U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10K-SB
        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                                 SURGICARE, INC.
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)



          DELAWARE                                      58-1597246

(STATE OR OTHER JURISDICTION OF           (I.R.S. EMPLOYER IDENTIFICATION NO.)
 INCORPORATION OR ORGANIZATION)

  6699 CHIMNEY ROCK, SUITE 105
  HOUSTON, TEXAS                                           77081
(ADDRESS OFPRINCIPAL EXECUTIVE OFFICES)                  (ZIP CODE)



ISSUER'S TELEPHONE NUMBER: (713) 665-1406
SECURITIES TO BE REGISTERED UNDER SECTION 12(B) OF THE ACT: NOT APPLICABLE
SECURITIES TO BE REGISTERED UNDER SECTION 12(G) OF THE ACT:
                      COMMON STOCK, $.005 PAR VALUE
                      SERIES A REDEEMABLE PREFERRED STOCK, $.001 PAR VALUE


<PAGE>




     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent  filer  pursuant to Item
405 of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be  contained,  to the best of  Registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

SurgiCare's revenues for fiscal year ended December 31, 1999: $4,216,660

     As of March 22, 2000,  12,596,657  shares of the Registrant's  Common Stock
were  outstanding.  The  aggregate  market  value of the shares of Common  Stock
(based  upon the  closing  sale price of these  shares as  reported by the Texas
brokerage   firm,   William  Little  and  Company  of  the  Registrant  held  by
non-affiliates on March 22, 2000 was approximately $1,787,471.  This calculation
assumes that all shares of Common Stock  beneficially held by executive officers
and  members  of  the  Board  of  Directors  of  the  Registrant  are  owned  by
"affiliates,"  a status which each of the officers  and  directors  individually
disclaims.  Portions of the Registrant's  Proxy Statement for the Annual Meeting
of Shareholders to be held May 21, 2000 are  incorporated by reference into Part
III of this Annual Report on Form 10-K.


<PAGE>


SURGICARE, INC.

FORM 10K-SB

TABLE OF CONTENTS

PART I
Item 1.  Description of Business
Item 2.  Description of Property
Item 3.  Legal Proceedings
Item 4.  Submission or matters to a Vote of Security Holders
PART II
Item 5.  Market for Common Equity and Related Stockholder Matters.
Item 6.  Management's Discussion and Analysis or Plan of Operation
Item 7.  Financial Statements
Item 8.  Changes in and Disagreements with Accountants
PART III
Item 9.  Directors,  Executive  Officers,  Promoters,  and Control  Persons;
          Compliance With 16(a) of the Exchange Act.
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits and Reports on Form 8-K




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PART I
ITEM 1. DESCRIPTION OF BUSINESS

THE COMPANY

     SurgiCare  was  incorporated  in Delaware on February 24, 1984 as Technical
Coatings  Incorporated.  On September 10, 1984 its name was changed to Technical
Coatings,  Inc.  ("TCI").  Immediately  prior to July 1999,  TCI was an inactive
company.  On July 11, 1999, TCI changed its name to SurgiCare  Inc., and at that
time  changed its  business  strategy to  developing,  acquiring  and  operating
freestanding  ambulatory surgery centers.  On July 21, 1999,  SurgiCare acquired
all of the issued and outstanding shares of common stock of Bellaire  SurgiCare,
Inc. a Texas corporation ("Bellaire"), in exchange for the issuance of 9,860,000
shares of common stock, par value $.005 per share ("Common Stock") and 1,350,000
shares  of  Series A  Redeemable  Preferred  Stock,  par  value  $.001 per share
("Series A Preferred"),  of SurgiCare to the holders of Bellaire's common stock.
For accounting purposes this transaction was effective July 1, 1999.

     This  acquisition  was  accounted  for as a  reverse  merger.  In  addition
1,095,556  were  issued to  Surgery  Centers  of America  II,  L.L.C.  (SCOA) as
required by the Bellaire / SCOA  management  contract that was in place prior to
July  21,  1999.  Bellaire  is  now a  wholly  owned  subsidiary  of  SurgiCare.
Throughout  this  document  we  may  refer  occasionally  to  SurgiCare  meaning
SurgiCare and its subsidiary Bellaire.

     SurgiCare is authorized  to issue up to 50,000,000  shares of common stock,
par value $.005 per share,  and 20,000,000  shares of preferred stock, par value
$.001 per share.

         At the present  time  SurgiCare  conducts  its  operations  through its
wholly owned subsidiary,  Bellaire.  SurgiCare's  current  management  personnel
were,  immediately  prior  to  the  reverse  merger  with  Bellaire,  management
personnel of Bellaire.  Bellaire owns and operates an ambulatory  surgery center
located in Houston, Texas. Bellaire has been in operation for 14 years. First as
The Institute for Eye Surgery,  and since March of 1995, as Bellaire  SurgiCare,
Inc. This center provides the venue for a wide range of high volume,  lower-risk
surgical procedures within a multi-specialty environment.  Surgeons specializing
in podiatry,  orthopedics,  pain management,  gynecology,  plastics,  as well as
general  surgery,  utilize this  facility.  The surgeons  performing  surgery at
Bellaire  generally  charge their  patients for the  professional  services they
provide, while Bellaire only charges the patients for the facility fee.
SurgiCare's  principal  executive  offices are located at 6699  Chimney Rock Rd,
Suite 105, Houston, Texas 77081, and its telephone number is 713-665-1406.

INDUSTRY OVERVIEW

         Free  standing  ambulatory  surgery  centers  are  licensed  outpatient
surgery centers,  generally  equipped and staffed for a wide variety of surgical
procedures. These procedures are generally lower-risk and considered appropriate
for the freestanding  ambulatory setting In recent years,  government  programs,
private  insurance  companies,   managed  care  organizations  and  self-insured
employers have implemented various cost-containment measures to limit the growth
of  healthcare  expenditures.  These  cost-containment  measures,  together with
technological  advances, have resulted in a significant shift in the delivery of
healthcare   services  away  from  traditional   inpatient   hospitals  to  more
cost-effective alternate sites, including ambulatory surgery centers.

         According to the  industry  publication  SMG  Marketing  Group  Inc.'s,
Freestanding Outpatient Surgery Center Directory, (June 1998):

              Outpatient  surgical procedures  represented  approximately 73% of
              all surgical procedures performed in the United States in 1997 and
              the number of  outpatient  surgery  cases  increased  71% from 3.1
              million in 1993 to 5.3 million in 1997.  As of December  31, 1997,
              there were 2,634  freestanding  ambulatory  surgery centers in the
              U.S.,  of which 155 were owned by hospitals  and 704 were owned by
              corporate entities.  Primarily physicians  independently owned the
              remaining 1,775 centers.

         SurgiCare  believes that the following  factors have contributed to the
growth of ambulatory surgery:

COST-EFFECTIVE ALTERNATIVE

         Ambulatory  surgical  centers  are not  saddled  with the high cost and
overhead  of  the  ancillary  services  such  as   administration,   laboratory,
radiology,  or  dietary,  that are  generally  found in the  hospital  settings.
Therefore surgery is generally less expensive than hospital  inpatient  surgery.
In  addition,  SurgiCare  believes  that  surgery  performed  at a  freestanding
ambulatory surgery center is also less expensive than hospital-based  ambulatory
surgery for a number of reasons, including

               Lower facility  development  costs.
               Lower cost associated with ancillary services.
               More efficient staffing and space utilization.
               Specialized operating environment focused on cost containment.

         SurgiCare  believes  that interest in  ambulatory  surgery  centers has
grown as managed care  organizations  have  continued  to seek a  cost-effective
alternative to inpatient services.

PHYSICIAN AND PATIENT PREFERENCE

         Operating  physicians,  who have  determined that their patients are in
need of a surgical procedure, generally choose what facility the surgery will be
done in. In most cases  patients  will have their  surgery  done at the facility
that their doctor determines is most appropriate.

         Freestanding  ambulatory  surgery  centers do not  subject  doctors nor
their patients to the large  institutional  environment found at both acute care
inpatient hospitals, and out patient surgery centers locating within a hospital.

         SurgiCare believes that because of the ease of admission and discharge,
many physicians prefer ambulatory surgery centers.  SurgiCare believes that such
centers  enhance  physicians'   productivity  by  providing  them  with  greater
scheduling  flexibility,  more consistent  nurse staffing and faster  turnaround
time between  cases.  This allows the  physician to perform more  surgeries in a
defined period.

         In contrast,  hospitals  generally serve a broader group of physicians,
including  those involved with emergency  procedures,  resulting in postponed or
delayed surgeries.  Additionally, many physicians choose to perform surgery in a
freestanding  ambulatory  surgery  center  because  their  patients  prefer  the
simplified  admissions  and  discharge  procedures  and the  less  institutional
atmosphere.

NEW TECHNOLOGY

         According to the  industry  publication  SMG  Marketing  Group  Inc.'s,
Freestanding Outpatient Surgery Center Directory, (June 1998):

         The increased use of minimally  invasive surgery,  enhanced  endoscopic
techniques  and  fiber  optics,  have  reduced  the  trauma  and  recovery  time
associated  with many surgical  procedures.  Improved  anesthesia  has shortened
recovery  time by  minimizing  postoperative  side  effects  such as nausea  and
drowsiness, thereby avoiding, in some cases, overnight hospitalization.

         These new  technology  and  advances  in  anesthesia,  which  have been
increasingly  accepted by physicians,  have significantly  expanded the types of
surgical procedures that are being performed in ambulatory surgery centers.

BUSINESS PHILOSOPHY

         SurgiCare  believes that physician owned and operated  surgical centers
have tended to be extremely  profitable.  This  profitability  results primarily
from the fact that physicians who own and operate an ambulatory  surgical center
are the center's most significant source of patients, and benefactors. Generally
it is the operating physician, not the patient, who chooses the facilities where
surgical  procedures  are to be  done.  Because  this  decision  is  made at the
physician  level, it is in fact the physicians  bring patients to the outpatient
surgical facility.

         SurgiCare  believes  that  ambulatory  surgical  centers  receive their
patient referrals almost exclusively from the operating physicians. Therefore it
becomes an extremely  important role of a center's management to insure that the
operating  physicians  have everything they need, and that they are pleased with
the results that they are able to obtain at the center.  If  management  and the
operating  physicians  are  substantially  the same,  it becomes  much easier to
insure that physician needs are meet, and that their  experiences at the centers
are pleasant.

         Furthermore,  SurgiCare believes that when operating physicians own and
operate an  ambulatory  surgical  center  they become  cost  conscious.  Without
allowing cost consciousness to detrimental to the patients,  it may still have a
significant  effect  on the  overall  profitability  of the  center.  For  these
reasons,  SurgiCare  believes,  physician owned ambulatory surgical centers have
historically been extremely profitable.

         SurgiCare  believes that the  profitability of freestanding  ambulatory
surgery  centers  tends to make  them  attractive  to  acquirers.  Nevertheless,
following the  acquisition of a physician owned center,  evidence  suggests that
the  typical  center's  profitability  will  significantly  decrease.  SurgiCare
believes that this typical decline in profitability  can be explained,  in part,
because in many of such  acquisitions  the operating  physician loses control of
the center.  After a typical  acquisition of an ambulatory  surgery center,  the
control of the  center is  typically  vested in  non-physician  management.  The
factors motivating the physician users to insure the center's  profitability are
therefore typically removed.

         SurgiCare's  management structure consists of physicians and healthcare
professionals.   SurgiCare's   management  has  substantial  experience  in  the
operations and management of ambulatory surgical centers. SurgiCare also expects
that it will issue its own shares, or other equity interests,  to the physicians
who own and  operate  other  centers  which  SurgiCare  may  acquire.  SurgiCare
believes  that it will thereby be able to  substantially  align the interests of
SurgiCare's  management and  shareholders  with those of the physician owners of
centers which SurgiCare may acquire.  SurgiCare also presently intends to permit
each  surgery  center to be  substantially  managed by its own  board,  which is
anticipated  to consist of a majority of physicians  associated  with the center
and  one or  more  representatives  of  SurgiCare.  Based  upon  this  approach,
SurgiCare  expects that it will benefit from the substantial  unity of goals and
motivations of its own management and shareholders  with those of physicians who
have previously owned and operated a freestanding center acquired by SurgiCare.

         SurgiCare   therefore   expects   that  with   goals  and   motivations
substantially  aligned, the profitability of each center, which it acquires, can
be maintained.  As there are numerous factors which affect the  profitability of
ambulatory surgery centers,  including  regulatory and liability matters,  there
can, however,  be no assurance that the profitability of any center or SurgiCare
as a whole will be maintained.

         SurgiCare   intends  to  apply  its  philosophy  in  the   acquisition,
development and operation of physician owned / managed  freestanding  ambulatory
surgery centers.

THE ESSENTIAL COMPONENTS OF SURGICARE'S STRATEGY ARE:

Acquire physician owned ambulatory surgery centers.

         SurgiCare  expects  to  continue  to  grow  through  a  combination  of
         acquisitions  and development of physician  owned / managed  ambulatory
         surgical centers throughout the United States.

Achieve Growth in Surgery Center Revenues and Profitability.

         SurgiCare  intends  to  enhance  physician   productivity  and  promote
         increased   same-center   revenues  and   profitability  by  increasing
         physician involvement,  and creating operating efficiencies,  including
         improved   scheduling,   group   purchasing   programs   and   clinical
         efficiencies.

