1998, the following events had also occurred:

       .    Key executive officers resigned, including the President, two Chief
            Financial Officers, and the Controller.

       .    The Board of Directors resigned with subsequent appointment of a new
            Board of Directors comprised of doctors who are with affiliated
            Eyecare Practices.

       .    A Letter of Intent ("LOI") was entered into between the Company and
            the Chairman of the Board of Directors in July of 1998. During the
            pendency of the LOI, the Company's options were extremely limited
            with respect to any proposed restructuring, responses to legal
            proceedings, and threatened terminations. The LOI was cancelled in
            late October of 1998.

       .    The New York Stock Exchange ("NYSE") halted trading in the Common
            Stock of the Company and moved to delist the stock (see Note 10).

       .    The Company did not make the interest payment due December 1, 1998
            related to the Company's outstanding 6% Convertible Subordinated
            Debentures (see Note 8).

       .    The Company had an outstanding balance of $9,500,000 under an
            amended credit facility that should have been repaid as of December
            31, 1998 (see Note 8).

       During January 1999, the Company repaid $2,600,000 of the amended credit
facility, with the remaining balance purchased by another bank. In March of
1999, the Company repaid the outstanding balance of $6,900,000, with the
proceeds of certain asset sales. On March 19, 1999, PRG entered into a
restructuring agreement (the "RAM Agreement") with Resurgence Asset Management,
LLC ("RAM"), owner of approximately $91,896,000 in principal amount of the 6%
convertible subordinated debentures. RAM's advance to PRG, evidenced by a
promissory note dated March 19,1999 in the amount original principal amount of
$3,750,000, was issued by PRG to RAM to pay the December 1, 1998 interest. As of
July 29, 1999, the Company repaid the promissory note with RAM.

       In April of 1999 PRG and AmSurg Corp. ("AmSurg") executed a letter of
intent for the purchase by AmSurg of a portion of PRG's ownership interests in
its practice-based ophthalmology ASCs. As of August 31, 2001, six ASCs had been
sold to AmSurg yielding an aggregate of approximately $30 million.

       On February 1, 2000 (the "Petition Date") PRG filed a voluntary petition
of relief (the "Filing") under Chapter 11 ("Chapter 11") of Title 11 of the
United Stated Bankruptcy Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the Northern District of Texas, Dallas Division (the
"Bankruptcy Court"), and, on May 25, 2000, EyeCorp, Inc. ("EyeCorp"), a
wholly-owned subsidiary of the Company, filed a voluntary petition for relief
under Chapter 11 of the Bankruptcy Code in the Northern District of Texas. The
cases are being jointly administered under

                                       F-8

<PAGE>

Case No. 00-30748-RCM-11 in the United States Bankruptcy Court for the Northern
District of Texas, Dallas Division. In Chapter 11, the Company continued to
manage its affairs and operate its business as a debtor in possession until it
developed a liquidation plan. As a debtor in Chapter 11, the Company did not
engage in transactions outside of the ordinary course of business without
approval, after notice and hearing, of the Bankruptcy Court.

       As a result of the Filing, the Company was in technical default under of
its funded debt agreements that were in effect prior to the Petition Date. As a
result, all unpaid principal of, and accrued pre-petition interest on, such debt
became immediately due and payable. The payment of such debt and accrued but
unpaid interest was prohibited during the pendency of the Company's Chapter 11
case.

       In accordance with the Bankruptcy Code, the Company was able to seek
court approval for the rejection of executory contracts, including real property
leases. Any such rejection may give rise to pre-petition unsecured claim for
breach of contract.

       On October 13, 2000, PRG and EyeCorp filed their First Amended Joint
Liquidating Plan under Chapter 11 (as modified prior to confirmation on December
1, 2000, the "Plan"). The Plan is a liquidating plan and does not contemplate
the financial rehabilitation of the Company or the continuation of their
businesses, except with respect to any physicians and Eyecare Practices who cure
their contractual defaults and a request that the Company recommence providing
management services and ownership interest in any ambulatory surgery centers
("ASCs") that the Company continues to own and operate. Many of the Company's
assets have been or are in the process of being liquidated, and the Plan
contemplates that the remaining assets will be liquidated. Funds generated from
the liquidation of assets will be paid to creditors as set forth in the Plan.
Holders of equity interests will not receive or retain any property under the
Plan with respect to their holdings unless and until all creditors have been
paid in full.

       On December 1, 2000, the Bankruptcy Court issued an order confirming the
Plan. The effective date of the Plan was December 15, 2000.

       As discussed in Note 9, the Company is a defendant in numerous lawsuits
that have been stayed by virtue of the Filing or refiled as an adversary
proceeding in the Bankruptcy Court. As of the Petition Date, payment of
liabilities to unsecured creditors, including trade creditors and note holders,
and pending litigation against the Company at the date of the filing were stayed
while the Company continued its business as a debtor in possession.

       The accompanying consolidated financial statements have been prepared on
the going concern basis of accounting. The Plan contemplates the ultimate
liquidation of the Company. As such, the Company will not continue as a going
concern and the recoverability of the carrying amounts of its assets is
uncertain.

