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, 2000

                                 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 REGISTERED UNDER SECTION 12(B) OF THE ACT: NOT APPLICABLE
SECURITIES 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 [ ]

     Check  if  disclosure  of  delinquent  filers  in  reponse  to Item  405 of
Regulation S-B is not  contained,  and no disclosure  will be  containedin  this
form, to the best of Registrant's  knowledge, in definitive proxy or information
statements  incorporated  by  reference  in Part III of this  Form  10-SB or any
amendment to this Form 10-SB. [ ]

SurgiCare's revenues for fiscal year ended December 31, 2000: $6,040,167

     As of March 20, 2001,  13,954,320  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 NASDAQ
Over the Counter  Bulletin  Board) of the Registrant held by  non-affiliates  on
March 20,  2001 was  approximately  $1,787,471,  based upon a per share price of
$2.74,  the average closing price per share for the companys Common Stock on the
OTC Bulletin  Board on the first day of each of the  preseeding  6 months.  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,  2001 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




<PAGE>



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. As of
December 31, 2000, the company owned a majority interest in two surgery centers,
and a minority interst as general partner in one center.  All of SurgiCare's
centers are currently located in Texas.

     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.

     SurgiCare, Inc's. principal office is located at 6699 Chimney Rock Houston,
Texas 77096, and its telephone number is 713-665-1406.

         Bellaire SurgiCare, Inc.

     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.

        SurgiCare Memorial Village, L.P.

     SurgiCare through its wholly owned subsidary Town & Country Surgicare, Inc.
owns a 60% General Partnership interest in SurgiCare Memorial Village, L.P. 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.

        San Jacinto Sugery Center, L.P.

     SurgiCare through its wholly owned subsidary Baytown Surgicare, Inc. owns a
10% General Partnership  interest in an Jacinto Sugery Center, L.P. 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.

INDUSTRY OVERVIEW

     Freestanding  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 SMG Marketing  Group Inc.'s  Freestanding  Outpatient  Surgery
Center Directory (June 1999), an industry publication,  freestanding  outpatient
surgery  centers  are one of the  fastest  growing  segments  of the  healthcare
industry and are  positioned  well to become the premier  provider of outpatient
surgery.  The number of outpatient  surgery cases increased 84% from 3.1 million
in 1993 to 5.7 million in 1999. As of June 1999,  there were 2,726  freestanding
ambulatory  surgery centers in the U.S., of which 93 were owned by hospitals and
733  were  owned  by  corporate  entities.  The  remaining  1,900  centers  were
independently owned, primarily by physicians.

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

COST-EFFECTIVE ALTERNATIVE

     Ambulatory  surgical centers are not usually 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 subject neither 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

     As  reported  in 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 become 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  physicians lose 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 an  interest.
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 in which  SurgiCare  may acquire an interest . 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, in whole or in part, by SurgiCare.

     SurgiCare  therefore expects that with goals and motivations  substantially
aligned, the profitability of each center in which it acquires an interest,  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  date of  this  filing,
SurgiCare has no current  agreements or arrangements  for the acquisition of any
surgery  center  except for the  non-binding  letter of intent  (the  "Letter of
Intent")  entered into between  SurgiCare and Surgery Centers of America II, LLC
("SCOA II"), and reported on SurgiCare's  Current Report on Form 8-K dated March
6, 2001. Dr. Joseph Huffmyer, a director of SurgiCare, owns approximately 90% of
SCOA II's membership  interests.  The Letter of Intent contemplates  SurgiCare's
acquisition  of SCOA II  exchange  for a  combination  of cash,  and  shares  of
SurgiCare's  common stock. The amount of cash, and number of shares to be issued
by SurgiCare in exchange for SCOA II membership interests will be agreed upon by
the  parties  following  a complete  valuation  of SCOA II. The  acquisition  is
subject  to  customary  conditions,  including  satisfactory  completion  of due
diligence,  negotiation  and  execution  of  definitive  agreements,  receipt of
required   regulatory   approvals   and  the  approval  of  SCOA  II's  members.
SCAOspecializes  in  the  development  and  management  of  ambulatory  surgical
centers.

     SurgiCare has maintained an affiliation  agreement with Surgery  Centers of
America,  Inc.  since July 1999, and the principal  owner of Surgery  Centers of
America,  Inc.  ("SCOA") is a director of SurgiCare.  Although SCOA II and SCOA,
are two different companies their principal ownership interests are similar, and
they may be considered to be affiliated.  For further  information  see ITEM 12,
Related Party Transactions, below.

     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.SurgiCare  may acquire  less than all of the  interest in a particular
center when such an acquisistions approach is thought to be advisable.

ACQUISITION AND DEVELOPMENT OF SURGERY CENTERS

     SurgiCare's  development  staff works to 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  are then 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 or acquisition of a new surgery centers, SurgiCare plans
to  continue  working  in  conjunction  with  SCOA,  either  under  the  current
affiliation  agreement,  or  as  a  combined  enterprise,   if  the  transaction
comtimplated  by the Letter of Intent is  consummated . 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  principal  to  utilize  SCOA to  assist  it in  these  efforts.
SurgiCare's  current  affiliation  agreement  with  SCOA  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, if involved,  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 most of its
freestanding  ambulatory  surgery  centers will generally be 100%.  However from
time to time SurgiCare may identify  centers where it is advantageous to acquire
interest  less than 100%.  Regardless  of the  percentage  of each  center  that
SurgiCare acquires,  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 the SurgiCare board or
management on operational aspects of the center.