         SurgiCare is in the process of identifying  ambulatory surgical centers
as potential acquisition targets, and has, in some cases,  conducted preliminary
discussions with  representatives  of centers.  At the time of this filing there
are no commitments, understandings, or agreements with any potential acquisition
targets.  All of such discussions have been tentative in nature and there can be
no assurance that SurgiCare will acquire any center with which  discussions have
been  conducted.  SurgiCare  expects that  generally the  acquisition of another
surgery  center  will take the form of a  merger,  stock-for-stock  exchange  or
stock-for-assets  exchange,  and that in most  instances the target company will
wish to structure  the business  combination  to be within the  definition  of a
tax-free  reorganization under Section 368 of the Internal Revenue Code of 1986,
as  amended.   SurgiCare  may,  however,   use  other  acquisition   structuring
techniques,  including  purchases of assets or stock for cash or cash and stock,
or through  formation of one or more limited  partnerships or limited  liability
companies.

ACQUISITION AND DEVELOPMENT OF SURGERY CENTERS

                  SurgiCare's  development  staff will identify existing centers
that are potential acquisition  candidates and identify physician practices that
are potential  partners for new center  development  in the medical  specialties
which SurgiCare has targeted for development.

         The  candidates  will then be  evaluated  against  SurgiCare's  project
criteria  which may be expected  to include  several  factors  such as number of
procedures  currently being performed by the practice,  competition from and the
fees being charged by other  surgical  providers,  relative  competitive  market
position of the physician practice under consideration, ability to contract with
payers in the market and state  certificate  of need  ("CON")  requirements  for
development of a new center.

         In the development of a new surgery centers,  SurgiCare intends to work
in conjunction with Surgery Centers of America II.  SurgiCare  believes that its
management  has  a  certain  expertise  in  acquiring,  managing  and  operating
ambulatory  surgical centers.  However,  in order to assure that its acquisition
and development  activities are efficiently and thoroughly conducted,  SurgiCare
has agreed in principle to utilize SCOA to assist it in these efforts.  However,
SurgiCare's  current  affiliation  agreement (Exhibit 10.1) which covers certain
operational  affiliations,  does not currently  cover these types of development
activates.  In  presenting  the  advantages  to  physicians  of developing a new
freestanding ambulatory surgery center in partnership with SurgiCare,  SurgiCare
anticipates  that the SurgiCare and SCOA  development  staffs will emphasize the
following factors, among others:

 1.Simplified administrative procedures.

 2.The  ability  to  schedule  consecutive  cases  without  preemption  by
   inpatient or emergency procedures.

 3.Rapid turnaround time between cases.

 4.The high  technical  competency  of the  center's  clinical  staff  that
   performs only a limited number of specialized  procedures, and
   state-of-the-art surgical equipment.

     SurgiCare  expects  that,  in  conjunction  with SCOA,  it will provide the
following  developmental  services:  Financial  feasibility  pro forma analysis;
Assistance in state CON approval  process;  Site selection;  Assistance in space
analysis and schematic floor plan design;  Analysis of local, state, and federal
building  codes;  Negotiation  of equipment  financing  with lenders;  Equipment
budgeting,  specification,  bidding,  and  purchasing;  Construction  financing;
Architectural oversight; Contractor bidding; Construction management; Assistance
with licensing;  Assistance with Medicare  certification and third party Managed
care contracts.

         SurgiCare  currently  intends  that  its  ownership  interests  in  its
freestanding  ambulatory  surgery centers will generally be 100%. The physicians
who had owned and  operated a center  acquired by  SurgiCare,  or who have newly
developed  a  center  in  partnership  with  SurgiCare,  generally  will  become
substantial  shareholders  in SurgiCare.  The local  physicians  will  generally
continue to oversee their local operations. SurgiCare anticipates that the terms
of its acquisition  agreements with new centers will include a provision for the
appointment of one or more physician partners from each newly acquired center to
a position on the Board of Directors  of  SurgiCare or on an advisory  committee
that will advise  SurgiCare's board or management on operational  aspects of the
center.
REVENUES
         SurgiCare's  principal  source of revenues is a facility fee charged to
patients,  for surgical  procedures  performed in its surgery center.  SurgiCare
depends upon  third-party  programs,  including  governmental and private health
insurance programs to pay these fees, on behalf of their patients.  Patients are
responsible for the co-payments and deductibles when applicable. This fee varies
depending on the procedure,  but usually includes all charges for operating room
usage, special equipment usage, supplies, recovery room usage, nursing staff and
medications.  Facility fees do not include the charges of the patient's surgeon,
anesthesiologist  or other  attending  physicians,  which are billed directly to
third-party payers by such physicians.

         Freestanding   ambulatory  surgery  centers  such  as  those  in  which
SurgiCare  owns and intends to acquire,  depend upon  third-party  reimbursement
programs,  including  governmental and private  insurance  programs,  to pay for
services rendered to patients.  SurgiCare  derived  approximately 23% of its net
revenues from governmental healthcare programs, including Medicare and Medicaid,
in the past trailing 12-month period.

         The Medicare  program  currently pays  ambulatory  surgery  centers and
physicians in accordance with fee schedules, which are prospectively determined.

         On June  12,  1998,  the  Health  Care  Financing  Agency  of the  U.S.
Department of Health and Human Services ("HCFA")  published a proposed rule that
would update the rate setting  methodology,  payment rates, payment policies and
the list of covered  surgical  procedures for ambulatory  surgery  centers.  The
proposed rule is subject to a comment  period that has been extended  until June
30, 1999,  and provides for an  implementation  date that has been extended to a
date to be no earlier than January  2000.  As of March 29, 2000,  this  proposed
plan has not been  adopted.  If the plan is ever  adopted,  the law now requires
that it can only be  implemented  by  phasing  it in  slowly  over a  three-year
period.

     The  proposed  rule  would  reduce the rates  paid for  certain  ambulatory
surgery  center  procedures  reimbursed  by  Medicare.  While the effects of the
proposed rule, if adopted in its current form,  cannot be precisely  forecasted,
SurgiCare  believesthat  if adopted in its current form,  the proposed HCFA rule
would not directly have a material adverse affect its annual  revenues.  This is
because the procedure  codes that are involved in the proposed  rule,  are codes
that SurgiCare  believes are not relevant or critical to its current  operation.
However many third party payers, base their payment structure on a percentage of
the Medicare  accepted  rate. The adjustment of such payers' rates to follow the
rates proposed in the rule could adversely affect  SurgiCare's  annual revenues.
There can be no assurance that HCFA will not modify the proposed rule, before it
is enacted in final form, in a manner that would  adversely  impact  SurgiCare's
financial condition, results of operation and business prospects.

         In addition to payment from governmental  programs,  ambulatory surgery
centers  derive  a  significant  portion  of their  net  revenues  from  private
healthcare  reimbursement  plans.  These plans include both  standard  indemnity
insurance  programs as well as managed care structures  such as PPO's,  HMOs and
other similar structures.

         The  strengthening  of managed care systems  nationally has resulted in
substantial  competition  among  providers of services,  including  providers of
surgery center services.  This competition  would include companies with greater
financial  resources  and  market  penetration  than  SurgiCare.  In some  cases
national  managed care systems require that a provider,  in order to participate
in a specific plan, be able to cover an expanded geographical area.

         In order to compete in market  penetration,  SurgiCare  has  associated
itself with SCOA. SCOA is located in Edmond Oklahoma,  and is in the business of
developing, building, and managing ambulatory surgical centers nation wide, with
participating physician partners. SCOA maintains a minority ownership in each of
the centers that is develops.

         This  association  allows  SCOA on  behalf  of all of its  centers  and
affiliates to cover a large  geographical  area, and to participate with managed
care systems  accordingly.  SCOA manages surgery  centers in Oklahoma,  Arizona,
Missouri,  and parts of Texas. The more comprehensive the geographical  coverage
provided  by a  company,  the  better it is able to  compete  for  managed  care
contracts. SurgiCare offers SCOA the ability to include the geographical regions
covered by  SurgiCare.  Since SCOA  includes  the  SurgiCare  facilities  in its
managed  care  contracting,   SurgiCare  also  benefits  from  the  geographical
penetration of SCOA.

         SurgiCare believes that all payers, both governmental and private, will
continue  their efforts over the next several years to reduce  healthcare  costs
and that  their  efforts  will  generally  result in a less  stable  market  for
healthcare  services.  While no assurances can be given  concerning the ultimate
success of SurgiCare's  efforts to contract with  healthcare  payers,  SurgiCare
believes  that its  position  as a low-cost  alternative  for  certain  surgical
procedures should enable its current center, and additional centers which it may
acquire,  to  compete   effectively  in  the  evolving  healthcare
marketplace.

COMPETITION

         There  are  several  companies,  many in niche  markets,  that  acquire
existing freestanding ambulatory surgery centers. Many of these competitors have
greater resources than SurgiCare.  The principal competitive factors that affect
the ability of SurgiCare  and its  competitors  to acquire  surgery  centers are
price, experience,  reputation,  and access to capital.  Competition for Managed
Care Contracts

          SurgiCare's participation in managed care contracts, often referred to
as HMO's and  PPO's,  in most cases  simply  makes it more  convenient  and cost
effective  for a potential  patient to allow their  doctor to choose a SurgiCare
facility.  Participation  in most  managed care  contracts  is helpful,  but not
material to SurgiCare's business. SurgiCare believes that its current center can
provide lower-cost,  high quality surgery in a more comfortable  environment for
the patient in  comparison to hospitals  and to hospital  based surgery  centers
with which SurgiCare competes for managed care contracts. SurgiCare intends that
any additional  center,  which it may acquire,  will be similarly  situated.  In
competing for Managed Care contracts,  it is important that SurgiCare be able to
show insurance companies that it provides quality  healthcare,  and can do so at
affordable competitive prices.

GOVERNMENT REGULATION

         The healthcare industry is subject to extensive  regulation by a number
of  governmental  entities at the  federal,  state and local  level.  Regulatory
activities  affect the  business  activities  of SurgiCare  by  controlling  its
growth, requiring licensure and certification for its facilities, regulating the
use of SurgiCare's  properties,  and controlling  reimbursement to SurgiCare for
the services it provides.

     Certificates of Need and State Licensing. CON regulations control the
development  of ambulatory  surgery  centers in certain  states.  CONs generally
provide that prior to the expansion of existing centers, the construction of new
centers,  the  acquisition  of major items of equipment or the  introduction  of
certain new  services,  approval  must be  obtained  from the  designated  state
health-planning  agency. State CON statutes generally provide that, prior to the
construction of new facilities or the introduction of new services, a designated
state  health-planning  agency  must  determine  that a need  exists  for  those
facilities or services.  SurgiCare  expects that its  development  of ambulatory
surgery  centers  will  generally  focus on  states  that do not  require  CONs.
However,  acquisitions of existing surgery centers,  even in states that require
CONs for new centers, generally do not require CON regulatory approval.

         State   licensing  of  ambulatory   surgery   centers  is  generally  a
prerequisite to the operation of each center and to  participation  in federally
funded programs,  such as Medicare and Medicaid.  Once a center becomes licensed
and  operational,  it must  continue  to comply  with  federal,  state and local
licensing and certification  requirements in addition to local building and life
safety  codes.  In addition,  each center is also subject to federal,  state and
local laws dealing with issues such as occupational safety, employment,  medical
leave, insurance regulations, civil rights and discrimination, and medical waste
and other environmental issues.

         Insurance  Laws.  Laws in all states regulate the business of insurance
and the  operation  of HMOs.  Many states also  regulate the  establishment  and
operation  of networks of  healthcare  providers.  SurgiCare  believes  that its
operations are in compliance with these laws in the states in which it currently
does business. The National Association of Insurance  Commissioners (the "NAIC")
recently  endorsed a policy proposing the state regulation of risk assumption by
healthcare  providers.  The policy proposes prohibiting  providers from entering
capitated  payment  or other  risk  sharing  contracts  except  through  HMOs or
insurance  companies.  Several states have adopted regulations  implementing the
NAIC policy in some form.  In states where such  regulations  have been adopted,
healthcare  providers will be precluded  from entering into capitated  contracts
directly with employers and benefit plans other than HMOs and companies.

         SurgiCare and its affiliated  groups may in the future enter  contracts
with  managed  care  organizations,  such as  HMOs,  whereby  SurgiCare  and its
affiliated  groups would assume risk in  connection  with  providing  healthcare
services under capitation  arrangements.  If SurgiCare or its affiliated  groups
are  considered  to be in the business of insurance as a result of entering into
such risk  sharing  arrangements,  they  could  become  subject  to a variety of
regulatory and licensing requirements applicable to insurance companies or HMOs,
which could have a material  adverse  effect upon  SurgiCare's  ability to enter
into such contracts.

         With respect to managed care  contracts  that do not involve  capitated
payments  or some  other  form of  financial  risk  sharing,  federal  and state
antitrust  laws  restrict the ability of  healthcare  provider  networks such as
SurgiCare's  specialty  physician networks to negotiate payments on a collective
basis

         Reimbursement.  SurgiCare depends upon third-party programs,  including
governmental and private health insurance programs; to reimburse it for services
rendered to  patients  in its  ambulatory  surgery  center.  In order to receive
Medicare reimbursement,  each ambulatory surgery center must meet the applicable
conditions  of  participation  set forth by the  Department  of Health and Human
Services ("DHHS") relating to the type of facility, its equipment, personnel and
standard of medical care,  as well as  compliance  with state and local laws and
regulations,  all of which are subject to change  from time to time.  Ambulatory
surgery  centers  undergo  periodic  on-site  Medicare   certification  surveys.
SurgiCare's  existing  center is  certified  as a  Medicare  provider.  Although
SurgiCare  intends for its current  center and those,  which it may acquire,  to
participate in Medicare and other government  reimbursement programs,  there can
be no assurance that these centers will continue to qualify for participation.