       As a result of the liquidation proceedings, the Company may sell or
otherwise realize assets and liquidate or settle liabilities for amounts other
than those reflected in the financial statements. Further, a change in the plan
of reorganization/liquidation could materially change amounts currently recorded
in the financial statements. The financial statements do not give effect to any
adjustments to the carrying value of assets, or amounts and classification of
liabilities that might be necessary as a consequence of these matters.

       The Company has continued to experience further losses and negative cash
flow from operations in 2000 and no assurance can be given that the Company's
existing cash, cash flow from operations, income tax refunds and cash generated
from practice disassociations or other asset dispositions will be sufficient to
allow the Company to meet its planned obligations as they become due.

       Management's plans are to execute The Plan provisions confirmed by court
order on December 1, 2000 with an effective date of December 15, 2000. The Plan
is a liquidating plan and does not contemplate the financial rehabilitation of
the Company or the continuation of their businesses, except with respect to any
physicians and Eyecare Practices (hereafter defined) who cure their contractual
defaults and request that the Company recommence providing management services
and ownership interest in any ambulatory surgery centers ("ASCs") that the
Company continues to own and operate. Many of the Company's assets have been or
are in the process of being liquidated, and the Plan contemplates that the
remaining assets will be liquidated. Funds generated from the liquidation of
assets will be paid to creditors as set forth in the Plan. Holders of equity
interests will not receive or retain any property under the Plan with respect to
their holdings unless and until all creditors have been paid in full.


                                       F-9

<PAGE>

3.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

   Principles of Consolidation

       The consolidated financial statements include the financial position and
results of operations of PRG and all of its subsidiaries. The financial
statements of these subsidiaries are consolidated with the Company's due to
their 100% ownership by the Company. All significant inter-company transactions
have been eliminated. Certain reclassifications of prior year amounts have been
made to conform to the current year presentation.

   Cash and Cash Equivalents

       PRG considers all highly liquid investments purchased with an original
maturity or re-pricing within three months or less to be cash equivalents. The
Company primarily invests in overnight repurchase agreements, tax-free municipal
bonds and money market accounts. The interest rates varied from 5.31 percent to
6.50 percent, 4.51 percent to 5.38 percent and 4.75 percent to 5.00 percent in
the years ended December 31, 2000, 1999 and 1998, respectively. These
investments are carried at fair value.

   Prepaid Expenses and Other Current Assets

       Prepaid expenses and other current assets primarily consist of
prepayments for insurance and rent, and retainers paid to attorneys and other
independent consultants.

   Long Lived Assets

       Property and Equipment

       Property and equipment are stated at cost. Depreciation of property and
equipment is calculated using a straight-line method over the estimated useful
lives of the assets. Routine maintenance and repairs are charged to expense as
incurred, while costs of betterments and renewals are capitalized.

       Intangible Assets

       Intangible assets consist of the value of the non-physician employee
workforce, MSAs and goodwill associated with ASC acquisitions. The estimated
fair value of the non-physician employee workforce is based on the estimated
cost to replace the workforce. The estimated fair value of the MSA for
affiliated practices is the excess of the purchase price over the estimated fair
value of the tangible assets and workforce acquired and liabilities assumed.
Workforce intangibles are amortized on a straight-line basis over seven years.
Intangible assets associated with MSAs are generally amortized on a
straight-line basis over 15 years. Amounts paid for ASC acquisitions in excess
of the net assets acquired are treated as goodwill and amortized on a
straight-line basis over 25 years.

       The Company reviewed the carrying value of the long-lived assets and
goodwill at least quarterly on a entity by entity basis to determine if facts
and circumstances existed which would suggest that assets may be impaired or
that the amortization period needed to be modified. In addition to the normal
quarterly reviews conducted as described above, during the latter half of 1997
and early 1998, the Company engaged in a strategic review of its assets,
operations and available resources, as more fully discussed in Note 2 above. As
a result, the Company made a decision to terminate its affiliation with a number
of Eyecare Practices through either sale, disposition or significant
restructuring of their MSAs. As a result of this review as well as continued
deteriorating relationships with its affiliated Eyecare Practices during late
1998 and continuing through 1999, the Company determined that significant amount
of existing intangibles related to those Eyecare Practices had been impaired.

   Income Taxes

       Deferred income tax liabilities and assets are recorded for the
differences between the tax and financial reporting basis of the assets and
liabilities and are based on the enacted income tax rates which are expected to
be in effect in the period in which the difference is expected to be settled or
realized. A change in tax laws results in adjustments to the deferred tax
liabilities and assets. As of December 31, 2000 and 1999, the Company provided a
100% valuation allowance for deferred tax assets because it was not likely the
deferred tax assets would be realized.


                                      F-10

<PAGE>

   Use of Estimates

       The preparation of these financial statements, in accordance with
generally accepted accounting principles, requires the use of certain estimates
by management in determining the entities' assets and related valuation
allowances, liabilities, revenues and expenses. Actual results could differ from
those estimates.