SURGERY CENTER LOCATIONS

     The following table sets forth information related to SurgiCare's  surgical
centers in operation as of December 31, 2000.
<TABLE>
<CAPTION>
                               SURGERY CENTER LOCATIONS

<S>                           <C>                <C>               <C>
         Name                  Location           Acquisition      SurgiCare
                                                     Date          Ownership

Bellaire SurgiCare           Houston, Texas       July 1999          100%
SurgiCare Memorial Village   Houston, Texas       Oct. 2000           60%
San Jacinto Surgery Center   Baytown, Texas       Oct. 2000           10%
</TABLE>




AAAHC ACCREDIDATION

     Two  of  SurgiCare   surgery  centers  are  currently   accredited  by  the
Accreditation  Association for Ambulatory Health Care Inc.  ("AAAHC").  Although
not required SurgiCare believes that obtaining a AAAHC accreditation,  is useful
in competing  for, and  contracting  with  certain  managed care  organizations.
SurgiCare, where practical will strive to obtain AAAHC accreditation.

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 18% 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  ("DHHS")  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.  DHHS
initially  planned to  implement  these new rates in the spring of 2001.  First,
BIPA deferred the date on which the proposal becomes  effective to January 2002;
second,  BIPA requires the phase-in of the new rates over four years; and third,
it requires that DHHS use data  beginning in January 2003 based on a new surgery
center cost survey from 1999 or later in calculating new rates.

     SurgiCare  estimates  that if full  implementation  of the  proposed  rates
occurred in January 2002,  they would  adversely  affect our annual  revenues by
less than 2% based on the proposed rates and our historical  procedure and payer
mix. However,  we believe due to the four year phase-in of the new rates coupled
with  updated  rates  based  on a new  cost  survey  to be used in 2003 and cost
efficiencies  we can implement at both the center and  corporate  level that our
financial results will not be materially impacted by the rule's  implementation.
However, there can be no assurance that the implementation of this rule will not
adversely  impact our  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.


         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 is
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 where 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  December  31,  2000,   SurgiCare   and  its   subsidiary   employed
approximately 75 persons,  58 of who were full-time employees and 17 of who were
part-time employees.  Of the above, 6 were employed at SurgiCare's  headquarters
staff office in Houston,  Texas and the  remaining  employees  were  employed by
SurgiCare's  surgery  centers.  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  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. The other two SurgiCare centers in operation at December 31, 2000,
lease space ranging from 10,000 to 14,000 square feet with remaining lease terms
ranging between 12 and 15 years.

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 traded on the NASADAQ's Over the Counter
Bulliten Board ("OTCBB") a 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 NASADAQ's Small Cap.
There can be no assurance that SurgiCare's  securities will become listed in the
NASAD's small cap or that any market will develop for SurgiCare's securities.

     SurgiCare's  common  stock began  trading in Texas on August  1999  through
William  Little and  Company.  In April 2000 the  company  began  trading on the
Nasadq's Over The Counter  Bulletin Board.  the following  table  represents 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  April 2000,  and the
Nasdaq OTCBB from April 2000  December 31, 2000 for each of the quarters in 1999
and 2000 subsequent to the initial quoting period.


                                                 HIGH        LOW
August 1999 through September 30, 1999 *       $  3.00     $ 2.938
Quarter ended December 31, 1999 *              $  3.875    $ 3.00
Quarter ended March 31, 2000 *                 $  4.25     $ 3.75
Quarter ended June 30, 2000                    $  4.00     $ 2.00
Quarter ended September 30, 2000               $  3.6875   $ 1.625
Quarter ended December 31, 2000                $  6.00     $ 2.125



     * Bid price  reflect  quotations  by William  Little,  and Company  without
commissions and may not represent actual transactions.

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 565 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 1,400,000 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.

     Pursuant to the Investment Banking Agreement Dated December 6, 2000 between
SurgiCare, Inc. and EquiTrade Securities Corporation("EquiTrade"), SurgiCare has
agreed to issue warrants for the purchase of 125,000 shares of SurgiCare  common
stock at $.25 per share.

     The cash portion of the purchase price for SurgiCare's interest in Memorial
Village's assets was funded in part by a loan from DVI Financial Services,  Inc.
("DVI"),  pursuant to a Master  Loan  Agreement,  dated as of October 17,  2000,
among DVI, SurgiCare and Bellaire  SurgiCare,  Inc. (the "Loan Agreement").  The
loan is  evidenced  by a Secured  Promissory  Note dated  October  17, 2000 (the
"Note"), in the amount of $3,750,000 payable in monthly  installments of $33,594
for the first six months and  thereafter in  installments  of  $81,067.33  until
March 17,  2006.  The Note is  secured  by  substantially  all of the  assets of
SurgiCare and Bellaire SurgiCare,  Inc. In connection with the loan transaction,
SurgiCare  issued to DVI a warrant for the  purchase of up to 200,000  shares of
SurgiCare's  Common Stock at a price of $3 per share. The warrant is exercisable
at any time from the date thereof until 12 months  following the satisfaction of
SurgiCare's obligations to DVI under the Note.