         Since performing surgery is a fundamental part of any surgical practice
the  facilities  were a surgeon  chooses  to  operate,  is  considered  to be an
extension  of the  surgical  practice.  It is  acceptable  for certain  surgical
procedures  to be done in a doctors  office,  others  procedures  require a more
clinical  environment  such as  that  of an  ambulatory  surgical  center,  or a
hospital.  Regardless of the location,  when a surgeon  performs a procedure the
surgical procedure is part of the surgical practice,  and therefore the location
is considered to be an extension of the practice.

If an  operating  physician  has a financial  interest  in a facility  through a
partnership  interest,  or as a  shareholder,  the  operating  physician has the
potential to benefit from the profitability of the facility.  Since the facility
where a surgeon  performs  surgery is  considered  an  extension of the surgical
practice,  profiting  from an  ownership  interest  is not  considered  to be in
violation  of  the  anti-kickback  statutes  of  the  Medicare-Medicaid  Illegal
Remuneration Provisions.

         Medicare-Medicaid  Illegal Remuneration  Provisions.  The anti-kickback
statute makes unlawful knowingly and willfully soliciting,  receiving,  offering
or paying any remuneration  (including any kickback,  bribe, or rebate) directly
or indirectly to induce or in return for referring an individual to a person for
the  furnishing or arranging for the furnishing of any item or service for which
payment may be made in whole or in part under Medicare or Medicaid. Violation is
a felony  punishable by a fine of up to $25,000 or  imprisonment  for up to five
years, or both. The Medicare and Medicaid Patient Program Protection Act of 1987
(the "1987 Act")  provides  administrative  penalties for  healthcare  practices
which  encourage  over  utilization  or illegal  remuneration  when the costs of
services  are  reimbursed   under  the  Medicare   program.   Loss  of  Medicare
certification  and severe financial  penalties are included among the 1987 Act's
sanctions.  The 1987 Act, which adds to the criminal penalties under preexisting
law, also directs the  Inspector  General of the DHHS to  investigate  practices
which may  constitute  over  utilization,  including  investments  by healthcare
providers  in  medical  diagnostic  facilities  and  to  promulgate  regulations
establishing  exemptions or "safe harbors" for  investments  by medical  service
providers in legitimate business ventures that will be deemed not to violate the
law even  though  those  providers  may also refer  patients  to such a venture.
Regulations  identifying  safe harbors were published in final form in July 1991
(the "Regulations").

         The  Regulations  set forth two specific  exemptions or "safe  harbors"
related to "investment interests":  the first concerning investment interests in
large publicly traded  companies  ($50,000,000  in net tangible  assets) and the
second for investments in smaller entities. The corporate structure of SurgiCare
and its center do not meet all of the  criteria of either  existing  "investment
interests" safe harbor as announced in the Regulations.

         While several  federal court  decisions have  aggressively  applied the
restrictions of the  anti-kickback  statute,  they provide little guidance as to
the  application  of the  anti-kickback  statute to SurgiCare or its  subsidiary
company.   SurgiCare  believes  that  it  is  in  compliance  with  the  current
requirements of applicable federal and state law.

         Notwithstanding  SurgiCare's  belief that the relationship of physician
partners  to  SurgiCare's   surgery   center  should  not   constitute   illegal
remuneration under the anti-kickback  statute, no assurances can be given that a
federal or state agency charged with  enforcement of the  anti-kickback  statute
and  similar  laws might not assert a contrary  position  or that new federal or
state  laws  might not be  enacted  that  would  cause the  physician  partners'
ownership  interest in SurgiCare to become illegal,  or result in the imposition
of penalties on SurgiCare or certain of its facilities.  Even the assertion of a
violation could have a material adverse effect upon SurgiCare.

         Prohibition  on  Physician  Ownership  of  Healthcare  Facilities.  The
so-called "Stark II" provisions of the Omnibus Budget Reconciliation Act of 1993
amend the federal  Medicare  statute to  prohibit a referral by a physician  for
"designated  health  services"  to an  entity  in  which  the  physician  has an
investment  interest  or  other  financial  relationship,   subject  to  certain
exceptions.  A referral under Stark II that does not fall within an exception is
strictly prohibited.  This prohibition took effect on January 1, 1995. Sanctions
for violating  Stark II can include civil monetary  penalties and exclusion from
Medicare and Medicaid.

         Ambulatory  surgery is not identified as a "designated health service",
and SurgiCare  therefore does not believe that  ambulatory  surgery is otherwise
subject to the restrictions set forth in Stark II. Proposed regulations pursuant
to Stark II that were  published  on January 9, 1998  specifically  provide that
services  provided in any ambulatory  surgery  center and  reimbursed  under the
composite payment rate are not designated health services.

         However,  unfavorable final Stark II regulations or subsequent  adverse
court  interpretations  concerning  similar provisions found in recently enacted
state  statutes  could  prohibit  reimbursement  for  treatment  provided by the
physicians  affiliated  with SurgiCare or its current or future centers to their
patients.
         Neither  SurgiCare  nor its  subsidiaries  are engaged in the corporate
practice  of  medicine.  SurgiCare  does not employ any  physicians  to practice
medicine on its behalf.  SurgiCare and its subsidiaries merely provide the venue
for its physicians to perform surgical procedures.  SurgiCare submits claims and
bills to patients,  for the FACILITY FEE only,  and in no way are involved  with
the billing or submission of claims for any professional medical fees.

         SurgiCare   cannot  predict  whether  other   regulatory  or  statutory
provisions will be enacted by federal or state  authorities which would prohibit
or otherwise  regulate  relationships  which  SurgiCare has  established  or may
establish with other healthcare providers or the possibility of material adverse
effects on its business or revenues arising from such future actions.  SurgiCare
believes,  however,  that it will be able  to  adjust  its  operations  to be in
compliance with any regulatory or statutory provision, as may be applicable.

         SurgiCare  is  subject  to state  and  federal  laws  that  govern  the
submission  of claims  for  reimbursement.  These  laws  generally  prohibit  an
individual or entity from knowingly and willfully presenting a claim (or causing
a claim to be  presented)  for payment  from  Medicare,  Medicaid or other third
party payers that is false or fraudulent. The standard for "knowing and willful"
often includes conduct that amounts to a reckless disregard for whether accurate
information is presented by claims processors

         Penalties under these statutes include  substantial  civil and criminal
fines,  exclusion from the Medicare program,  and imprisonment.  One of the most
prominent of these laws is the federal  False Claims Act,  which may be enforced
by  the  federal  government  directly,  or  by  a  qui  tam  plaintiff  on  the
government's  behalf.  Under the False Claims Act, both the  government  and the
private plaintiff, if successful,  are permitted to recover substantial monetary
penalties,  as well as an amount equal to three times actual damages.  In recent
cases,  some qui tam plaintiffs  have taken the position that  violations of the
anti-kickback  statute and Stark II should also be  prosecuted  as violations of
the federal False Claims Act. SurgiCare believes that it has procedures in place
to ensure the accurate completion of claims forms and requests for payment.

         However,  the laws and  regulations  defining the proper  parameters of
proper  Medicare or Medicaid  billing are  frequently  unclear and have not been
subjected to extensive  judicial or agency  interpretation.  Billing  errors can
occur  despite  SurgiCare's  best  efforts to prevent  or correct  them,  and no
assurances  can be  given  that  the  government  will  regard  such  errors  as
inadvertent and not in violation of the False Claims Act or related statutes.

EMPLOYEES

         As  of  July  21,  1999,   SurgiCare   and  its   subsidiary   employed
approximately 18 persons,  13 of who were full-time  employees and 5 of who were
part-time employees.  Of the above, 2 were employed at SurgiCare's  headquarters
staff office in Houston,  Texas and the  remaining  employees  were  employed by
Bellaire.  SurgiCare  believes its  relationship  with its employees to be good.
SurgiCare does not have any employment or labor contracts, nor does it currently
plan on having any such contracts  with any operating  physician on staff at any
of its  facilities.  At this time SurgiCare  believes that all of its nurses and
other employees have (at will) employment relationships with the company.

PHYSICIAN SHAREHOLDERS

          SurgiCare has never entered into any arrangement,  nor does it plan on
entering into any  arrangement  with any  physicians  that operate at any of its
facilities,  to assure their continued use of its companies facilities.  However
many  of  the  surgeons  that  operating  in  SurgiCare  facilities  own  either
SurgiCare's  common stock,  preferred  stock, or both.  Depending on SurgiCare's
profitability,  the potential  exist for all  shareholders,  both  physician and
non-physician, to benefit financially.

         Surgeons  specializing  in  podiatry,   orthopedics,  pain  management,
gynecology,  ophthalmology,  plastics,  as  well  as  general  surgery,  utilize
SurgiCare's  facility.  SurgiCare is not  dependent on the revenue  generated by
patients  brought by any single  operating  physician.  SurgiCare  does  however
derive a large portion of its revenue from procedures  performed within specific
specialties. Currently podiatry and pain management are the dominant specialties
at Bellaire.  Since  Bellaire has over 20 podiatrist  and three pain  management
physicians  bringing patients to the surgery center, none are considered to be a
major customer.

ITEM 2. DESCRIPTION OF PROPERTY

         SurgiCare's principal office is located at 6699 Chimney Rock Rd., Suite
105,  Houston,  Texas,  77081.  SurgiCare  currently  occupies  space within the
facility  operated by its wholly owned  subsidiary,  Bellaire.  This property is
approximately  10,000  square feet,  occupying  about half of both the first and
second  floors of the  building in which it is located.  The  property is leased
from an unaffiliated  third party for a term that expires in March 2003, with an
annual rental of $ 172,081.92,  payable monthly in the amount of $15,771.50. The
rent has increased over prior years, in part because  Bellaire has increased its
rental space by approximately 637 square feet, as of August 1, 1999. The balance
of the increase can be attributed to a rental increase for Bellaire's'  pro-rata
share of  building  overhead.  SurgiCare  maintains  tenant  fire  and  casualty
insurance on its property  located in such building in an amount deemed adequate
by SurgiCare.

ITEM 3. LEGAL PROCEEDINGS

         SurgiCare  is not party to, and none of its  property  or  holdings  is
subject to, any pending or threatened  legal,  governmental,  administrative  or
judicial  proceedings  that will have a material adverse effect upon SurgiCare's
condition  or  operation.

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

         Not Applicable

PART II

ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
        OTHER SHAREHOLDER MATTERS

MARKET INFORMATION

         SurgiCare's  Common  Stock  currently  is not  traded  on any  national
securities  exchange or other public market.  SurgiCare's  management is working
with  certain  broker  dealers  affiliated  with  the  National  Association  of
Securities Dealers Inc. in order to have the SurgiCare's  companies stock listed
on the Over The Counter  Bulletin Board (OTCBB).  There can be no assurance that
SurgiCare's securities will become eligible to be quoted or that any market will
develop for SurgiCare's securities.

     SurgiCare's  common stock has been  trading in Texas since  August  23,1999
through William Little and Company.  The following table sets forth the high and
low sales prices per share of the company's  common stock as reported by William
Little and Company  from August 23, 1999  through  December 31, 1999 and each of
the quarters in 1999 subsequent to the initial  quoting  period.  Such bid price
reflect  quotations by William Little,  and Company without  commissions and may
not represent actual transactions.

                                                    HIGH BID     LOW BID
August 23, 1999 through September 30, 1999              3         2 15/16
Quarter ended December 31, 1999                        3 7/8        3

PENNY STOCK

         SurgiCare's  common stock may be classified as "penny stock" as defined
by  the  Securities  and  Exchange  Commission.   The  Securities  and  Exchange
Commission  has  adopted a Rule which  established  the  definition  of a "penny
stock," for purposes relevant to the Company,  as any equity security that has a
market price of less than $5.00 per share or with an exercise price of less than
$5.00 per share,  subject to certain  exceptions  that do not currently apply to
SurgiCare's stock. For any transaction  involving a penny stock,  unless exempt,
the rules require:  (i) that a broker or dealer  approve a person's  account for
transactions  in penny  stocks;  and (ii) the broker or dealer  receive from the
investor a written agreement to the transaction,  setting forth the identity and
quantity  of the penny  stock to be  purchased.  In order to  approve a person's
account for  transactions in penny stocks,  the broker or dealer must (i) obtain
financial  information  and investment  experience and objectives of the person;
and (ii) make a reasonable  determination  that the transactions in penny stocks
are  suitable  for that  person and that  person has  sufficient  knowledge  and
experience  in  financial  matters  to be  capable  of  evaluating  the risks of
transactions in penny stocks.  The broker or dealer must also deliver,  prior to
any  transaction  in a  penny  stock,  a  disclosure  schedule  prepared  by the
Commission  relating to the penny stock market,  which,  in highlight  form, (i)
sets  forth  the  basis on which  the  broker  or  dealer  made the  suitability
determination,  and (ii) that the broker or dealer  received  a signed,  written
agreement from the investor prior to the transaction.  Disclosure also has to be
made about the risks of investing in penny stock in both public  offering and in
secondary trading,  and about commissions  payable to both the broker-dealer and
the  registered  representative,  current  quotations for the securities and the
rights and  remedies  available  to an investor  incases of fraud in penny stock
transactions.  Finally,  monthly  statements have to be sent  disclosing  recent
price information for the penny stock held in the account and information on the
limited  market in penny  stocks.  These  requirements  may  reduce the level of
trading  activity  in the market for a stock that is subject to the penny  stock
rules and therefore make it more difficult to sell those shares.