   Concentration of Credit Risk

       The Company's accounts receivable consist primarily of management service
revenues due from affiliated physician groups and from medical services due from
patients funded through Medicare, Medicaid, commercial insurance and private
payment. The Company and its Eyecare Practices perform ongoing credit
evaluations of their patients and generally do not require collateral. The
Company and its Eyecare Practices maintain allowances for potential credit
losses, and such losses have been within management's expectation.

   Net Income (Loss) Per Share

       Basic net income (loss) per share is computed by the weighted average
number of common shares outstanding for the period. Diluted net income (loss)
per share does not differ from basic net income (loss) per share since potential
common shares from conversion of stock options and warrants are anti-dilutive
for all periods presented.

4.     ASSETS HELD FOR DISPOSITION:

       As discussed in Note 2 above, the Company received notification from many
of its affiliated Eyecare Practices during 1998 and 1999 purporting to
unilaterally terminate the MSAs and/or initiating legal proceedings against the
Company. These Eyecare Practices have alleged that PRG has breached the
provisions of their respective MSAs, and have withheld financial information and
refused to pay management fees due under their respective MSAs. The Company
denied these parties' allegations and denies that the MSAs were properly
terminated by the providers.

     As a result and pursuant to SFAS No. 121, the Company determined that an
impairment had occurred and wrote down the associated clinic assets and MSA
intangibles to fair value determined by discounting future operating cash flows
of the related physician groups. The future operations of the Company have been
impaired, and the Company is attempting to recover its investment in many of
these practices. However, there can be no assurance of any recovery.

As discussed in Notes 1 and 2, starting in 1998 and throughout 1999 and 2000,
the Company continued the dissociation of many of its affiliated Eyecare
Practices through either sale or other disposition. In connection therewith,
pre-tax allowances totaling approximately $226,486,000 were provided at December
31, 1999 and $118,453,000 at December 31, 2000 for losses expected to be
incurred in this process. The Company reclassified the net assets of these
practices, including the related intangible assets, into "Assets held for
disposition" on the accompanying consolidated balance sheet as of December 31,
1999 and 2000, net of such allowances.

       The following is a table which reflects the carrying value of the assets
and liabilities reclassified into "Assets held for disposition" as of December
31, 1999 and 2000:

              Description                         1999             2000
              -----------                       -------------------------------
                                                    (000's)          (000's)

Current assets ..............................       $92,001        $  48,080
Property and equipment ......................        26,040           12,122
Intangible and other non-current assets .....       171,387           77,453
Liabilities assumed .........................       (14,417)          (5,129)
                                                -------------------------------
       Net assets held for disposition ......       275,011          132,526
Less: Asset valuation allowances ............      (226,486)        (118,453)
                                                -------------------------------
Assets held for disposition .................       $48,525        $  14,073
                                                ===============================

                                      F-11

<PAGE>

5.   REVENUE RECOGNITION AND RECEIVABLES:

   Revenues

          A significant portion of the Eyecare Practices' medical service and
ASCs' revenues are received from Medicare and other governmental programs.
Medicare and other governmental programs reimburse providers based on fee
schedules that are determined by the related governmental agency. In the
ordinary course of business, providers receiving reimbursement from Medicare and
other governmental programs are potentially subject to a review by regulatory
agencies concerning the accuracy of billings and sufficiency of supporting
documentation.

          The Eyecare Practices' and ASCs' gross medical service revenues are
based on established rates reduced by contractual adjustments. Contractual
adjustments represent the difference between charges at established rates and
estimated recoverable amounts and are recognized in the period the services are
rendered. Any differences between estimated contractual adjustments and actual
final settlements are reported as contractual adjustments in the period final
settlements are made.

          Revenues have not been recognized by the Company for those Eyecare
Practices alleging either breaches of their MSA's or for those attempting to
unilaterally terminate their MSA's throughout 1998, 1999, and 2000.

   Revenues-Management Services

          The Company manages the Eyecare Practices under various types of
service and management agreements. The management services revenues are based on
several different types of arrangements, including percentages of the medical
services revenues or flat fees and reimbursement of clinic expenses. During
2000, the Company did not recognize revenues for any Eyecare Practices as the
remaining practices were alleging either breaches of their MSA's or were
attempting to unilaterally terminate their MSA. The following table presents the
amount of medical service revenues included in the determination of the
Company's management service revenues for the years ended December 31, 1998,
1999, and 2000:

<TABLE>
<CAPTION>
                   Description                                                1998         1999          2000
                   -----------                                              ---------    ---------     --------
                                                                                          (000's)
<S>                                                                         <C>          <C>             <C>
Gross medical services revenues .....................................       $ 464,528    $  88,572           --
     Less--Contractual adjustments ..................................        (200,575)     (29,998)          --
                                                                            ---------    ---------     --------
Net medical services revenues .......................................         263,953       58,574           --
     Less--Amounts retained by the Eyecare Practices owner
        physicians...................................................         (37,021)     (43,638)          --
                                                                            ---------    ---------     --------
          Management services revenues ..............................       $ 226,932    $  14,936           --
                                                                            =========    =========     ========
</TABLE>