     Restricted Securities. As of December 31, 2000 there were approximately 565
holders of record of  SurgiCare's  Common  Stock and 15 holders of record of its
Series A Preferred  Stock.  Currently  12,413,219  of the  13,954,320  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 5,967,750  restricted shares of Common Stock and 600,000
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 635 E. 10 1/2 Street.  Houston, Texas, 77008 Their toll free telephone number
is 1-713-291-2288.

RECENT SALES OF UNREGISTERED SECURITIES


     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.

     Pursuant  to an  Acquisition  Agreement,  dated as of October 20, 2000 (the
"Acquisition Agreement"),  SurgiCare issued 1,357,663 shares of its Common Stock
to the partners of HealthFirst  Memorial Village Surgery Center, Ltd. ("Memorial
Village") as part of the  consideration  for the acquisition,  by a wholly owned
subsidiary  of SurgiCare,  of a 60% interest in the assets of Memorial  Village.
The purchased interest was then contributed to a limited partnership of which an
affiliate of SurgiCare is the general  partner and in which SurgiCare owns a 60%
interest,  and which owns and operates the surgery  center  previously  owned by
Memorial  Village.  Of the  shares of Common  Stock  issued in the  transaction,
109,490 shares attributable to Memorial Village's general partner were deposited
into escrow as security  for the  satisfaction  of  indemnification  obligations
under the Acquisition 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)  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.

     (ii)  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>

                                                       2000      1999     1998
<S>                                                   <C>       <C>     <C>
--------------------------------------------------------------------------------
Revenues, net                                         100.00%   100.00%  100.00%
--------------------------------------------------------------------------------
Expenses
--------------------------------------------------------------------------------
       Total Direct Cost of Services                   38.34%   28.65%   34.16%
--------------------------------------------------------------------------------
General & Administrative Expenses
--------------------------------------------------------------------------------
      Total G & A                                      30.37%   27.19%   30.37%
--------------------------------------------------------------------------------
      Total Expenses                                   66.01%   55.84%   64.53%
--------------------------------------------------------------------------------
      Operating Income                                 33.99%   44.16%   35.47%
--------------------------------------------------------------------------------
Other Income
--------------------------------------------------------------------------------
      Total Other Income                               -1.28%   -0.60%   -1.28%
--------------------------------------------------------------------------------
Earnings Before Federal Income Tax Expense             28.53%   43.55%   34.19%
--------------------------------------------------------------------------------
Federal Income Tax Expense (Benefit)
--------------------------------------------------------------------------------
       Current                                          6.36%    3.93%    0.00%
--------------------------------------------------------------------------------
       Deferred                                         4.12%   12.95%    0.00%
--------------------------------------------------------------------------------
       Net Earnings                                    18.04%   26.68%    34.19%
--------------------------------------------------------------------------------
</TABLE>



      RESULTS OF OPERATION

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

<TABLE>
<CAPTION>
                                FACILITY UTILIZATION

                                                             For the
                                                            Year Ended
                                                           December 31,
`
                                                   2000        1999        1998
<S>                                               <C>          <C>         <C>
--------------------------------------------------------------------------------
Number of Cases
--------------------------------------------------------------------------------
     Bellaire                                   2924         2620        1790
-------------------------------------------------------------------------------
     SurgiCare Memorial Village *                680            0           0
--------------------------------------------------------------------------------
Total                                           3604         2620        1790
--------------------------------------------------------------------------------
Total Revenues Generated                 $ 6,040,167   $4,216,660  $2,559,526
--------------------------------------------------------------------------------
Avg. Revenue Generated per Case          $     1,675   $    1,609  $    1,430
--------------------------------------------------------------------------------
Avg. Earnings Before Federal Income
Tax per Case **                          $       478   $      701  $      489
--------------------------------------------------------------------------------
</TABLE>

     * Numbers reflect only October, November, and December.

     ** The use of specialty pain management  implants in increased  numbers for
the year ending December 31, 2000 has created the appearance of a lower earnings
per procedure. Third party payers have a fixed reimbursement for implants at our
cost plus a predetermined  percentage  multiplier that in all cases is less than
our usual  profit.  Earnings  per case appear to drop because of this low profit
cap and the high cost of these  implants.  Implants  accounted for 30.55% of the
total  procedure  costs in the three months ending  December 31, 2000, and 14.8%
for the twelve-month period ending December 31, 2000.

     Management  does  not  consider  the  use of  implants  or  the  associated
reduction in earnings  per case  significant  in view of the fact that  revenue,
earnings  and case volume  each  increased  in the  twelve-month  period  ending
December 31, 2000.



FISCAL YEAR END 2000 vs. FISCAL YEAR END 1999

     In the twelve months ending December 31, 2000 SurgiCare  recorded  revenues
of  $6,040,167  compared  to  $4,216,660  for the same  period  in  1999,  which
represents  a 43.24%  increase in revenue for the year.  This in part due to the
acquisitions  completed  in the 4th  quarter  of  2000,  and in  part  due to an
increased number of cases and specifically revenue generated per case.