HOLDERS
         SurgiCare  believes that there were approximately 325 holders of record
of the  Company's  Common  Stock,  and 15  holders  of the  Company's  Series  A
Preferred as of December 31, 1999.

DIVIDENDS

         SurgiCare  has not paid  dividends on shares of its Common Stock within
the last two years,  and does not expect to declare or pay any cash dividends on
its common shares in the foreseeable future

CONVERTIBLE SECURITIES AND RESTRICTED SECURITIES

         Convertible  Securities.  At the date of  filing  of this  registration
statement,  there are 1,350,000 shares of Series A Preferred Stock  outstanding.
Each  share of Series A  Preferred  Stock is  convertible  at the  option of the
holder into one share of Common Stock of SurgiCare.

         No options or warrants to purchase  shares of Common  Stock or Series A
         Preferred Stock have been issued by SurgiCare.

     Restricted Securities. As of December 31, 1999 there were approximately 325
holders of record of  SurgiCare's  Common  Stock and 14 holders of record of its
Series A Preferred  Stock.  Currently  11,055,556  of the  12,596,657  shares of
Common  Stock and all of the  shares  of Series A  Preferred  Stock  issued  and
outstanding are deemed to be "restricted  securities" within the meaning of Rule
144  promulgated  under the  Securities  Act and may be publicly  resold only if
registered  under the Securities Act in the future or sold in accordance with an
applicable  exemption  from  registration,  such as is set  forth  in Rule  144.
SurgiCare  believes that its directors and officers  constituting  affiliates of
SurgiCare currently own 3,247,776  restricted shares of Common Stock and 400,000
restricted shares of Series A Preferred Stock.

     In general,  under Rule 144 as currently in effect, a person  (including an
affiliate of SurgiCare) who beneficially  has owned  restricted  securities that
were  acquired  from  SurgiCare  for at least one year prior to an intended sale
date is entitled to sell within any  three-month  period a number of shares that
does not exceed the  greater of the  following:  a. one percent of the number of
shares of common  stock then  outstanding;  or b. the  average  weekly  reported
trading  volume of the common stock during the four calendar  weeks  immediately
preceding the date on which notice of such sale is filed with the Securities and
Exchange  Commission,  provided that manner of sale and notice  requirements and
requirements  as to the  availability of current public  information  concerning
SurgiCare are satisfied.

         Under Rule 144(k),  a person who has not been an affiliate of SurgiCare
for at least three months  preceding the intended sale date and who beneficially
has owned restricted  securities  acquired from SurgiCare for at least two years
prior to the sale date,  would be  entitled  to sell the shares  without  volume
limitations, manner of sale provisions, or notification requirements.
 .
         Shares owned by persons who, under the Securities Act, are deemed to be
affiliates  of  SurgiCare  are  subject  to volume  limitations,  manner of sale
provisions,  notification requirements,  and requirements as to the availability
of current public information  regarding  SurgiCare,  regardless of how long the
shares have been owned.  As defined in Rule 144, an  affiliate of an issuer is a
person   that   directly  or   indirectly   through  the  use  of  one  or  more
intermediaries,  controls, or is controlled by, or is under common control with,
the issuer.  SurgiCare believes that Messrs.  Blumfield,  Penso,  Nagler,  Mineo
Browne,  Nguyen,  and Cohen (its  directors  and  officers)  are  affiliates  of
SurgiCare.

TRANSFER AGENT

         SurgiCare's  transfer  agent is First  National  Trust  Company;  their
address is 240 N. Jones Blvd, STE F-206,  Las Vegas,  NV 89107.  Their toll free
telephone number is 1-888-505-3721.

RECENT SALES OF UNREGISTERED SECURITIES

         On July 2, 1999  Technical  Coatings  issued  100,000  Shares of Common
Stock to Marjorie  Kleiman Mintz,  personally and as surviving  spouse of Martin
Kleiman,  in exchange  for all of her rights,  title and  interest in a judgment
owned by her in the amount of  $211,040.40  plus interest and  attorney's  fees,
pursuant to Settlement  Agreement dated July 7, 1999. The original  judgment had
been issued against TCI in the Circuit Court of the Eleventh Judicial Circuit in
and for Dade County  Florida,  on April 20, 1990.  This  transaction  took place
prior to the Bellaire Shareholders  acquiring the Technical Coatings Stock There
is no remaining contingent liabilities as a result of this settlement agreement.

     Pursuant to the Settlement Agreement,  Mrs. Kleiman Mintz agreed that for a
period of one year she  would  not sell  more  than 25% of the  shares of Common
Stock  received by her,  increasing by 25% per year  thereafter.  The Settlement
Agreement further provides that if at any time the Common Stock reaches a market
price of $5.00 per share,  and  maintains  that market  price for a period of 90
days, all  restrictions  imposed by the Settlement  Agreement would be released.
The stock issued is subject to the restrictions of Rule 144, and any restriction
imposed by that rule shall  supersede  any  restrictions  imposed,  or released,
pursuant to the terms of the Settlement Agreement.

         On July 21,  1999,  SurgiCare  issued  9,860,000  shares of its  Common
Stock,  with a $0.005 per share par value,  and 1,350,000 shares of its Series A
Preferred,  to  the  shareholders  of  Bellaire  pursuant  to a  Stock  Exchange
Agreement  effective July 1, 1999. The shares were issued as part of a stock for
stock  exchange,  upon  the  completion  of  which  SurgiCare  became  the  sole
shareholder of Bellaire.

         On July 18,1999  SurgiCare  issued 1,095,566 shares of its Common Stock
to SCOA pursuant to an agreement,  dated July 1, 1999, among SurgiCare, SCOA and
Bellaire  (the  "SCOA  Agreement").  The  shares  issued to SCOA were  issued in
satisfaction  of SCOA's rights,  under a previous  agreement  with Bellaire,  to
participate in the proceeds of any transaction  resulting in a change of control
of  Bellaire,  and in  connection  with the  agreed  early  termination  of that
agreement.

         No underwriters were involved in any of the foregoing sales or issuance
of  securities.  Such sales or issuance  were made in reliance upon an exemption
from the registration provisions of the Securities Act set forth in Section 4(2)
thereof relative to sales by an issuer not involving any public offering, or the
rules and regulations there under. Each individual  receiving  securities in the
foregoing  sales or  issuance  is believed  by  SurgiCare  to be an  "accredited
investor"  as that term is  defined  under  Rule 501 of  Regulation  D under the
Securities  Act,  and to have  been  provided  with,  or have by virtue of their
position access to, adequate information concerning SurgiCare at the time of the
respective  issuance.  All of the  foregoing  securities  are deemed  restricted
securities for the purposes of the Securities Act.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD LOOKING STATEMENTS

         The  information  contained  herein  contains  certain  forward looking
statements  within the meaning of Section 27A of the  Securities Act of 1933, as
amended and  Section 21E of the  Securities  Exchange  Act of 1934,  as amended,
which are intended to be covered by the safe harbors created thereby.  Investors
are cautioned that all forward looking statements involve risks and uncertainty,
including,  without  limitation,  the  ability  of  SurgiCare  to  continue  its
expansion strategy,  changes in federal or state healthcare laws and regulations
or third party payer practices,  SurgiCare's  historical and current  compliance
with existing or future  healthcare  laws and  regulations and third party payer
requirements, changes in costs of supplies, labor and employee benefits, as well
as general  market  conditions,  competition  and  pricing.  Although  SurgiCare
believes  that  the  assumptions   underlying  the  forward  looking  statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore,  there  can be no  assurance  that  the  forward  looking  statements
included  in  this  Form  10K-SB  will  prove  to be  accurate.  In  view of the
significant  uncertainties  inherent in the forward looking statements  included
herein,  the  inclusion  of  such  information  should  not  be  regarded  as  a
representation by SurgiCare or any other person that the objectives and plans of
SurgiCare  will be achieved.  SurgiCare  undertakes  no  obligation to update or
revise forward-looking statements to reflect changed assumptions, the occurrence
of unanticipated events or changes to future operating results over time.

     SurgiCare's  principal  business  strategies are to (i) increase  physician
utilization of existing facilities,  (ii) increase both the revenue and profits,
from current cases and procedures  being  performed in existing  facilities and,
(iii) achieve growth and expand revenues by pursuing  strategic  acquisitions of
existing,  and the  development  of new,  physician  owned  ambulatory  surgical
centers.

     (i) Bellaire SurgiCare is currently operating at or near capacity. In order
     to facilitate growth,  SurgiCare is in the process of adding one additional
     operating room to its Bellaire  facility.  This  additional  operating room
     will increase the capacity at Bellaire by 50%.

     (ii)  SurgiCare is  constantly  striving to achieve  increase  profits from
     existing  revenues.  Surgical  supply  costs are the  single  largest  cost
     component of any ambulatory surgical center.  Therefore SurgiCare is always
     looking  for  ways to  decrease  the  cost of  surgical  supplies.  Through
     participation  in  national  buying  groups  SurgiCare  has  been  able  to
     negotiate  discounts  on  most  of the  commonly  used  surgical  supplies.
     SurgiCare has also implemented a "Just in Time" approach to inventory. This
     allows the center to minimize the amount of supplies that it is required to
     keep in inventory. SurgiCare is also always looking for new distributors of
     its surgical  supplies that have the  capability to deliver the majority of
     its surgical  supplies  "Just in Time",  and provide  quality  service,  at
     reduced  prices.  SurgiCare  has found that the  purchasing  policies  that
     govern  the  acquisition  of  surgical  equipment  is an  important  key to
     maximize a centers  profit.  Therefore  all  equipment  is purchased at the
     corporate level, in order to insures that the equipment is purchased at the
     lowest possible price.

     (iii)  SurgiCare  is in the  process  of  identifying  ambulatory  surgical
     centers as potential acquisition targets, and has, in some cases, conducted
     preliminary  discussions with  representatives  of centers.  At the time of
     this filing there are no  commitments,  understandings,  or agreements with
     any  potential  acquisition  targets.  All of such  discussions  have  been
     tentative  in nature  and there can be no  assurance  that  SurgiCare  will
     acquire any center with whom  discussions  have been  conducted.  SurgiCare
     expects that generally the  acquisition of another surgery center will take
     the  form  of  a  merger,   stock-for-stock  exchange  or  stock-for-assets
     exchange,  and that in most  instances  the  target  company  will  wish to
     structure  the  business  combination  to be  within  the  definition  of a
     tax-free  reorganization  under Section 368 of the Internal Revenue Code of
     1986, as amended. SurgiCare may, however, use other acquisition structuring
     techniques,  including  purchases  of  assets or stock for cash or cash and
     stock, or through formation of one or more limited  partnerships or limited
     liability companies.


FINANCIAL CONDITION AND RESULTS OF OPERATION

     The following table sets forth for the periods indicated the percentages of
revenues represented by income statement items.
<TABLE>

<CAPTION>

                                                       1998       1999
<S>                                                   <C>        <C>
------------------------------------------------------------------------
Revenues, net                                         100.00%    100.00%
------------------------------------------------------------------------
Expenses

Direct Costs of Sales
------------------------------------------------------------------------
       Surgical Costs                                  18.34%    15.53%
------------------------------------------------------------------------
       Clinical Salaries, Wages and benefits           11.37%     9.24%
------------------------------------------------------------------------
       Other Surgical Cost                              4.45%     3.88%
------------------------------------------------------------------------
       Total Direct Cost of Services                   34.16%    28.65%
------------------------------------------------------------------------
General & Administrative Expenses
------------------------------------------------------------------------
       Salaries, Wages and benefits                     3.86%     4.80%
------------------------------------------------------------------------
       Management Co. Termination Fee                   0.00%     3.90%
-----------------------------------------------------------------------
       Professional Fees                                2.98%     1.16%
------------------------------------------------------------------------
       Rent                                             6.57%     4.29%
------------------------------------------------------------------------
       Management Fee                                   7.98%     4.89%
------------------------------------------------------------------------
       Insurance                                        0.84%     1.04%
------------------------------------------------------------------------
       Depreciation                                     5.14%     3.36%
------------------------------------------------------------------------
       Repairs & Maintenance                            0.52%     0.29%
------------------------------------------------------------------------
       Other operating expenses                         1.36%     1.75%
------------------------------------------------------------------------
       Taxes                                            1.12%     1.72%
------------------------------------------------------------------------
Total G & A                                            30.37%    27.19%
------------------------------------------------------------------------
       Total Expenses                                  64.53%    55.84%
------------------------------------------------------------------------
       Operating Income                                35.47%    44.16%
------------------------------------------------------------------------
Other Income
------------------------------------------------------------------------
       Gain on sale of property and equipment           0.20%     0.29%
------------------------------------------------------------------------
       Miscellaneous income                             0.28%     0.29%
------------------------------------------------------------------------
       Interest Expense                                -1.76%    -1.18%
------------------------------------------------------------------------
Total Other Income                                     -1.28%    -0.60%
------------------------------------------------------------------------
Earnings Before Federal Income Tax Expense             34.19%    43.55%
------------------------------------------------------------------------
Federal Income Tax Expense (Benefit)
------------------------------------------------------------------------
       Current                                          0.00%     3.93%
------------------------------------------------------------------------
       Deferred                                         0.00%    12.95%
------------------------------------------------------------------------
       Net Earnings                                    34.19%    26.68%
------------------------------------------------------------------------
</TABLE>



      RESULTS OF OPERATION

The following  table sets forth for the period  indicated the number of surgical
cases.