   Revenues - Medical Services

          Certain states in which the Company operates allow for the corporate
practice of medicine. In those states, the Company's revenues are derived from
medical services performed. In addition, the Company owns and operates ASCs
through various arrangements. Revenues derived from ASCs are based on facility
fees charged to patients, third-party payers or other physician practices for
use of the ASCs as well as reimbursement of ASC expenses. ASC revenues are also
net of contractual adjustments. The following table presents amounts included in
determining the Company's medical service revenues for the years ended December
31, 1998, 1999, and 2000:

<TABLE>
<CAPTION>
                    Description                                               1998         1999         2000
                    -----------                                            ---------    ---------      --------
                                                                                         (000's)
<S>                                                                         <C>          <C>           <C>
Gross medical services revenues .....................................       $ 123,933    $  30,483     $      -
Gross ASCs revenues .................................................         100,181       91,672       64,746
                                                                            ---------    ---------     --------
         Total ......................................................         224,114      122,155       64,746
     Less--Contractual adjustments ..................................        (109,321)     (61,363)     (35,860)
                                                                            ---------    ---------     --------
         Net medical services revenues ..............................       $ 114,793    $  60,792     $ 28,886
                                                                            =========    =========     ========
</TABLE>


                                      F-12

<PAGE>

   Receivables

         2000 Receivable Allowance

         As discussed in Notes 2 and 4 above, the Company recorded certain
allowances during 1999 relative to anticipated losses on dispositions of the
assets of certain Eyecare Practices with which the Company was in the process of
terminating its affiliation. The receivables or due from affiliates balances
relating to the Eyecare Practices targeted for disposition or dissociation of
$19,585,521 and $21,156,207 for the years ending 1999 and 2000 respectively,
have been reclassified to "Assets held for disposition" in the accompanying
consolidated balance sheets. Accounts receivable for 1999 and 2000 have been
reclassified to "Assets held for disposition" as of December 31, 1999 and 2000
as all remaining Eyecare Practices were being held for sale or disposition
pursuant to the Plan as discussed in Note 4.

6.       PROPERTY AND EQUIPMENT:

         Property and equipment consists of the following as of December 31,
1999 and 2000:

<TABLE>
<CAPTION>
                                                                   Estimated
                                                                    Useful
                                                                     Lives
                   Description                                      (Years)             1999           2000
                   -----------                               ----------------      --------------   ------------
                                                                                              (000's)
     <S>                                                     <C>                   <C>              <C>
     Equipment, software and other.......................            3-10          $        3,635   $      3,635
     Leasehold improvements .............................            3-10                     183            246
     Furniture and fixtures .............................            7-10                     668            415
                                                                                   ------------------------------
                                                                                            4,486          4,296
     Less--Accumulated depreciation and amortization ....                                  (3,144)        (3,692)
                                                                                   -----------------------------
          Property and equipment, net ...................                          $        1,342   $        604
                                                                                   =============================
</TABLE>

         As indicated in Notes 2 and 4 above, the Company recorded certain
allowances during 1999 and 2000 relative to anticipated losses on dispositions
of the assets of certain Eyecare Practices targeted for sale or disassociation.
The net asset value of property and equipment relating to these Eyecare
Practices of $26,040,000 and $12,122,000 was reclassified to "Assets held for
disposition" on the accompanying consolidated balance sheets as of December 31,
1999 and 2000, respectively. See Note 4 for details.

7.   INTANGIBLE ASSETS:

     Intangible assets consists of the following as of December 31, 1999 and
2000:

<TABLE>
<CAPTION>
                                                                     Estimated
                                                                       Useful
                                                                       Lives
                           Description                                (Years)           1999             2000
                           -----------                           ---------------   --------------     -----------
                                                                                               (000's)
     <S>                                                         <C>               <C>                <C>
     Non-compete agreements..............................              3 - 5              $   577      $     577
     Goodwill ...........................................                25                 4,141              -
                                                                                   ------------------ ----------
                                                                                            4,718            577
     Less - Accumulated amortization ....................                                  (1,115) ()       (577) ()
                                                                                   ------------------ -----------
          Intangible assets, net ........................                                 $ 3,603      $       -
                                                                                   ================== ===========
</TABLE>

         As indicated in Notes 1 and 2 above, the Company recorded certain
allowances during 1997 and 1998 relative to anticipated losses on dispositions
of the assets of certain Eyecare Practices targeted for disassociation. The net
intangible assets relating to these Eyecare Practices of $23,694,677 as of
December 31, 1999 and $8,107,918 as of December 31, 2000, respectively, have
been reclassified to "Assets held for disposition" on the accompanying
consolidated balance sheets. See Note 4 for details.

         During 1997, the Securities and Exchange Commission ("SEC") informed
the Company that it had concerns, on a prospective basis, regarding the use by
physician practice management companies, generally, and the Company,
specifically, of amortization periods for intangible assets in excess of 25
years. Effective January 1, 1998, the Company reduced its maximum period of
amortization from 40 years to 25 remaining years as the useful life for
amortization of its

                                      F-13

<PAGE>

MSAs. This change in accounting estimate was made to reflect a more conservative
amortization period for MSA intangible assets regarding the use of amortization
periods in excess of 25 years on a prospective basis. Additional amortization of
approximately $3,463,000 was recognized for 1998.