     SurgiCare  performed 3604 cases in the  twelve-month  2000 compared to 2620
cases for the same period in 1999.  This  represents  37.55%  increase in number
cases.   11.6%  of  this  increase  can  be  attributed  to  increased  facility
utilization, and 25.95% can be attributed to the acquisitions in the 4th quarter
of 2000.  Revenue per case for the year ending December 31, 2000 increased 4% to
$1675 from $1609 for the same period in 1999.

     The pre-tax  earnings  generated per case  decreased from $701 per case for
the year ending  December 30, 1999,  to $478 for the same period in 2000,  which
represents a 46% decrease.  This drop is attributed partially to the increase in
General and  Administrative  expenses as well as the increased surgical expenses
caused by the high cost of implant.  The  utilization  of implant for the period
increased,  due to contractual obligations with third party payers, earnings per
procedure  utilizing implants are reimbursed at a fixed rate which is lower than
normal direct surgical costs, thereby reducing per case earnings.

     General and  administrative  expenses  increased as a  percentage  of total
revenue from 27.19% for the year ending  December  31,  1999,  to 30.37% for the
same period in 2000. Management expects that these costs to continue to increase
slightly  as the  company  continues  to  aggressively  pursue  its  merger  and
acquisition strategy.

     As a percentage  of revenue,  total  expenses rose from 55.84% for the year
ending  December 31, 1999,  to 66.01% for the same period in 2000.  The cause of
this increase was in part due to higher advertising, accounting and legal costs,
as well as an increase in salaries due to the expansion and  acquisitions in the
4th  quarter.  Management  anticipated  this small  increase as it  continues to
aggressively advertise for, pursue, and finalize mergers with suitable partners.

     For the year, utilization of the center remained steady. However,  expenses
associated with the pending  mergers,  as well as the limited  reimbursement  on
implant  procedures,  resulted in pre-tax earnings of 28.53% of revenues for the
year ending December 31, 2000 vs. 43.55% for the same period in 2000.


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  were $1.1 million in fiscal 2000. The Company had $(211) thousand of
working  capital as of December  31, 2000  compared to $640  thousand of working
capital as of December 31, 1999.  This decrease was due to the  acquisitions  of
both Memorial  Village and San Jacinto Surgery Centers.  Historically  operating
income from  SurgiCare'  centers has provided  adequate  working capital and the
company  expects  that  future   operating  income  will  be  adequate  to  fund
operations.  SurgiCare  is also in the  process  of  refinancing  the short term
portion  of the debt that was  utilized  in the  Memorial  Village  acquisition.
SurgiCare  is  also  exploring  certain  opportunities  to  convert  much of its
long-term  debt to equity.  There can be no  assurance  that  SurgiCare  well be
successful in its attempts to refinance or convert any portion of its debt.


     The cash portion of these acquisitions was $4.7 million.  Net cash provided
by financing  activities  for the year was $3.8  million.  Capital  expenditures
excluding acquisitions increased from $194 thousand through December 31, 1999 to
$366  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-term  liquidity of the company.  The company does expect to see an increase
in liquidity from  operations and through the  refinancing of certain short term
debt to long term debt. The company also anticipates that the majority of future
acquisitions will be paid for with the companys common stock.

<PAGE>



ITEM 7.  FINANCIAL STATEMENTS TABLE OF CONTENTS


                                 SURGICARE, INC.

                                 Houston, Texas

                          CONSOLIDATED FINANCIAL REPORT


                                December 31, 2000
<PAGE>

<TABLE>
<CAPTION>

                                TABLE OF CONTENTS


<S>                                                <C>
                                                  Page Number


Independent Auditors' Report .....................  F-1

Consolidated Balance Sheets ......................  F-2

Consolidated Statements of Earnings ..............  F-4

Consolidated Statements of Shareholders' Equity ..  F-5

Consolidated Statements of Cash Flows ............  F-6

Notes to Consolidated Financial Statements .......  F-8
</TABLE>



                                       F-1
<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,  2000 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  auditing  standards  generally
accepted in the United States of America.  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
principals  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, 2000 and 1999 and the results of its  operations and its
cash flows for the years then ended, in conformity  with  accounting  principals
generally accepted in the United States of America.





WEINSTEIN SPIRA & COMPANY, P.C.
Houston, Texas
February 23, 2001


<TABLE>
<CAPTION>

                                       F-2
<PAGE>

                                 SURGICARE, INC.
                           CONSOLIDATED BALANCE SHEETS



-------------------------------------------------------------------------------
 .......................                                December 31,
<S>                                               <C>           <C>
------------------------------------------------------------------------------
                                                   2000          1999
------------------------------------------------------------------------------
                ASSETS
------------------------------------------------------------------------------
Current Assets
------------------------------------------------------------------------------
   Cash and cash equivalents ................ $    21,666    $  243,859
------------------------------------------------------------------------------
   Accounts Receivable:
------------------------------------------------------------------------------
   Trade (less allowance for contractual
   adjustments and doubtful accounts of
   $2,274,000 and $1,682,000 at
    December 31, 2000 and 1999, respectively)   3,088,916     1,751,984