<TABLE>
<CAPTION>

                                                             For the
                                                            Year Ended
                                                           December 31,

                                                        1998           1999
<S>                                               <C>             <C>
----------------------------------------------------------------------------
Number of Cases
----------------------------------------------------------------------------
     Bellaire                                           1790           2620
----------------------------------------------------------------------------
Total Revenues Generated                          $2,559,526     $4,216,660
----------------------------------------------------------------------------
Avg. Revenue Generated per Case                   $    1,430     $    1,609
----------------------------------------------------------------------------
Avg. Earnings Before Federal Income Tax per Case  $     489      $      701
----------------------------------------------------------------------------
</TABLE>

TWELVE MONTHS ENDING DECEMBER 31,1999 vs.TWELVE MONTHS ENDING DECEMBER 31,1998

         The twelve months ending  December 31, 1999  dramatically  demonstrated
the success of SurgiCare's strategic effort to increase the number of profitable
low cost  procedures  while  decreasing  the  number of high  cost,  low  profit
procedures. The results of these efforts had significant impact on the financial
results for the year ending  December 31, 1999. The total case performed for the
year 1999 were 2620 compared to 1790 procedures during 1998, this represents 46%
increase year over year utilization.

       Revenues  generated  per case  for the same  period  rose  12.5%  from an
average of $1,430 per case to $1,609. Most significant was the 43.3% increase in
pre-tax  earnings  generated  per case,  from $489 for the  twelve-month  period
ending December 31, 1998, to $701 for the same period in 1999.

         In the twelve months ending  December 31, 1999,  Bellaire posted record
revenues of  $4,216,660  compared to  $2,559,526  for the same period in 1998, a
64.7%  increase,  resulting  from the  increase  in cases and  average  per case
discussed above. For the same period direct surgical expenses rose only 38% from
$0.87  million to $1.2  million.  As a  percentage  of revenue  direct  surgical
expenses  dropped  from 34.2% for the twelve month  period  ending  December 31,
1998,  to 28.7% for the same period in 1999,  this  reduction  was the result of
increased percentage of lower cost cases. As a percentage of revenue General and
Administrative  Expenses  fell from  30.4% for the  twelve-month  period  ending
December 31, 1998, to 27.2% for the same period in 1999.

         The increased revenue,  along with the percentage  decrease in expenses
yielded  an  increase  in pre  tax  earnings  of  110%  to  $1,836,520  for  the
twelve-month  period ending December 31, 1999, from $875,125 for the same period
in 1998.

         In July of 1999, SurgiCare incurred a one-time charge of $164,333. This
charge  was a fee for the  termination  of  Bellaire's  pre-existing  management
contract with Surgery Centers of America.  As a direct result of the termination
of  this  contact,  there  was a  slight  decrease  in the  management  fee as a
percentage of revenue, The cost of the new affiliation agreement the company has
with Surgery Centers of America, is only 2% of total collected revenue, compared
to the previous contracted 5% of total collected revenue.

         Due to the expanded facility  utilization in 1999,  SurgiCare is adding
one  additional  operating  room  to  its  Bellaire  facility.  This  additional
operating  room will  increase the capacity at Bellaire by 50%.  This  expansion
project was completed in early March of 2000,  and by the end of the same month,
the company began utilizing it's new expanded facilities

         The funds for this expansion  have been secured and approved  through a
conventional  loan from the Southwest  Bank of Texas.  With the exception of the
above-mentioned  remodeling  project,  SurgiCare does not anticipate the need to
raise or borrow any additional  funds to meet any of its obligations  during the
next 12 months.
         Prior to the reverse  merger in July 1999,  Bellaire  SurgiCare  was an
S-Corporation and therefore any and all tax liabilities,  and or credits, passed
through directly to its shareholders. SurgiCare has therefore entered a one-time
charge in 1999 for deferred taxes of $429,000,  based on Bellaire's  balances at
the time of the reverse merger.

LIQUIDITY AND CAPITAL RESOURCES

            Since  its  formation,   the  Company  has  financed  its  operating
activities  primarily through cash generated from operations.  Net cash provided
by  operating  activities  increased  from $.6  million  in fiscal  1998 to $1.4
million in fiscal 1999,  due primarily to the level of net income and changes in
operating  assets and  liabilities.  The  Company  had $641  thousand of working
capital as of December 31, 1999 compared to $420 thousand of working  capital as
of December 31, 1998.

            Capital  expenditures  increased from $71 thousand  through December
31, 1998 to $194  thousand for the same period in 1999.  The increase was due in
part to the  additional  equipment  required to increase  case  capacity  within
specific surgical services, as well as the expenses associated with the addition
of the new operative suite. All anticipated capital  expenditures,  can and will
be funded from operating revenues.

            SurgiCare  does not  foresee any trend or  uncertainties  that would
impact the long or  short-term  liquidity of the  company.  The company does not
plan or expect any material capital  expenditures that would require  additional
source of funds.

YEAR 2000 COMPLIANCE

        SurgiCare experienced no material Y2K related complications.


<PAGE>



ITEM 7.  FINANCIAL STATEMENTS TABLE OF CONTENTS



                                                           Page Number


Independent Auditors' Report                                    1

Consolidated Balance Sheets                                     2

Consolidated Statements of Earnings                             4

Consolidated Statements of Shareholders' Equity                 5

Consolidated Statements of Cash Flows                           6

Notes to Consolidated Financial Statements                      8


<PAGE>


                                            Independent Auditors' Report



The Board of Directors
SurgiCare, Inc.
Houston, Texas


We have audited the accompanying  Consolidated Balance Sheets of SurgiCare, Inc.
as of December 31, 1998 and 1999,  and the related  Consolidated  Statements  of
Earnings,  Shareholders'  Equity, and Cash Flows for the years then ended. These
consolidated  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  generally   accepted  auditing
standards. 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 financial position of SurgiCare,  Inc. as
of December 31, 1998 and 1999,  and the results of its  operations  and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.





WEINSTEIN SPIRA & COMPANY, P.C.
Houston, Texas
March 3, 2000



                                       -2-
<PAGE>
<TABLE>
<CAPTION>


                                 SURGICARE, INC.
                           CONSOLIDATED BALANCE SHEETS

                                                             December 31,
<S>                                                     <C>       <C>
------------------------------------------------------- ---------- ----------
                                                              1998       1999
                                                        ---------- ----------
                               ASSETS
------------------------------------------------------- ---------- ----------
Current Assets
------------------------------------------------------- ---------- ----------
------------------------------------------------------- ---------- ----------
   Cash and cash equivalents                            $   57,049 $  243,859
------------------------------------------------------- ---------- ----------
------------------------------------------------------- ---------- ----------
   Accounts receivable (less allowance for contractual
   adjustments and doubtful accounts of $835,000 and
   $1,682,000 at Decand 1999, respectively)                923,4321 1,751,984
------------------------------------------------------- ---------- ----------
   Other receivable                                         80,849
------------------------------------------------------ ---------- ----------
   Inventory                                                47,987     89,361
------------------------------------------------------- ---------- ----------
   Prepaid expenses                                         26,210     27,175
------------------------------------------------------- ---------- ----------
   Other current assets                                      5,862     21,200
                                                        ---------- ----------
------------------------------------------------------- ---------- ----------
------------------------------------------------------- ---------- ----------
       Total Current Assets                              1,060,540  2,214,428
                                                        ---------- ----------
------------------------------------------------------- ---------- ----------
Property and Equipment
------------------------------------------------------- ---------- ----------
   Office furniture and equipment                           34,445     40,922
------------------------------------------------------- ---------- ----------
   Medical and surgical equipment                          583,648    660,225
------------------------------------------------------- ---------- ----------
   Leasehold improvements                                   28,016     28,016
------------------------------------------------------- ---------- ----------
   Computer equipment                                       38,175     58,303
------------------------------------------------------- ---------- ----------
   Construction in progress                                117,121
                                                        ---------- ----------
------------------------------------------------------- ---------- ----------
                                                           684,284    904,587
------------------------------------------------------- ---------- ----------
   Less:  Accumulated depreciation and amortization        401,988    487,998
                                                        ---------- ----------
------------------------------------------------------- ---------- ----------
                                                           282,296    416,589
------------------------------------------------------- ---------- ----------
------------------------------------------------------- ---------- ----------
Goodwill (net of amortization of $5,737)                   166,367
                                                        ---------- ----------
------------------------------------------------------- ---------- ----------
                                                        $1,342,836 $2,797,384
                                                        ========== ==========

</TABLE>




                       See notes to consolidated financial
                                  statements.
                                       -4-
<PAGE>

<TABLE>
<CAPTION>


                                                              December 31,
<S>                                                     <C>         <C>
------------------------------------------------------- ----------  ----------
                                                              1998        1999
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
                              LIABILITIES
------------------------------------------------------- ----------  ----------
Current Liabilities
------------------------------------------------------- ----------  ----------
   Current portion of capital lease obligations         $    7,386  $   21,464
------------------------------------------------------- ----------  ----------
   Notes payable                                           545,278     633,764
------------------------------------------------------- ----------  ----------
   Accounts payable                                         37,826     147,685
------------------------------------------------------- ----------  ----------
   Accrued expenses                                         49,811     128,280
------------------------------------------------------- ----------  ----------
   Federal income tax payable                               95,637
------------------------------------------------------- ----------  ----------
   Deferred federal income tax                             546,000
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
       Total Current Liabilities                           640,301   1,572,830
------------------------------------------------------- ----------  ----------
Long-Term Capital Lease Obligations                          7,491      49,544
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
                                                           647,792   1,622,374
------------------------------------------------------- ----------  ----------
                         SHAREHOLDERS' EQUITY
------------------------------------------------------- ----------  ----------


Preferred Stock, Series A, par value $.001, 1,650,000
authorized,1,400,000 issued and outstanding at December
31, 1999 and liquidation value $7,000,000                                 1400
------------------------------------------------------- ----------  ----------
Common Stock, par value $.10, 1,000,000 shares
authorize 140 issued at December 31, 1998                   140
------------------------------------------------------- ----------  ----------
Common Stock, par value $.005, 50,000,000 shares
authorized, 12,652,766 issued and outstanding at
December 31, 1999                                                       63,272
------------------------------------------------------- ----------  ----------
Additional Paid-In Capital                                  32,610     899,956
------------------------------------------------------- ----------  ----------
Retained Earnings                                          765,794     237,882
------------------------------------------------------- ----------  ----------
Less:  Treasury stock, 150 shares at cost                  (54,750)
------------------------------------------------------- ----------  ----------
         Shareholder receivables                           (48,750)    (27,500)
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
                                                           695,044   1,175,010
------------------------------------------------------- ----------  ----------
                                                        $1,342,836  $2,797,384
                                                        ==========  ==========
------------------------------------------------------- ----------  ----------
</TABLE>


<PAGE>
<TABLE>

                                 SURGICARE, INC.
                       CONSOLIDATED STATEMENTS OF EARNINGS
                                                        ----------  ----------
<CAPTION>
                                                           For the Year Ended
                                                               December 31,
<S>                                                     <C>         <C>

------------------------------------------------------- ----------  ----------
                                                              1998        1999
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
Revenues, net                                           $2,559,526  $4,216,660
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
Expenses
------------------------------------------------------- ----------  ----------
   Surgical costs                                          469,528     654,727
------------------------------------------------------- ----------  ----------
   Salaries, wages and benefits                            389,999     592,180
------------------------------------------------------- ----------  ----------
   Contract services                                        31,871      38,506
------------------------------------------------------- ----------  ----------
   Management fees                                         204,328     206,335
------------------------------------------------------- ----------  ----------
   Management company termination fee                      164,333
------------------------------------------------------- ----------  ----------
   Rent                                                    168,083     180,693
------------------------------------------------------- ----------  ----------
   Depreciation and amortization                           131,559     141,884
------------------------------------------------------- ----------  ----------
   Insurance                                                21,603      29,844
------------------------------------------------------- ----------  ----------
   Professional fees                                        87,460      48,771
------------------------------------------------------- ----------  ----------
   Repairs and maintenance                                  52,154      44,875
------------------------------------------------------- ----------  ----------
   Other operating expenses                                 66,456     179,907
------------------------------------------------------- ----------  ----------
   Taxes                                                    28,605      72,628
                                                        ----------  ----------
                                                         1,651,646   2,354,683
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
Operating Income                                           907,880   1,861,977
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
Other Income (Expense)
------------------------------------------------------- ----------  ----------
   Gain on sale of property and equipment                    5,092      12,025
------------------------------------------------------- ----------  ----------
   Miscellaneous income                                      7,292      12,433
------------------------------------------------------- ----------  ----------
   Interest expense                                        (45,139)    (49,915)
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
                                                           (32,755)    (25,457)
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
Earnings Before Federal Income Tax Expense                 875,125   1,836,520
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
Federal Income Tax Expense
------------------------------------------------------- ----------  ----------
   Current                                                 165,637
------------------------------------------------------- ----------  ----------
   Deferred                                                546,000
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
                                                                       711,637
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
Net Earnings                                            $  875,125  $1,124,883
                                                        ==========  ==========
------------------------------------------------------- ----------  ----------
Pro forma income data (unaudited):
------------------------------------------------------- ----------  ----------
   Earnings before federal income tax expense           $  875,125  $1,836,520
------------------------------------------------------- ----------  ----------
   Pro forma income tax                                    341,299     624,417
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
   Pro forma Net Earnings                               $  533,826  $1,212,103
                                                        ==========  ==========
------------------------------------------------------- ----------  ----------
   Pro forma earnings per share - basic                 $      .05  $      .08
                                                        ==========  ==========
-------------------------------------------------------- ----------  ----------
   Pro forma earnings per share - diluted               $      .05  $      .07
                                                        ==========  ==========

</TABLE>

                                  See notes to
                       consolidated financial statements.