8.   LONG-TERM OBLIGATIONS:

  Long-Term Debt

     Long-term debt consisted of the following as of December 31, 1999 and 2000

<TABLE>
<CAPTION>
                                       Description                                                  1999            2000
                                       ------------                                           --------------- --------------
                                                                                                           (000's)
     <S>                                                                                      <C>             <C>
     6% convertible subordinated debentures due December 2001, interest payable
      on June 1 and December 1..............................................................     $ 125,000        $ 50,166

     Other obligations......................................................................         6,883             841
                                                                                              --------------- --------------
          Total long-term debt (all debt is classified as current for 1999 and 2000)........     $ 131,883        $ 51,007
                                                                                              =============== ==============
</TABLE>

     In December of 1996, PRG completed an offering of 6% convertible
subordinated debentures (the "Debentures") due in December 2001. The Debentures
were convertible at any time after the 60th day following issuance at a
conversion price of $25 per share. Interest was payable on June 1 and December
1. The Debentures were not redeemable by the Company until December 1999. The
Company incurred approximately $3,321,000 in costs related to the offering, with
such amount being amortized over the life of the Debentures and included in
other non-current assets at December 31, 1997. However, during 1998, the
unamortized balance of these costs was written off.

     On March 19, 1999, PRG entered into the RAM Agreement with RAM, the owner
of $91,896,000 in principal amount of the Debentures. Interest due December 1,
1998 on the Debentures was not paid at December 31, 1998. RAM advanced to PRG
$3,750,000 which enabled PRG to pay the past due interest on March 19, 1999.
RAM's advance to PRG was evidenced by the issuance of a promissory note by PRG
to RAM in the original principal amount of $3,750,000. The note's maturity was
September 30, 1999 and the interest rate was 20%. The note was secured by PRG's
equity interests held in various PRG subsidiaries. The $3,750,000 note was
repaid to RAM in July 1999.

     In March of 1997, PRG entered into a credit facility with a group of
lenders that allowed the Company to borrow up to $90,000,000 for acquisitions,
capital expenditures, working capital and stock repurchases. Advances under this
facility were to bear interest at LIBOR plus 1% to 2.125%, or the bank's prime
rate plus 1.125% and were secured by the stock of the subsidiaries of PRG and
guaranteed by the subsidiaries of PRG. On October 1, 1997, the Company borrowed
$8,000,000 under this facility to fund the acquisition of certain Eyecare
Practice assets and related rights.

     Primarily as a result of a 1997 third quarter net loss, the Company went
into technical default on various financial covenants under the $90,000,000
credit facility. On November 28, 1997, the Company received a commitment letter
for a $14,000,000 revolving credit facility from its lead bank that would
replace the existing $90,000,000 facility. This facility had the same security
arrangements as the March 1997 $90,000,000 facility and, additionally, allowed
for a security interest in all MSAs, accounts receivables and general
intangibles of PRG. In addition, the facility was guaranteed by one current
member of the Company's Board of Directors, as well as by one former member.

     In addition to the $8,000,000 that was outstanding under its original
credit facility, the Company borrowed an additional $4,248,000, bringing total
outstanding borrowings under the $14,000,000 facility to $12,248,000 as of
December 31, 1997. This $14,000,000 facility expired and was amended again in
March of 1998. The amended facility required that the balance outstanding be
paid down to $9,500,000 by September 30, 1998, with the remainder to be repaid
on December 31, 1998. The Company borrowed an additional $1,751,658 in May 1998
to bring the balance back to $14,000,000. The facility was paid down to
$9,500,000 by September 30, 1998. At December 31, 1998, the Company was engaged
in restructuring negotiations with the lender pursuant to which the maturity of
the note was ultimately extended to February 28, 1999. The note was retired in
full in the first quarter of 1999 with proceeds from the sale of various
practice assets.

     During 1998, a reserve was established against 1998 long-term debt for
subsequent sales of ophthalmology practices and ASCs occurring in 1999. The
total amount of these reserves equaled $5,612,000 at December 31, 1998. Reserves
for the current portion of long-term debt equaled $2,607,000, while reserves for
the long-term portion of long-term debt equaled $3,005,000. There were no
reserves for long-term debt at December 31, 1999. However, as previously
discussed in Note 1 and Note 4 regarding the reclassification of net assets to
"Assets held for disposition," the

                                      F-14

<PAGE>

long-term debt (current and long-term portions) reclassification at December 31,
1999 was $1,683,107 and at December 31, 2000 was $449,980.

  Obligations to Affiliates

     Obligations to affiliates consist of the following as of December 31, 1999
and 2000.