------------------------------------------------------------------------------
     Shareholders ...........................     244,500
------------------------------------------------------------------------------
     Other ..................................                    80,849
------------------------------------------------------------------------------
   Inventory ................................     620,150        89,361
------------------------------------------------------------------------------
   Prepaid expenses .........................     120,042        27,175
------------------------------------------------------------------------------
   Other current assets .....................      27,187        21,200
-----------------------------------------------------------------------------
       Total Current Assets .................   4,122,461     2,214,428
------------------------------------------------------------------------------
Property and Equipment
------------------------------------------------------------------------------
   Office furniture and equipment ...........     159,891        40,922
------------------------------------------------------------------------------
   Medical and surgical equipment ...........   2,143,490       660,225
------------------------------------------------------------------------------
   Leasehold improvements ...................     812,064        28,016
------------------------------------------------------------------------------
   Computer equipment .......................      68,628        58,303
------------------------------------------------------------------------------
   Transportation equipment .................      30,142
------------------------------------------------------------------------------
   Construction in progress .................                   117,121
------------------------------------------------------------------------------
                                                3,214,215       904,587
------------------------------------------------------------------------------
   Less:  Accumulated depreciation and amortiz    712,649       487,998
------------------------------------------------------------------------------
                                                2,501,566       416,589
------------------------------------------------------------------------------
Goodwill (net of amortization of $140,626 and
 $5,737 in 2000 and 1999,respectively) ......   7,485,918       166,367
------------------------------------------------------------------------------
Investment in Limited Partnership ...........     331,868
------------------------------------------------------------------------------
Loan Fees (net of amortization of $4,925) ...     157,575
------------------------------------------------------------------------------
                                              $14,599,388    $2,797,384
------------------------------------------------------------------------------

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




--------------------------------------------------------------------------------
 .........................                                December 31,
--------------------------------------------------------------------------------
------------------------------------------------------------------------------
                                                     2000          1999
------------------------------------------------------------------------------
                              LIABILITIES
------------------------------------------------------------------------------
Current Liabilities
------------------------------------------------------------------------------
   Short-term debt .......................... $ 2,084,234    $  655,228
------------------------------------------------------------------------------
   Due to San Jacinto .......................     170,000
------------------------------------------------------------------------------
   Accounts payable .........................     494,760       147,685
------------------------------------------------------------------------------
   Accrued expenses .........................     367,201       128,280
------------------------------------------------------------------------------
   Federal income tax payable ...............     422,441        95,637
------------------------------------------------------------------------------
   Deferred federal income tax ..............     795,000       546,000
------------------------------------------------------------------------------
       Total Current Liabilities ............   4,333,636     1,572,830
------------------------------------------------------------------------------
Long-Term Capital Lease Obligations .........      38,383        49,544
------------------------------------------------------------------------------
Long-Term Debt ..............................   4,556,894
------------------------------------------------------------------------------
Minority Interest in Partnership ............     202,600
------------------------------------------------------------------------------
                                                9,131,513     1,622,374
------------------------------------------------------------------------------
                         SHAREHOLDERS' EQUITY

------------------------------------------------------------------------------
Preferred Stock, Series A, par value $.001,
 1,650,000 authorized,1,450,000 issued and
 outstanding at December 31, 2000, and 1,400,000
 issued and outstanding at December 31, 1999,
 redemption and liquidation value $7,250,000        1,450         1,400
-----------------------------------------------------------------------------
Common Stock, par value $.005, 50,000,000
 shares authorized, 13,954,320 issued and
 outstanding at December 31, 2000, and
 12,596,657 issued and outstanding at
 December 31, 1999 ..........................      69,771        62,983
------------------------------------------------------------------------------
Additional Paid-In Capital ..................   4,710,907       900,245
------------------------------------------------------------------------------
Retained Earnings ...........................     693,997       237,882
------------------------------------------------------------------------------
Less:  Shareholder receivables ..............      (8,250)      (27,500)
------------------------------------------------------------------------------
                                                5,467,875     1,175,010
------------------------------------------------------------------------------
                                              $14,599,388    $2,797,384
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
                                 SURGICARE, INC.
                       CONSOLIDATED STATEMENTS OF EARNINGS



--------------------------------------------------------------------------------
  ...........................................          For the Year Ended
  ...........................................             December 31,
------------------------------------------------------------------------------
<S>                                                  <C>           <C>
                                                     2000          1999
------------------------------------------------------------------------------
Revenues, net ............................... $ 6,040,167    $4,216,660
------------------------------------------------------------------------------
Direct Cost of Revenues:
------------------------------------------------------------------------------
   Surgical costs ...........................   1,404,078       654,727
------------------------------------------------------------------------------
   Clinical salaries and benefits ...........     600,933       389,722
------------------------------------------------------------------------------
   Other ....................................     310,848       163,554
------------------------------------------------------------------------------
                                                2,315,859     1,208,003
------------------------------------------------------------------------------