                                       -5-
<PAGE>
<TABLE>

                                 SURGICARE, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                 For the Years Ended December 31, 1998 and 1999
<CAPTION>
                                                $.10 Par Value $.005 Par Value Additional
                               Preferred Stock   Common Stock   Common Stock     Paid-in Treasury Stock Shareholder Retained Total
                                                                                 Capital                Receivables Earnings Equity
                              Shares    Amount  Shares Amount  Shares   Amount            Shares Amount
<S>                           <C>       <C>     <C>     <C>   <C>       <C>     <C>       <C>   <C>      <C>       <C>      <C>
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Balance - December 31, 1997                      1,400   140                     $13,860                  $(20,500)$417,419 $410,919
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Dividends to shareholders                                                                                         (526,750)(526,750)
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Purchase of Treasury stock                                                                (400)$(146,000)                  (146,000)
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Sale of Treasury stock                                                           $18,750   250   91,250  (110,000)
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Collections on shareholder                                                                                 81,750             81,750
  receivables
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Net Earnings                                                                                                        875,125  875,125
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Balance - December 31, 1998                      1,400   140                     $32,610  (150)$(54,750)  (78,750)  765,794  695,044
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Dividends to shareholders                                                                                         (599,000)(599,000)
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Sale of Treasury stock                                                           $ 8,500   100   36,500   (45,000)
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Cancellation of Treasury
  stock                                            (50)   (5)                    (18,245)   50   18,250
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Stock issued for termination
  of management agreement                                     1,095,556  $5,478  158,855                                     164,333
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Net earnings -
  January 1, 1999 to                                                                                                561,001  561,001
  June 30, 1999
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Capitalization of S                                                              727,795                           (727,795)
  corporation earnings
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Contributions by shareholders                                                     27,000                                      27,000
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Shares exchanged in reverse   1,350,000 $1,350  (1,350) (135) 11,501,101 57,505  (58,720)
  acquisition
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Sale of preferred stock          50,000 $   50                                   $22,450                  (22,500)
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Dividends paid to preferred                                                                                       (326,000)(326,000)
  shareholders
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Collections on shareholder                                                                                 88,750             88,750
  receivables
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Net earnings -
  July 1, 1999 to                                                                                                  563,882   563,882
  December 31, 1999
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------
Balance - December 31, 1999   1,400,000 $ 1,400         $    12,596,657 $62,983  $900,24               $(27,500) $237,882 $1,175,010
----------------------------- --------- ------- ------- ----- --------- ------- --------- ----- -------- --------- -------- --------

</TABLE>


                       See notes to consolidated financial
                                  statements.
                                       -6-
<PAGE>



                                 SURGICARE, INC.
<TABLE>               CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                        ----------  ----------
                                                          For the Year Ended
                                                              December 31,
                                                        ----------  ----------
<S>                                                     <C>          <C>
------------------------------------------------------- ----------  ----------
                                                              1998        1999
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
Cash Flows From Operating Activities
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
   Net earnings                                         $  875,125  $1,124,883
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
   Adjustments to reconcile net earnings to net cash provided by operations:
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
       Depreciation and amortization                       131,559     141,884
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
       Gain on sale of property and equipment               (5,092)    (12,025)
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
       Deferred federal income tax                         546,000
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
       Management company termination fee                  164,333
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
       (Increase) Decrease in:
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
         Accounts receivable                              (356,667)   (828,552)
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
         Inventory                                          (1,988)    (41,374)
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
         Prepaid expenses                                    3,828        (965)
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
         Other current assets                               (2,845)    (15,338)
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
       Increase (Decrease) in:
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
         Accounts payable                                  (52,743)    109,859
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
         Federal income tax payable                         95,637
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
         Accrued expenses                                   19,847      78,469
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
       Net Cash Provided by Operating Activities           611,024   1,362,811
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
Cash Flows From Investing Activities
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
   Capital expenditures                                    (70,865)   (193,872)
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
   Advance on other receivable                             (80,849)
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
   Proceeds from sale of property and equipment             27,500      12,428
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
   Acquisition of SurgiCare, Inc.                         (172,104)
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
       Net Cash Used in Investing Activities               (43,365)   (434,397)
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
Cash Flows From Financing Activities
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
   Borrowings on debt                                       78,500     336,000
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
   Payments on debt                                       (118,369)   (247,514)
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
   Principal payments on capital lease                     (12,216)    (20,840)
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
   Purchase of treasury stock                             (121,667)
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
   Collections on shareholder receivable                    88,750
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
   Contributions by shareholders                            27,000
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
   Dividends paid to preferred shareholders               (326,000)
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
   Distributions to shareholders                          (526,750)   (599,000)
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
       Net Cash Used in Financing Activities              (618,752)   (741,604)
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
Net Increase (Decrease) in Cash and Cash Equivalents       (51,093)    186,810
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
Cash and Cash Equivalents - Beginning of Period            108,142      57,049
                                                        ----------  ----------
------------------------------------------------------- ----------  ----------
------------------------------------------------------- ----------  ----------
Cash and Cash Equivalents - End of Period               $   57,049  $  243,859
                                                        ==========  ==========
------------------------------------------------------- ----------  ----------
</TABLE>


                                      -10-
<PAGE>

                                 SURGICARE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1998 and 1999


Note 1 - Accounting Policies

SurgiCare,  Inc. (the Company)  maintains its accounts on the accrual  method of
accounting  in  accordance  with  generally  accepted   accounting   principles.
Accounting  principles followed by the Company and the methods of applying those
principles which  materially  affect the  determination  of financial  position,
results of operations and cash flows are summarized below:

   Description of Business

     Bellaire Surgicare,  Inc. (Bellaire) was formed in January, 1995 as a Texas
     corporation  to  operate  a day  surgery  center  in  Houston,  Texas,  and
     therefore  operates as a single segment.  Effective July 1, 1999,  Bellaire
     acquired SurgiCare,  Inc. (formerly Technical Coatings,  Inc.) in a reverse
     acquisition.  Bellaire Surgicare,  Inc. is now a wholly-owned subsidiary of
     SurgiCare, Inc.

   Principles of Consolidation

     These consolidated financial statements include the accounts of the Company
     and its  wholly-owned  subsidiary,  Bellaire  Surgicare,  Inc. All material
     intercompany   balances   and   transactions   have  been   eliminated   in
     consolidation.

   Cash and Cash Equivalents

     The Company considers all short-term  investments with an original maturity
     of three  months  or less to be cash  equivalents.  During  the  year,  the
     Company maintained cash balances in excess of federally insured limits.

   Revenue Recognition

     Revenue  is  recognized  on the  date the  procedures  are  performed,  and
     accounts receivable are recorded at that time. Revenues are reported at the
     estimated  realizable amounts from patients and third-party payers. If such
     third-party payers were to change their reimbursement  policies, the effect
     on revenue could be significant.  Earnings are charged with a provision for
     contractual  adjustments  and  doubtful  accounts  based on fee  schedules,
     contracts and collection experience.  Contractual  adjustments and accounts
     deemed uncollectible are applied against the allowance account.

   Inventory

     Inventory consists of medical and pharmaceutical  supplies which are stated
     at the lower of cost or  market.  Cost is  determined  under the  first-in,
     first-out method.

   Property and Equipment

     Property  and  equipment  are  presented  at  cost.  Medical  and  surgical
     equipment,  of approximately  $144,000,  under capital lease is recorded at
     the  present  value of future  minimum  lease  payments.  Depreciation  and
     amortization  are computed at rates  considered  sufficient to amortize the
     cost of the assets,  using the  straight-line  method over their  estimated
     useful lives as follows:

          Office furniture and equipment         7 years
          Medical and surgical equipment         5 years
          Leasehold improvements                 5 years
          Computer equipment                     5 years

   Goodwill

   Goodwill  arises  from the  acquisition  of  assets at an amount in excess of
   their fair market value. Amortization is computed by the straight-line method
   over 15 years.

                                 SURGICARE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                           December 31, 1998 and 1999


   Federal Income Taxes

   Prior  to  July  1,  1999,  the  Company  had  elected  to be  taxed  as an S
   corporation  under provisions of the Internal Revenue Code. As such,  current
   taxable   income  had  been  included  on  the  income  tax  returns  of  the
   shareholders  for federal  income tax purposes and no provision had been made
   for federal income taxes.

   Effective July 1, 1999,  the Company  changed its election to be taxed as a C
   corporation  under the Internal  Revenue  Code.  Taxes on income are provided
   based upon Statement of Financial  Accounting  Standards No. 109, "Accounting
   for  Income  Taxes,"  which  requires  an asset  and  liability  approach  to
   financial  accounting  and reporting for income  taxes.  Deferred  income tax
   assets and  liabilities  are computed for  differences  between the financial
   statement and tax bases of assets and liabilities that will result in taxable
   or  deductible  amounts in the  future.  Such  deferred  income tax asset and
   liability  computations are based on enacted tax laws and rates applicable to
   periods in which the differences are expected to affect taxable income.

   Use of Estimates

   The preparation of financial statements in conformity with generally accepted
   accounting  principles  requires management to make estimates and assumptions
   that affect the reported  amounts of assets and liabilities and disclosure of
   contingent assets and liabilities at the date of the financial statements and
   the reported  amounts of revenues and expenses  during the reporting  period.
   Actual results could differ from those estimates.

Note 2 - Acquisition

     In July,  1999, the shareholders of Bellaire paid $125,000 to an individual
for 1,000,000 shares of common stock  (approximately 60%) of Technical Coatings,
Inc. (a publicly-held company with no assets, liabilities or revenues). The name
of Technical Coatings, Inc. was changed to SurgiCare, Inc.

<PAGE>

                                 SURGICARE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                           December 31, 1998 and 1999
Effective  July 1, 1999, in a reverse  acquisition  accounted for as a purchase,
the Bellaire  shareholders  received  1,350,000  shares of  preferred  stock and
9,860,000 shares of $.005 par common stock for all of the Bellaire common stock,
and Bellaire became a wholly-owned  subsidiary of SurgiCare,  Inc. In connection
with this  transaction,  the management  company  received  1,095,556  shares of
common stock as a termination fee. After these transactions, the former Bellaire
shareholders owned approximately 86% of SurgiCare, Inc. The acquisition costs of
$172,104,  including  legal  fees,  have been  allocated  to  goodwill  in these
consolidated financial statements.

Note 3 - Unaudited Pro Forma Net Earnings and Pro Forma Earnings Per Share

Pro forma earnings per share represent pro forma net earnings (after a pro forma
provision  for income  taxes as if the Company  had been  subject to federal and
state income taxation as a C corporation  since  inception)  available to common
shareholders  divided by the pro forma weighted  average number of common shares
outstanding during the period. Pro forma weighted average shares were calculated
giving effect to the 7,304 to 1 exchange of SurgiCare  common stock for Bellaire
common  stock,  as if the reverse  acquisition  had occurred at the beginning of
each period presented.