<TABLE>
<CAPTION>
                                          Description                                                 1999           2000
                                          ------------                                            -------------  ------------
                                                                                                              (000's)
<S>                                                                                               <C>            <C>
Convertible promissory notes payable for affiliate acquisitions, bearing interest
     at 7%, due 1999, principal due at maturity and interest payable semi-annually .............      $5,792         $841
Other obligations to affiliates ................................................................       1,091            -
                                                                                                  -------------  ------------
     Total obligations to affiliates ...........................................................      $6,883         $841
                                                                                                  =============  ============
</TABLE>

     Over the course of 1997, the Company issued various promissory notes and
convertible promissory notes in partial payment for acquisitions. These notes
bearing an interest rate of 7% totaled $841,000 at December 31, 2000, and
$5,792,000 at of December 31, 1999. The convertible promissory notes originally
were convertible into PRG Common Stock at maturity at the option of the holder
at prices ranging from $12.38 to $18.73 per share, however PRG's Common Stock
has since been delisted from the NYSE, and there is no readily available market
for these shares.

9. COMMITMENTS AND CONTINGENCIES:

     The Company and certain of its officers and directors have been named in
six class action lawsuits, all pending in the U.S. District Court for the
Northern District of Texas. These class action lawsuits make various allegations
of violations of the federal securities laws (specifically Sections 10 and 20 of
the Securities Exchange Act of 1934), including misrepresentations and omissions
of material facts in connection with purchases and sales of the Company's
securities. Damages are claimed but are unspecified as to the amount. The
Company has filed a motion requesting consolidation of these six lawsuits into
one action and intends to vigorously defend against the various claims alleged.

     In response to the bankruptcy filings, proofs of claim have been filed
against the Company and EyeCorp. With respect to those claims that state a
specific monetary amount, PRG has identified a number to which is has no
objection and which will be allowed by the Bankruptcy Court. Among governmental
entities, there is approximately $430,000 to which PRG did not object. Among the
ranks of general unsecured creditors, the total amount of proofs of claim that
state a specific monetary sum and to which the Company did not object is
approximately $135 million. The approximate total of specific monetary amounts
asserted by the Eyecare Practices which remain unresolved is approximately $70
million. In addition, there are proofs of claim that contend additional sums are
owed. The Company has objected to all of the claims filed by the Eyecare
Practices and is pursuing counterclaims against such practices. In the event the
Company and Eyecare Practices are unable to resolve their differences by
settlement, the Bankruptcy Court has entered a Claims Resolution Methodology
that will procedurally govern the disposition of the claims and counterclaims
asserted among and between them. Although the Company intends to pursue these
claims vigorously, due, in part to their relatively undeveloped state, it cannot
be predicted with certainty what their outcome will be or whether the Company
will suffer a net benefit of a net loss as a result of these claims and
counterclaims.

     As indicated above with respect to the class action lawsuits and the proofs
of claim, the Company intends to defend each of the claims vigorously.

     In the normal course of business, certain of the affiliated physician
groups have been named in lawsuits alleging medical malpractice. In the opinion
of the Company's management, the ultimate liability, if any, without considering
possible insurance recoveries, will not have a material impact on the Company's
financial position, results of operations or cash flows. Additionally, the
Company's affiliated physician groups and the Company are insured with respect
to medical malpractice risks on a claims-made basis.

  Long-Term Lease Obligations

     PRG leases medical equipment and office space under non-cancelable
operating lease agreements that expire at various dates. At December 31, 2000,
minimum annual rental commitments under non-cancelable operating leases with
terms in excess of one year are as follows:

                                      F-15

<PAGE>

       Year                                                     Amount
       ----                                                 --------------
                                                                (000's)
       2001 .............................................   $      3,217
       2002 .............................................          2,822
       2003 .............................................          2,792
       2004 .............................................          2,287
       2005 .............................................          2,016
       Thereafter .......................................          5,871
                                                            --------------
            Total .......................................   $     19,005
                                                            ==============

     Rent expense related to operating leases amounted to approximately
$29,539,000, $8,396,000 and $2,429,000 for the years ended December 31, 1998,
1999 and 2000, respectively.

10. STOCKHOLDERS' EQUITY:

  Common Stock

     In May of 1996, the Company followed its original June 1995 initial public
offering with the offering of 5,750,000 additional shares of Common Stock. In
connection therewith, the Company issued 4,250,000 new shares of Common Stock
and the then existing stockholders of the Company sold 1,500,000 shares of
Common Stock. Proceeds to the Company, net of offering costs and underwriting
commissions, were approximately $113,640,000. The Company also registered an
additional 11,000,000 and 10,000,000 shares of Common Stock during 1996 and
1997, respectively, 11,111,500 of which were issued in connection with
additional acquisitions.

     In March 1997, the Board of Directors approved the purchase by the Company
of up to 4,000,000 shares of its outstanding Common Stock. Ultimately, 36,000
shares of PRG Common Stock were purchased under this program for $399,000 before
such program was terminated in December of 1997.

     In addition to the stock issued in acquisitions during 1997 as discussed
above 125,000 shares were received from the sale of assets of one Eyecare
Practice and related ASC back to the original owner. The shares received from
the sale of the assets have been treated as treasury stock. During 1998, the
Company restructured the terms of its agreements with 5 of its smaller optometry
practices in which the relationships were eliminated. From these transactions,
101,795 shares were received by the Company and treated as treasury stock.