------------------------------------------------------------------------------
General and Administrative Expenses:
------------------------------------------------------------------------------
   Salaries and benefits ....................     404,779       202,458
------------------------------------------------------------------------------
   Management and affiliation fees ..........      81,358       206,335
------------------------------------------------------------------------------
   Management company termination fee .......                   164,333
------------------------------------------------------------------------------
   Rent .....................................     224,670       180,693
------------------------------------------------------------------------------
   Depreciation .............................     364,465       141,884
------------------------------------------------------------------------------
   Professional fees ........................     197,774        48,771
------------------------------------------------------------------------------
   Taxes ....................................      99,489        73,958
------------------------------------------------------------------------------
   Other ....................................     298,811       128,248
------------------------------------------------------------------------------
                                                1,671,346     1,146,680
------------------------------------------------------------------------------
                                                3,987,205     2,354,683
------------------------------------------------------------------------------

------------------------------------------------------------------------------
Operating Income ............................   2,052,962     1,861,977
------------------------------------------------------------------------------

------------------------------------------------------------------------------
Other Income (Expense)
------------------------------------------------------------------------------
   Gain on sale of property and equipment ...                    12,025
------------------------------------------------------------------------------
   Miscellaneous income .....................       2,259        12,433
------------------------------------------------------------------------------
   Equity in earnings of limited partnership       11,868
------------------------------------------------------------------------------
   Interest expense .........................    (215,532)      (49,915)
------------------------------------------------------------------------------
                                                 (201,405)      (25,457)
------------------------------------------------------------------------------
Earnings Before Minority Interest and
Federal Income Tax Expense
                                                1,851,557     1,836,520
------------------------------------------------------------------------------
Minority Interest in Earnings of Partnership    (128,138)
------------------------------------------------------------------------------
Earnings Before Federal Income Tax Expense ..   1,723,419     1,836,520
------------------------------------------------------------------------------
Federal Income Tax Expense
------------------------------------------------------------------------------
   Current ..................................  384,304       165,637
------------------------------------------------------------------------------
   Deferred .................................  249,000       546,000
------------------------------------------------------------------------------
                                               633,304       711,637
------------------------------------------------------------------------------
Net Earnings ..............................$ 1,090,115    $1,124,883
------------------------------------------------------------------------------
Net earnings per share (proforma
in 1999) - basic and diluted
                                          $       .04    $      .08
------------------------------------------------------------------------------
</TABLE>



                 See notes to consolidated financial statements.
                                       F-5
<PAGE>

<TABLE>
<CAPTION>

                                 SURGICARE, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 For the Years Ended December 31, 2000 and 1999


<S>                    <C>              <C>              <C>                <C>       <C>       <C>          <C>          <C>
                                        $.10 Par Value    $.005 Par Value  Additional
                        Preferred Stock   Common Stock      Common Stock    Paid-in   Retained Treasury Stock Share-      Total
                                                                            Capital   Earnings                holder      Equity
---------------------- ---------- ----- --------- ----- ----------- -------                     ----- ------ Receivable
                         Shares    Amnt  Shares   Amnt    Shares      Amnt                     Shares  Amnt
---------------------- ---------- ----- --------- ----- ----------- ------- ------- ---------- ----- ------- --------- -------------
Balance -
December 31, 1998                        1,400   $ 140                     $32,610  $ 765,794 (150)$(54,750)$(48,750)   $   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                                              1,095,556  $5,478  158,855                                           164,333
--------------------- ---------- ----- --------- ----- ----------- ------- ------- ---------- ----- ------- ---------- -------------
--------------------- ---------- ----- --------- ----- ----------- ------- ------- ---------- ----- ------- ---------- -------------
Net earnings
- January 1,1999
to June 30, 1999                                                                     561,001                                561,001
--------------------- ---------- ----- --------- ----- ----------- ------- ------- ---------- ----- ------- ---------- -------------
Capitalization of S
corporation earnings                                                       727,795  (727,795)
--------------------- ---------- ----- --------- ----- ----------- ------- ------- ---------- ----- ------- ---------- -------------
Contributions by
shareholders                                                                27,000                                            27,000
--------------------- ---------- ----- --------- ----- ----------- ------- ------- ---------- ----- ------- ---------- -------------
Shares exchanged in
reverse acquisition   1,350,000 $1,350  (1,350) (135) 11,501,101   57,505  (58,720)
-------------------- ---------- ----- --------- ----- ----------- ------- ------- ---------- ----- ------- ---------- -------------
Sale of preferred
 stock                  50,000   50                                        22,450                            (22,500)
------------------- ---------- ----- --------- ----- ----------- ------- ------- ---------- ----- ------- ---------- -------------
Dividends paid to
preferred
shareholders                                                                       (326,000)                             (326,000)
------------------- ---------- ----- --------- ----- ----------- ------- ------- ---------- ----- ------- ---------- -------------
Collections on
shareholder
receivables                                                                                                   88,750        88,750
------------------- ---------- ----- --------- ----- ----------- ------- ------- ---------- ----- ------- ---------- -------------
Net earnings -
July 1, 1999
to December 31, 1999                                                               563,882                                563,882
------------------- ---------- ----- --------- ----- ----------- ------- ------- ---------- ----- ------- ---------- -------------
Balance -
December 31, 1999    1,400,000 1,400                  12,596,657  62,983  900,245  237,882                  (27,500)     1,175,010
------------------- ---------- ----- --------- ----- ----------- ------- --------- ---------- ----- ------- ---------- -------------
Sale of preferred
stock                50,000    50                                         22,450                             (15,000)         7,500
------------------ ---------- ----- --------- ----- ----------- ------- --------- ---------- ----- ------- ---------- -------------
Collections on
 shareholder                                                                                                   34,250         34,250
 receivables
------------------- ---------- ----- --------- ----- ----------- ------- --------- ---------- ----- ------- ---------- -------------
Acquisition of
Memorial Village                                        1,357,663  6,788 3,713,212                                         3,720,000
-------------------- ---------- ----- --------- ----- ----------- ------- --------- ---------- ----- ------ ---------- -------------
Dividends paid to
preferred
shareholders                                                                       (634,000)                              (634,000)
------------------- ---------- ----- --------- ----- ----------- ------- --------- ---------- ----- ------- ---------- -------------
Issuance of warrants                                                      75,000                                             75,000
------------------- ---------- ----- --------- ----- ----------- ------- --------- ---------- ----- ------- ---------- -------------
Net earnings                                                                        1,090,115                              1,090,115
------------------- ---------- ----- --------- ----- ----------- ------- --------- ---------- ----- ------- ---------- -------------
Balance
December 31, 2000   1,450,000  $1,450                 13,954,320 $69,771 $4,710,907 $ 693,997                $ (8,250)   $ 5,467,875
------------------- ---------- ----- --------- ----- ----------- ------- --------- ---------- ----- ------- ---------- -------------
</TABLE>
                                      F-6
<PAGE>