The following table sets forth the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>

  ..........................................................     For the Year Ended
  ..........................................................        December 31,
<S>                                                          <C>         <C>
                                                             ----------- -----------
------------------------------------------------------------ ----------- -----------
                                                                 1998        1999
Basic Earnings Per Share:
------------------------------------------------------------ ----------- -----------
   Pro forma net earnings .................................. $   533,826 $ 1,212,103
------------------------------------------------------------ ----------- -----------
   Less: Preferred dividends ...............................     326,000
 ------------------------------------------------------------ ----------- -----------
   Pro forma net earnings available for common shareholders  $   533,826 $   886,103
                                                             =========== ===========
------------------------------------------------------------ ----------- -----------
   Weighted average shares outstanding .....................  11,546,840  11,811,531
                                                             =========== ===========
------------------------------------------------------------ ----------- -----------
   Pro forma net earnings per share - basic ................ $       .05 $       .08
                                                             =========== ===========
------------------------------------------------------------ ----------- -----------
Diluted Earnings Per Share:
------------------------------------------------------------ ----------- -----------
   Pro forma net earnings available for common shareholders  $   533,826 $   886,103
                                                             =========== ===========
------------------------------------------------------------ ----------- -----------
   Weighted average shares outstanding .....................  11,546,840  11,811,531
------------------------------------------------------------ ----------- -----------
   Plus: Shares from assumed conversion of preferred stock .     679,167
                                                             ----------- -----------
------------------------------------------------------------ ----------- -----------
   Weighted average shares assuming dilution ...............  11,546,840  12,490,698
                                                             =========== ===========
------------------------------------------------------------ ----------- -----------
   Pro forma net earnings per share - diluted .............. $       .05 $       .07
                                                             =========== ===========
------------------------------------------------------------ ----------- -----------
</TABLE>


<PAGE>





                                 SURGICARE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                           December 31, 1999 and 1998

<TABLE>
<CAPTION>                                       December 31,
                                              1998        1999


<S>                                      <C>         <C>
Note payable bearing interest at the
  prime rate, secured by furniture,
  equipment and intangibles, guaranteed
  by the shareholders, payable on demand
  or in monthly installments of           $   457,792 $   329,202
  principal and interest of $13,398
  through March, 2002

Note payable bearing interest at the
  prime rate, secured by furniture,
  equipment and intangibles, guaranteed
  by the shareholders, payable on demand
  or in monthly installments of
  principal of $5,667, plus interest,
  due June 8, 2001                                        102,000

Note payable bearing interest at the
  prime rate, guaranteedby the shareholders,
  payable on demand or in monthly installments
  of principal of %,500 per month plus
  interest, due January 1, 2003                           200,000


Non-interest-bearing unsecured note
  payable to a former shareholder, due
  November 30, 1999                            24,333

Note payable bearing interest at the
  prime rate, secured by furniture,
  equipment and intangibles, guaranteed
  by the shareholders, payable on demand
  or in monthly installments of
  principal and interest of $5,000
  through January, 2000                        63,153       2,562

                                          $   545,278 $   633,764
</TABLE>


<PAGE>



Note 5 - Operating Lease

The  Company  leases  its  treatment  facility  from an entity in which a former
Bellaire  shareholder was a partner under an operating sublease which expires in
2003. The lease provides for annual operating expense  increases.  Rent for 1998
and 1999 was $168,083 and $180,693,  respectively.  Base rental  payments  under
this lease agreement are as follows:
------------------------------------------------ ---- --------------------
          For the Year Ending December 31,
------------------------------------------------ ---- --------------------
                   2000                                       184,841
------------------------------------------------ ---- --------------------
                   2001                                       184,841
------------------------------------------------ ---- --------------------
                   2002                                       184,841
------------------------------------------------ ---- --------------------
                   2003                                        77,017
------------------------------------------------ ---- --------------------
                                                       $      631,541
                                                       ===================


Note 6 - Long-Term Capital Leases

The Company  leases  certain  equipment  from third  parties.  The leases expire
through 2003. The stockholders have guaranteed the leases.

The following is a schedule of future  minimum lease  payments under the capital
leases,  together with the present value of the net minimum lease payments as of
December 31, 1999:


                  For the Year Ending December 31,
 --------------------------------------------------------- --------------------
                            2000                            $            33,078
 --------------------------------------------------------- --------------------
                            2001                                         24,468
 --------------------------------------------------------- --------------------
                            2002                                         20,891
 --------------------------------------------------------- --------------------
                            2003                                          1,325
                                                           -------------------
                                                                         79,962
 --------------------------------------------------------- --------------------
  Less: Amount representing interest                                      8,754

 --------------------------------------------------------- --------------------
  Present value of minimum lease payments                                71,008
 --------------------------------------------------------- --------------------
 --------------------------------------------------------- --------------------
  Less: Current obligations                                              21,464
                                                            -------------------
 --------------------------------------------------------- --------------------
 --------------------------------------------------------- --------------------
  Long-term obligations under capital lease                 $            49,544
                                                            ===================

<PAGE>

                                 SURGICARE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                           December 31, 1998 and 1999

Note 7 - Management Fees

The Company had an agreement with a third party management company to manage the
operations  of the  treatment  facility.  Under the  contract,  the  Company was
required  to pay 5% of net  monthly  collected  revenues  and 10% of the  amount
distributed  to  shareholders.  Management  fee expense  under this contract was
$204,328  and  $168,969  in 1998 and  1999,  respectively.  This  agreement  was
terminated effective July 1, 1999 concurrent with the reverse  acquisition.  The
Company  issued  1,095,556  shares  of $.005 par value  common  stock  valued at
$164,333 in connection with this transaction.

After  the  termination  of the  management  agreement,  the  Company  signed an
affiliation   agreement  with  the  same  management  company.  The  affiliation
agreement  permits  the  Company to utilize  regulatory  approved  clinical  and
administrative  policies and  procedures,  managed care contract  assistance and
access  to  national  purchasing  contracts.  The  Company  will  pay 2% of cash
collections  for these  services.  The Company  expensed  $37,366 under this new
agreement in 1999.

Note 8 - Related Party Transactions

As  of  December  31,  1998  and  1999,  the  Company  had  non-interest-bearing
receivables  from  shareholders  of $48,750 and $27,500,  respectively,  for the
purchase of stock.

During  1998  and  1999,  the  Company  paid  rent  of  $168,083  and  $180,693,
respectively, to an entity in which a former Bellaire shareholder was a partner.

Note 9 - Federal Income Taxes

Prior to July 1, 1999,  the Company had elected to be taxed as an S  corporation
under provisions of the Internal  Revenue Code. As such,  current taxable income
had been included on the income tax returns of the shareholders.  Effective July
1, 1999, the Company's  Subchapter S status was  terminated  and, as a result of
such change in status,  the Company  established  a deferred  tax  liability  of
$429,000.  The  remaining  retained  earnings  of  $727,795 at July 1, 1999 were
transferred to additional paid-in capital.

The  following  is a  reconciliation  of federal  income  taxes  computed at the
statutory  rate with income  taxes  recorded in the  Consolidated  Statement  of
Earnings for the year ended December 31, 1999:

---------------------------------------------------------- --------------------
Federal income tax expense at statutory rate                 $          624,417
---------------------------------------------------------- --------------------
S corporation earnings                                                (341,700)
---------------------------------------------------------- --------------------
Deferred taxes provided for change in tax status                        429,000
---------------------------------------------------------- --------------------
Other                                                                      (80)
                                                             ------------------
---------------------------------------------------------- --------------------
                                                             $          711,637
                                                             ==================
-------------------------------------------------------------------------------
                The  component of the deferred tax liability as of December 31,
1999 is as follows:
---------------------------------------------------------- --------------------
Deferred tax liability:
---------------------------------------------------------- --------------------
   Accrual to cash conversion                                $          546,000
                                                             ==================

Note 10 - Preferred Stock

The Series A preferred  stock is convertible at a rate of one share of preferred
stock into one share of $.005 par value common stock. The Company can redeem the
stock at $5 per share. The Series A preferred stock accrues  dividends at a rate
of $.48 per share per annum which are payable,  in arrears,  on the first day of
the month. Holders of Series A preferred stock are entitled to one vote for each
share of Series A preferred stock held.


<PAGE>



ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
         On June 15, 1999,  TCI retained  Philip H.  Salchli,  Certified  Public
Accountant,  to serve as its  independent  accountant.  Philip H.  Salchli  is a
member of the SEC  Practice  Section  of the AICPA.  Mr.  Salchli  preformed  an
independent  audit for both 1997 and 1998.  The audit opinion was issued with no
qualification or modifications.  On May 28, 1999,  Bellaire  retained  Weinstein
Spira &  Company,  Certified  Public  Accountants,  to serve as its  independent
accountants.  Weinstein  Spira  &  Company,  P.C.  is also a  member  of the SEC
Practice  Section  of the  AICPA.  Weinstein  Spira  and  Company  preformed  an
independent audit Bellaire, for both 1997 and 1998.
         As of the date of this  registration  statement Philip H. Salchli is no
longer the principal  independent  accountant for SurgiCare  (formerly Technical
Coatings, Inc), and Weinstein Spira & Company has been retained as the principal
independent public  accountants for both SurgiCare and Bellaire.  To the best of
the  knowledge  of   SurgiCare's   current   management,   there  have  been  no
disagreements  between SurgiCare and either of its current or former accountants
during the last two years over any accounting policy or practice.

PART III
ITEM     9.  DIRECTORS,   EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL  PERSONS

 SurgiCare's Directors and Executive Officers are as follows:
<TABLE>
<CAPTION>

Name /Address ...........              Position               Age
<S>                        <C>                               <C>
David Blumfield .........    President and Chief Executive
                                        Officer
                                        Director              42
------------------------- ----------------------------------- --
Jeffery Penso ...........           Vice-President            44

------------------------- ----------------------------------- --
Sherman Nagler ..........              Secretary              44

------------------------- ----------------------------------- --
Michael Mineo ...........              Treasurer

------------------------- ----------------------------------- --
Charles S. Cohen ........       Chief Operating Officer       38

------------------------- ----------------------------------- --
Shirley Browne ..........              Director               47

------------------------- ----------------------------------- --
Son Nguyen ..............              Director               44

</TABLE>

     Dr. David  Blumfield  D.P.M.  was elected as a Director and  President  and
Chief Executive  Officer of SurgiCare,  Inc. on July 10, 1999. Dr. Blumfield has
served as President of Bellaire SurgiCare, Inc. since March of 1995. He has been
in private practice for 15 years. He received his  undergraduate  degree in 1980
at  Wilkes  University,  and then  attended  the  Temple  College  of  Podiatric
Medicine.  He has been a diplomat of the  American  Board of  Podiatric  Surgery
since 1988.

     Charles S. Cohen was elected as a Director and Chief  Operating  Officer of
SurgiCare,  Inc. on July 10, 1999. Mr. Cohen has been the acting Chief Operating
Officer of Bellaire SurgiCare,  Inc. since September 1998. Prior to September of
1998, Mr. Cohen was the President of Medical  Distributors  International,  Inc.
(MDI) he was elected to that  position  in November of 1994.  He has served as a
Director of TMDI Medical,  from 1995-1997.  Both MDI and TMDI were involved with
the international  purchasing,  importing, and exporting of medical and surgical
equipment.  Mr. Cohen was educated at the  University of Missouri at Columbia in
business.

     Dr.  Jeffery  Penso D.P.M.  was elected as Director  and Vice  President of
SurgiCare,  Inc. on July 10,  1999.  Dr. Penso has served as  Vice-President  of
Bellaire SurgiCare, Inc. since July of 1998. He has been in private practice for
16 years. He received his  undergraduate  degree in 1983 at University of Akron,
and then attended the Ohio College of Podiatric Medicine. He has been a Diplomat
of the American Board of Podiatric Surgery since 1988.

     Dr.  Shirley  Brown M.D.  Director - Dr.  Browne has served as the  Medical
Director of Bellaire SurgiCare since September of 1998. She has been in practice
for 19 years. She received her undergraduate  degree from Lamar University,  and
then attended the University of Texas Medical School, Houston

     Dr. Son Nguyen  M.D.  Director - Dr.  Nguyen was  elected as a director  in
August of 1999.  He has been in private  practice for 13 years.  He received his
undergraduate degree from Waynesberg College and then attended the University of
Cincinnati  Medical  School.  He has been a Diplomat  of the  American  Board of
Anesthesia  since 1989,  and a Fellow of the American  College of Pain  Medicine
since 1994.

     Dr.  Michael  Mineo  D.P.M.  was  elected  as  Director  and  Treasurer  of
SurgiCare,  Inc. on July 10,  1999.  Dr. Mineo has served as  Vice-President  of
Bellaire  SurgiCare,  Inc. since March of 1995. He has been in private  practice
for 29 years. He received his undergraduate  degree in 1964 from Geneva College,
Beaver Falls, PA, and then attended the Ohio College of Podiatric  Medicine.  He
has been a Diplomat of the American Board of Podiatric Surgery since 1979, and a
Fellow of the American College of Foot Surgeons since 1980.

     Dr.  Sherman  Nagler  D.P.M.  was  elected as  Director  and  Secretary  of
SurgiCare, Inc. on July 10, 1999. Dr. Nagler has served as Secretary of Bellaire
SurgiCare,  Inc.  since  March of 1995.  He has been in private  practice  for16
years. He received his  undergraduate  degree in 1977 at State University of New
York at  Plattsburgh,  and then  attended  the New  York  College  of  Podiatric
Medicine.  He has been a Diplomat of the  American  Board of  Podiatric  Surgery
since 1985.

         The terms of office of SurgiCare's current directors will expire at the
next annual meeting of the stockholders.  Thereafter, directors will hold office
until  the  succeeding  annual  meeting  or their  successors  are  elected  and
qualified.  SurgiCare's  officers  hold  office at the  pleasure of the board of
directors  and until the meeting of the board of directors  next  following  the
annual  meeting of  stockholders,  at which  board  meeting  officers  are to be
elected.

ITEM 10. EXECUTIVE COMPENSATION
         The following table provides certain summary information concerning the
compensation  paid during each of SurgiCare's last three fiscal years to each of
the highest  paid  persons who are  officers or  directors  of  SurgiCare,  Inc.
receiving compensation of at least $100,000 and the Chief Executive Officer (the
"Covered Executives"). Each of the persons indicated received their compensation
as a director or officer of Bellaire.
<TABLE>
<CAPTION>

            Name           Principal Position          Year     Annual Compensation
<S>                           <C>                       <C>       <C>
-------------------------- ------------------------- --------- --------------------
       David Blumfield        President and CEO            1999   $     24,000
-------------------------- ------------------------- --------- --------------------
-------------------------- ------------------------- --------- --------------------
        Charles Cohen         Chief Operating Officer      1999   $     75,000
-------------------------- ------------------------- --------- --------------------
-------------------------- ------------------------- --------- --------------------
                                                           1998   $     50,000
-------------------------- ------------------------- --------- --------------------
</TABLE>

Except as set fourth in the table, no compensation  has been rewarded to, earned
by or paid to any of the Covered  Executives  and required to be reported in the
table for any of the last  three  fiscal  year.  Item 11.  Directors,  Executive
Officers,  Promoters, and Control Persons; COMPLIANCE With 16(a) of the Exchange
Act.