     On November 12, 1998, the NYSE halted the trading of the Company's Common
Stock, with no plans to resume trading in the Company's securities. The NYSE's
actions were taken in view of the fact that the Company had fallen below the
NYSE's continued listing criteria relating to net tangible assets available to
Common Stock (less than $12 million) together with average net income after
taxes for the past three years (less than $600,000). Following suspension,
application was made by the NYSE to the SEC to delist the Common Stock. The
Company's stock was subsequently delisted by the NYSE in 1999 and is now traded
in the over-the-counter market.

     On December 15, 2000, the effective date of the Plan, the stock was
extinguished. As such, holders of equity interests may not receive or retain any
property under the Plan with respect to their holding unless and until all
creditors have been paid in full. Currently the Company does not anticipate
making any distributions to holders of equity interests.

  Preferred Stock

     The Company has authorized the issuance of up to 10,000,000 shares of
preferred stock, $.01 par value. In 1997, the Board of Directors created a
series of preferred stock, par value $.01 per share, of the Company and
authorized 200,000 shares of convertible preferred stock designated as Series B
Convertible Preferred Stock ("Series B"). The holders of such Series B shares
are not entitled to dividends nor have voting rights, except as provided by law.
Each share of Series B is convertible, at any time, into one share of the Common
Stock of PRG, subject to certain adjustments. The shares are non-redeemable and
are non-cumulative. Upon liquidation or dissolution of PRG, the holders of the
shares shall be entitled to receive the liquidation value of shares ($.01 per
share) in preference to and in priority over distributions upon the Common
Stock.

     Effective February 21, 1997, the Board of Directors approved the grant of
the right to purchase up to 200,000 of the Series B shares to the former
Chairman of the Board of Directors and Chief Executive Officer during the two
year

                                      F-16

<PAGE>

period beginning February 21, 1997 and ending on February 21, 1999. The
agreement provided that the former Chairman of the Board should pay to PRG an
amount equal to the closing sale price of PRG's Common Stock on the New York
Stock Exchange on the date of delivery of notice to PRG of the intention to
purchase the shares times the number of shares purchased. The former Chairman of
the Board exercised his right to purchase 200,000 Series B shares for an
aggregate price of $2,225,000 on March 25, 1997. The purchase of the shares was
funded by a loan from PRG, the principal of which is not subject to recourse and
the interest of which is subject to recourse. The note evidencing the loan is
secured by the Series B shares that were purchased. The note bears interest at
the rate of 6.42% per annum. As of December 31, 1998, the outstanding principal
and interest of $2,477,272 was reserved as a component of the total 1998 asset
valuation loss of $347,857,000. The determination was made by the Company that a
provision should be established for all outstanding amounts associated with this
loan based on the potential under collateralization of the note as evidenced by
the current market value of the Series B shares. As of December 31, 2000, the
loan was in default.

11. INCOME TAX EXPENSE:

     Income tax expense (benefit) for the years ended December 31, 1998, 1999
and 2000 consists of the following:

<TABLE>
<CAPTION>
                         Description                                      1998        1999         2000
                         -----------                                    --------    --------------------
                                                                                      (000's)
<S>                                                                     <C>         <C>          <C>
Current--
     Federal .........................................................  $ (4,997)         --          --
     State ...........................................................      (714)         --          --
                                                                        --------    --------------------
          Total current ..............................................    (5,711)         --          --
Deferred
     Federal .........................................................   (53,186)    (23,006)     21,485
     State ...........................................................    (7,970)     (3,287)      3,069
                                                                         --------    --------------------
         Total Deferred ..............................................   (61,156)    (26,293)     24,554
         Valuation Allowance .........................................        --      26,293     (24,554)
                                                                        --------    --------------------
         Total income tax expense (benefit) ..........................  $(66,867)   $     --    $     --
                                                                        ========    ====================
</TABLE>

     Total income tax expense differed from the amount computed by applying the
statutory federal income tax rate to income before income taxes as a result of
the following:

<TABLE>
<CAPTION>
                         Description                                      1998        1999         2000
                         -----------                                    --------    --------------------
<S>                                                                     <C>         <C>            <C>
Computed statutory tax expense (benefit) .............................     (35.0)%     (35.0)%      35.0%
Increase (decrease) in income taxes resulting from--
     State income taxes, net of federal income tax benefit ...........      (2.5)%     (27.8)%       4.7%
     Other nondeductible expenses/ Asset Valuation Losses ............      20.6 %    (160.2)%      27.8%
     Tax-exempt interest income ......................................        --          --          --
     Valuation Allowance .............................................        --       223.0 %     (67.5)%
     Other ...........................................................       0.1 %        --          --
                                                                        --------    --------------------
         Total income tax expense benefit ............................     (16.8)%        --          --
                                                                        ========    ====================
</TABLE>

     Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities for financial reporting and such amounts as
measured by tax laws and regulations. Deferred taxes related to intangible
assets result from acquisitions for which there is no basis in the intangibles
for tax purposes. The deferred taxes related to intangible assets will not
result in future cash payments. The components of the net deferred tax liability
are as follows:

                                      F-17

<PAGE>

<TABLE>
<CAPTION>
                      Description                            1999         2000
                      -----------                          ----------------------
                                                                   (000's)
<S>                                                        <C>          <C>
Current deferred tax assets (liabilities):
     Temporary differences relating to cash-to-accrual
        conversions of the Eyecare Practices ..........    $     (32)   $      --
     Allowance for doubtful accounts ..................          187           --
     Accrued expenses .................................           17           --
     Other book/tax differences .......................           --           --
     Assets held for disposition ......................       25,024       18,304
                                                           ----------------------
        Net current deferred tax assets (liabilities)      $  25,196    $  18,304
                                                           ======================

Non-current deferred tax liabilities:
     Net Operating Loss ...............................    $  34,724    $  40,201
     Assets held for disposition ......................       19,794       12,095
     Property and equipment ...........................         (495)         406
     Intangibles ......................................       24,200        7,859
                                                           ----------------------
        Net non-current deferred tax assets ...........    $  78,223    $  60,561
                                                           ----------------------
        Total Deferred Tax Assets (Liabilities) .......      103,419       78,865
        Valuation Allowance ...........................     (103,419)     (78,865)
                                                           ----------------------
        Net Deferred Tax Assets (Liabilities) .........           --           --
                                                           ======================
</TABLE>

         The Company has net operating loss carry forwards of $99,917,000 as of
December 31, 2000, respectively, which will begin to expire in year 2018.

12.      EMPLOYEE BENEFIT PLANS:

   Savings Plans

         The Company maintained various defined contribution plans, which
permitted participants to make voluntary contributions. The Company paid all
general and administrative expenses of the plans, and, in some cases, made
matching contributions on behalf of the employees. The Company also maintained a
stock option plan the purpose of which was to provided directors, key employees
and certain advisors with additional incentives by increasing their proprietary
interest in the Company. The stock option plan provided for the grant of
incentive stock options and nonqualified stock options.

         The Company is in the process of terminating all of these plans. Plan
participants, all of whom have been identified, are being reimbursed for vested
proceeds and contributions for stock purchases that were not made. The Company
recorded no expense associated with these plans for the years ended December 31,
1998, 1999 and 2000.

13.      RELATED-PARTY TRANSACTIONS:

         The Company leases facility space from various partnerships, which
include affiliated physicians as partners and trusts in which relatives of the
affiliated physicians are named beneficiaries. Rent expense on related-party
operating leases amounted to $7,116,000, $7,055,000 and $4,407,000 for the years
ended December 31, 1997, 1998 and 1999, respectively. In addition, the Company
leases facilities to affiliated physicians. Rent income on related-party
operating leases amounted to $1,162,000, $1,034,000 and $676,527 for the years
ended December 31, 1998, 1999 and 2000, respectively.

         In July of 1997, the Company loaned $500,000 to an affiliated physician
and former board member. The purpose of the loan was to provide funds to the
former board member to purchase the practice of a retiring physician practicing
in his market (also a PRG affiliate). This retiring physician had contractual
rights to terminate his practice affiliation with PRG. The new arrangement also
provided for the retiring physician to work on a contract basis for the new
practice. The loan was repayable in two equal installments of $250,000 in
January and July of 1998. The January payment was received in October 1998, but
the July payment has not yet been made. The loan bore interest at 8% and is
secured by the accounts receivable of the practice. The loan was repaid as part
of the buyout transaction effected by the Company with the physician.

                                      F-18

<PAGE>

         On March 25, 1997, the Company loaned Emmett Moore, the former Chairman
of the Board of Directors and Chief Executive Officer, $2,225,000 to purchase
200,000 Series B shares. The principal balance is not subject to recourse, but
the interest is subject to recourse. The note evidencing the loan is secured by
the Series B shares that were purchased. The note bears interest at the rate of
6.42% per annum. As of December 31, 1998, the outstanding principal and interest
of $2,477,272 was reserved as a component of the total 1998 asset valuation loss
of $47,857,000. See Note 10 for additional information.

         During the course of the Company's 1998 review of its due from
affiliates balance (see Note 5), allowances were provided with respect
receivables from Eyecare Practices where three of the Company's former board
members are practitioners.

         From January of 1998 and continuing through February 1999, the Company
paid guaranty fees to Lucius Burch, a member of the Board of Directors, in the
aggregate amount of $752,258 (see Note 9).

         From January 1998 and continuing through February 1999, the Company
paid Dr. David Meyer, a member of the Board of Directors and an owner of an
Eyecare Practice that was party to an MSA with PRG, guaranty fees in the amount
of $785,774 (see Note 9).

         During 1999, Dr. David Meyer, the Chairman of the Board of Directors,
borrowed $982,000 from the Company, which at December 31, 1999 was recorded as a
current receivable and was unsecured. There was no loan agreement to evidence
the receivable balance. Interest was not accrued on the receivable balance. The
amount was paid back in January of 2000.

                                      F-19