<TABLE>



<CAPTION>
                                 SURGICARE, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS



-------------------------------------------------------------------------------
  ...........................................         For the Year Ended
  ...........................................             December 31,
------------------------------------------------------------------------------
<S>                                                  <C>           <C>
                                                     2000          1999
------------------------------------------------------------------------------
Cash Flows From Operating Activities
------------------------------------------------------------------------------
   Net earnings ............................. $ 1,090,115    $1,124,883
------------------------------------------------------------------------------
   Adjustments to reconcile net earnings to
   net cash provided by operating activities:
------------------------------------------------------------------------------
       Equity in earnings of limited partnersh    (11,868)
------------------------------------------------------------------------------
       Minority interest in earnings of
       partnership ..........................     128,138
------------------------------------------------------------------------------
       Depreciation and amortization ........     364,465       141,884
------------------------------------------------------------------------------
       Gain on sale of property and equipment                   (12,025)
------------------------------------------------------------------------------
       Deferred federal income tax ..........     249,000       546,000
------------------------------------------------------------------------------
       Management company termination fee ...                   164,333
------------------------------------------------------------------------------
       (Increase) Decrease in:
------------------------------------------------------------------------------
         Accounts receivable ................    (792,190)     (828,552)
------------------------------------------------------------------------------
         Inventory ..........................    (165,792)      (41,374)
------------------------------------------------------------------------------
         Prepaid expenses ...................     (77,351)         (965)
------------------------------------------------------------------------------
         Other current assets ...............      12,988       (15,338)
------------------------------------------------------------------------------
       Increase (Decrease) in:
------------------------------------------------------------------------------
         Accounts payable ...................    (223,567)      109,859
------------------------------------------------------------------------------
         Federal income tax payable .........     326,804        95,637
------------------------------------------------------------------------------
         Accrued expenses ...................     238,921        78,469
------------------------------------------------------------------------------
       Net Cash Provided by Operating Activiti  1,139,663     1,362,811
------------------------------------------------------------------------------
Cash Flows From Investing Activities
------------------------------------------------------------------------------
   Purchase of Memorial Village .............  (4,515,056)
------------------------------------------------------------------------------
   Capital expenditures .....................    (366,017)     (193,872)
------------------------------------------------------------------------------
   Advance to shareholders ..................    (244,500)
------------------------------------------------------------------------------
   Collection (Advance) on other receivable .      80,849       (80,849)
------------------------------------------------------------------------------
   Proceeds from sale of property and equipmen                    12,428
------------------------------------------------------------------------------
   Acquisition of SurgiCare, Inc. ...........                   (172,104)
------------------------------------------------------------------------------
   Investment in San Jacinto ................    (150,000)
------------------------------------------------------------------------------
       Net Cash Used in Investing Activities   (5,194,724)     (434,397)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Cash Flows From Financing Activities
------------------------------------------------------------------------------
   Borrowings on debt .......................   5,953,617       336,000
------------------------------------------------------------------------------
   Payments on debt .........................  (1,398,114)     (247,514)
------------------------------------------------------------------------------
   Principal payments on capital lease ......     (42,885)      (20,840)
------------------------------------------------------------------------------
   Collections on shareholder receivable ....      34,250        88,750
------------------------------------------------------------------------------
   Contributions by shareholders ............                    27,000
------------------------------------------------------------------------------
   Dividends paid to preferred shareholders .    (634,000)     (326,000)
------------------------------------------------------------------------------
   Distributions to shareholders ............                  (599,000)
------------------------------------------------------------------------------
   Sale of preferred stock ..................       7,500
------------------------------------------------------------------------------
   Proceeds from issuance of warrants .......      75,000
------------------------------------------------------------------------------
   Loan fees ................................    (162,500)
------------------------------------------------------------------------------
       Net Cash Provided by (Used in) Financing
       Activities
                                                3,832,868      (741,604)
------------------------------------------------------------------------------