     The  following  table  sets forth  information,  to the best  knowledge  of
SurgiCare  as of August 9, 1999,  with respect to each person known by SurgiCare
to own beneficially more than 5% of any class of SurgiCare's  outstanding common
stock.

<TABLE>
<CAPTION>

Title of Class ....Name and address of   Amount and nature of   Percent of Class
                    Beneficial Owner ...  Beneficial Ownership(a)
<S>                  <C>                     <C>                         <C>

Common Stock ....... SCOA II                 1,095,556                   8.695%
                     1930 S. Bryant
                     Edmond, OK 73013

Common Stock ....... David Blumfield         804,444 (b)                  6.357%
Series A Preferred . 7400 Fannin # 1100      100,000 (d)                  7.407%
                     Houston, TX 77056

Common Stock ....... Sherman Nagler          804,444 (b)                  6.357%
Series A Preferred . 1200 Binz               100,000 (d)                  7.407%
                     Houston, TX 77004

Common Stock ....... William Bradbury        804,444 (b)                  6.357%
Series A Preferred . 7400 Fannin #1100       100,000 (d)                  7.407%
                     Houston, TX 77056

Common Stock ....... Robert Parker           804,444 (b)                  6.357%
Series A Preferred . 14441 Memorial #16      100,000 (d)                  7.407%
                     Houston, TX 77079

Common Stock ....... Jeffery Penso           804,444 (b)                  6.357%
Series A Preferred . 11006 Westheimer        100,000 (d)                  7.407%
                     Houston, TX 77042

Common Stock ....... Gregory Mangum          804,444 (b)                  6.357%
Series A Preferred . 4754 Beechnut           100,000 (d)                  7.407%
                     Houston, TX 77096

Common Stock ....... Jeffrey Ross            804,444 (b)                  6.357%
Series A Preferred . 6624 Fannin #2450       100,000 (d)                  7.407%
                     Houston, TX 77030

Common Stock ....... Michael Mineo           804,444 (b)                  6.357%
Series A Preferred . 6699 Chimney Rock       100,000 (d)                  7.407%
                     Houston, TX 77081

Common Stock ....... Bruce Miller            804,444 (b)                  6.357%
Series A Preferred . 13737 S.W. Freeway      100,000 (d)                  7.407%
                     Sugarland, TX 77478

Common Stock ....... Brain Zale              804,444 (b)                  6.357%
Series A Preferred . 11320 S. Post Oak #1    100,000 (d)                  7.407%
                     Houston, TX 77035

Common Stock ....... Son Nguyen              804,444 (b)                  6.357%
Series A Preferred . 1120-A Dennis           100,000 (d)                  7.407%
                     Houston, TX 77004

Common Stock ....... Long Nguyen             804,444 (b)                  6.357%
Series A Preferred . 4007 Bellaire #FF       100,000 (d)                  7.407%
                     Houston, TX 77025

Common Stock ....... Larry Likover           804,444 (b)                  6.357%
Series A Preferred . 902 Frostwood #902      100,000 (d)                  7.407%
                     Houston, TX

Common Stock ....... Shirley Browne          402,222 (c)                  3.179%
Series A Preferred . P.O. Box 247             50,000 (d)                  3.704%
                     Richmond, TX 77406

</TABLE>

a.     As of January 31, 2000, 12,596,657shares of common stock were issued and
       outstanding. Unless otherwise noted, the security ownership disclosed in
       the table is of record and beneficial.

b.     Includes  74,074  shares held in trust  pursuant  to that Voting  Trust
       Agreement,  dated,  of July 28, 1999 (the  "Voting  Trust  Agreement"),
       between  and  among  the  shareholders  and  David  Blumfield,  D.P.M.,
       trustee.  A total  of  1,000,000  shares  of  Common  Stock  have  been
       deposited  in the voting  trust  created  pursuant to such Voting Trust
       Agreement. Dr. Blumfield is deemed to have sole voting power as to such
       shares.

c.     Includes 37,037 shares held in trust pursuant to the Voting Trust
       Agreement.
d.     As of January 31,  2000,  1,350,000  shares of Series A Preferred  were
       issued and outstanding.  Unless otherwise noted, the security ownership
       of such  Series A  Preferred  disclosed  in the table is of record  and
       beneficial.

(B) Security ownership of management.

The following  table sets forth  information,  to the best knowledge of
SurgiCare as of January 31, 2000,  with respect to the  beneficial  ownership of
each officer and director, and all directors and executive officers as a group.

<TABLE>
<CAPTION>

Title of Class ....Name and address of  Amount and nature of   Percent of Class
                    Beneficial Owner ...Beneficial Ownership (a)
<S>                 <C>                    <C>                      <C>
Common Stock .......David Blumfield        804,449 (b)              6.357%
Series A Preferred .7400 Fannin #1100      100,000 (c)              7.407%
                    Houston, TX 7705

Common Stock .......Jeffery Penso          804,449 (b)              6.357%
Series A Preferred .11006 Westheimer       100,000 (c)              7.407%
                    Houston, TX 77042

Common Stock .......Sherman Nagler         804,449 (b)              6.357%
Series A Preferred .1200 Binz              100,000 (c)              7.407%
                    Houston, TX 77004

Common Stock .......Michael Mineo          804,449 (b)              6.357%
Series A Preferred .6699 Chimney Rock      100,000 (c)              7.407%
                    Houston, TX 77081

Common Stock .......Charles S. Cohen        30,000                  0.237%
                    5947 Bankside
                    Houston, TX 77096

Common Stock ...... Son Nguyen              804,444 (b)             6.357%
Series A Preferred  1120-A Dennis           100,000 (d)             7.407%
                    Houston, TX 77004

Common Stock ...... Shirley Browne          402,222 (c)             3.179%
Series A Preferred  P.O. Box 247             50,000 (d)             3.704%
                    Richmond, TX 77406
All officers and dir                     3,247,796 (a)              35.36%
(seven persons).....                        400,00 (b)              40.74%

</TABLE>


a.     As of January 31, 2000, 12,596,657shares of common stock were issued and
       outstanding. Unless otherwise noted, the security ownership disclosed in
       the table is of record and beneficial.

b.     Includes  74,074  shares held in trust  pursuant  to that Voting  Trust
       Agreement,  dated,  of July 28, 1999 (the  "Voting  Trust  Agreement"),
       between  and  among  the  shareholders  and  David  Blumfield,  D.P.M.,
       trustee.  A total  of  1,000,000  shares  of  Common  Stock  have  been
       deposited  in the voting  trust  created  pursuant to such Voting Trust
       Agreement. Dr. Blumfield is deemed to have sole voting power as to such
       shares.

c.     Includes 37,037 shares held in trust pursuant to the Voting Trust
       Agreement.
d.     As of January 31,  2000,  1,350,000  shares of Series A Preferred  were
       issued and outstanding.  Unless otherwise noted, the security ownership
       of such  Series A  Preferred  disclosed  in the table is of record  and
       beneficial.

(B) Compliance with Section 16(a) of the Securities Exchange Act

     Section 16(a) of the Securities  Exchange Act of 1934 (the "Exchange  Act")
requires  SurgiCare's  officers and directors,  and persons who own more than 10
percent of a registered class of SurgiCare's equity securities,  to file reports
of  ownership  and  changes  in  ownership  with  the  Securities  and  Exchange
Commission   ("SEC").   Officers,   directors,   and  greater  than  10  percent
stockholders are required by SEC regulation to furnish  SurgiCare with copies of
all Section 16(a) forms they file.

     Based solely on SurgiCare's  review of the copies of such forms received by
SurgiCare,  SurgiCare  believes that during the year ended December  31,1999 all
filing requirements applicable to its officers,  directors,  and greater than 10
percent  beneficial  stockholders  were  complied  with  except  that  (i)  Drs.
Blumfield,  Penso, Mineo and Nagler, and Mr. Cohen, failed to timely file a Form
3 upon SurgiCare's equity securities becoming registered under the Exchange Act,
and (ii) Drs.  Browne and Nguyen  failed to timely  file a Form 3 upon  becoming
directors of SurgiCare.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          On July  21,  1999,  the  Board of  Directors  of both  SurgiCare  and
Bellaire unanimously approved SurgiCare's acquisition, effective July 1, 1999 of
100% (1,350  shares) of the issued and out standing  common stock of Bellaire in
exchange for 10,955,556 shares of SurgiCare's  common stock and 1,350,000 shares
of  SurgiCare's  Series A Preferred.  This  acquisition  was  accounted for as a
reverse  merger.  Following the closing of the  transaction,  Bellaire  became a
wholly owned subsidiary of SurgiCare. At the time of the approval by both boards
of  directors,  the  shareholders  of Bellaire  jointly held the majority of the
issued and outstanding shares of SurgiCare. In addition four of the five members
of the Board of Directors of SurgiCare  each  individually  held 7.4% of the out
standing and issued shares of Bellaire.

         In determining the amount and character of the consideration to be paid
by SurgiCare for the Bellaire  stock,  the boards of directors of both SurgiCare
and Bellaire considered numerous factors,  including the then inactive status of
SurgiCare  and prior offers that  Bellaire had received for the  acquisition  of
Bellaire by others.

         SurgiCare  has  entered  into a  formal  "Affiliation  Agreement"  (see
exhibit 10.1), effective July 1,1999 with SCOA, pursuant to which agreement SCOA
will render certain  administrative  and other  services to SurgiCare.  SCOA has
developed  extensive  policies  and  procedures  that have been  approved by all
governmental licensing and regulatory authorities. These Policies and procedures
pertain  to  both  clinical  and   administrative   services.   Throughout  this
affiliation  agreement  SurgiCare  is licensed  to utilize  these  policies  and
procedures at each of its centers.  SCOA has a managed care  department  that is
continually  reviewing  managed care  contracts,  negotiating  new contracts and
negotiating  the renewal of existing  contract.  Throughout the SCOA / SurgiCare
affiliation  agreement,   SurgiCare  utilizes  the  services  provided  by  this
department. SCOA has also negotiated national buying contracts that increase the
buying power of each surgery center.  These contract can substantially  decrease
the cost of  surgical  supplies.  SurgiCare  through its  affiliation  agreement
participates in all of SCOA's national buying contract.

SurgiCare  will pay to SCOA 2% of the total cash  collections  monthly for these
services.  SurgiCare  believes  that  the  terms of such  agreement  are no less
favorable to SurgiCare  than could be obtained  from surgery  center  management
companies not affiliated with the Company.  Prior to SurgiCare's  reverse merger
with Bellaire,  SCOA provide management and administrative services to Bellaire.
In consideration of the termination of this  pre-existing  management  contract,
SurgiCare issued SCOA 1,095,556 shares of SurgiCare common stock.

PART III

ITEM13. EXHIBITS AND REPORTS ON FORM 10K
        --------------------------------
(A) EXHIBITS
EXHIBIT                                              DESCRIPTION
NUMBER
 3.1 *Amended and Restated Certificate of Incorporation of SurgiCare, Inc.
 3.2 *Articles of Incorporation of Bellaire SurgiCare, Inc.
 3.3 *By-Laws of Technical Coatings Incorporated (now SurgiCare, Inc.)
 3.4 *By-Laws of Bellaire SurgiCare, Inc.
  4  *Certificate of Designation, Powers, Preferences and Rights of Series A
        Redeemable
  9  *Voting Trust Agreement, dated July 28, 1999, among
      David Blumfield, D.P.M., individually
10.1 *Agreement, dated July 29,  1999, between SurgiCare, Inc. and
      Surgery Centers of America
10.2 *Letter agreement with SCOA
  21 *List of Subsidiaries of SurgiCare, Inc.
  27 *Financial Data Schedule

 Incorporated herein by reference to the Company's Registration Statement on
Form 10-SB/A filed on January 28, 2000

         (B) Reports on Form 8-k

                  NONE


<PAGE>


                                    SIGNATURES
In accordance  with the  requirements  of the Exchange Act, this report has been
signed  by  the  following  persons  on  behalf  of the  Registrants  and in the
capacities and on the date indicated.
Date:    March 29, 2000                              REGISTRANT:

                                                   SurgiCare, Inc

                                             By: /s/ David Blumfield
                                                     Dr. David Blumfield
                                                     President, CEO and Director
                                                     Date: March 29, 2000
                                                By:  /s/ CHARLES S. COHEN
                                                     Charles S. Cohen
                                                     Chief Operating Officer
                                                     Date: March 29, 2000

                                                By:  /s/ JEFFERY PENSO
                                                     Dr. Jeffery Penso
                                                     Vice-President and Director
                                                     Date: March 29, 2000

                                                By:  /s/ SHERMAN NAGLER
                                                     Dr. Sherman Nagler
                                                     Secretary and Director
                                                     Date: March 29, 2000

                                                By:  /s/ MICHAEL MINEO
                                                     Dr. Michael Mineo
                                                     Treasure and Director
                                                     Date: March 29, 2000
                                                By:  /s/ SHIRLEY BROWNE
                                                     Dr. Shirley Browne
                                                     Director
                                                     Date: March 29, 2000
                                                By:  /s/ SON NGUYEN
                                                     Dr. Son Nguyen
                                                     Director
                                                     Date: March 29, 2000