                See notes to consolidated financial statements.
                                       F-7
<PAGE>







--------------------------------------------------------------------------------
  ...........................................         For the Year Ended
  ...........................................             December 31,
------------------------------------------------------------------------------
                                                     2000          1999
------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and
 Cash Equivalents ...........................    (222,193)      186,810
------------------------------------------------------------------------------
Cash and Cash Equivalents - Beginning of Perio    243,859        57,049
------------------------------------------------------------------------------
Cash and Cash Equivalents - End of Period ... $    21,666    $  243,859
------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information
------------------------------------------------------------------------------
   Interest paid ............................ $   245,764    $   49,915
------------------------------------------------------------------------------
   Taxes paid ............................... $    57,500    $   70,000
------------------------------------------------------------------------------
Supplemental Schedule of Non-Cash Investing
and Financing Activities
------------------------------------------------------------------------------
   Investment in San Jacinto ................ $   170,000
------------------------------------------------------------------------------
   Notes receivable from sale of Treasury stoc$                  45,000
------------------------------------------------------------------------------
   Notes receivable from sale of Preferred sto$                  22,500
------------------------------------------------------------------------------
   Cancellation of Treasury stock ...........               $    18,250
------------------------------------------------------------------------------
   Capital lease for medical equipment ......               $    76,971

------------------------------------------------------------------------------
During 2000, the Company acquired the following
assets of Memorial Village Surgery Center, L P.:
------------------------------------------------------------------------------
   Accounts receivable ...................... $   544,742
------------------------------------------------------------------------------
   Inventory ................................     364,997
------------------------------------------------------------------------------
   Prepaid expenses .........................      15,516
------------------------------------------------------------------------------
   Property and equipment ...................   1,943,611
------------------------------------------------------------------------------
   Goodwill .................................   7,454,440
------------------------------------------------------------------------------
   Other current assets .....................      18,975
------------------------------------------------------------------------------
   Accounts payable .........................    (570,642)
------------------------------------------------------------------------------
   Capital leases ...........................     (89,643)
------------------------------------------------------------------------------
   Debt .....................................  (1,372,478)
------------------------------------------------------------------------------
   Stock issued .............................  (3,720,000)
------------------------------------------------------------------------------
   Minority interest in net assets ..........     (74,462)
------------------------------------------------------------------------------
       Net cash paid ........................ $ 4,515,056
------------------------------------------------------------------------------
</TABLE>

<PAGE>



                                      F-16

                                 SURGICARE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999


Note 1 - Accounting Policies

     SurgiCare,  Inc. (the Company) maintains its accounts on the accrual method
of accounting in accordance with accounting principals generally accepted in the
United States of America.  Accounting principals followed by the Company and the
methods of applying those principals 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. 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.

     In September,  2000, Town & Country  SurgiCare,  Inc. was formed as a Texas
corporation  and a  wholly-owned  subsidiary of  SurgiCare,  Inc. Town & Country
SurgiCare,  Inc.  is a 60%  general  partner  in  Healthfirst  Memorial  Village
Surgery, L.P., which operates a day surgery center in Houston, Texas.

     In October, 2000, Baytown SurgiCare, Inc. was formed as a Texas corporation
and a wholly-owned  subsidiary of SurgiCare,  Inc. Baytown SurgiCare,  Inc. is a
10% general partner of San Jacinto Surgery  Center,  Ltd.,  which operates a day
surgery center in Baytown, Texas.

   principals of Consolidation

     These consolidated financial statements include the accounts of the Company
and its  wholly-owned  subsidiaries,  Bellaire  SurgiCare,  Inc., Town & Country
SurgiCare,  Inc. and Baytown 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.

   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.

<PAGE>

                                 SURGICARE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                           December 31, 2000 and 1999


   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  $111,329,  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  - 10  years
             Computer equipment                                    5  years
             Transportation equipment                              5  years

   Investment in Limited Partnership

     The Company has a 10% general  partnership  interest in San Jacinto Surgery
Center,  Ltd., a Texas Limited  partnership.  The investment is accounted for by
the equity method. Under the equity method, the investment is initially recorded
at cost and is  subsequently  increased  to reflect the  Company's  share of the
income of the  investee  and  reduced to reflect  the share of the losses of the
investee or distributions from the investee.

   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.

   Loan Fees

     Fees paid in connection  with obtaining debt financing are being  amortized
over 5.5 years, the term of the loan.

   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.


<PAGE>

                                 SURGICARE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                           December 31, 2000 and 1999


     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  accounting
principals   generally  accepted  in  the  United  States  of  America  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 - Acquisitions

     Effective  October 1, 2000,  the Company  acquired  from  Memorial  Village
Surgery Center,  L.P. (MVSC) an undivided 60% interest in the assets and assumed
liabilities of a surgery center in Houston,  Texas,  in a transaction  accounted
for as a purchase.

     The purchase price of $8,235,056 consisted of $4,423,711 in cash, 1,357,663
shares of SurgiCare,  Inc.  common stock valued at $3,720,000,  and  acquisition
costs of $91,345,  including legal and accounting  fees. The excess of cost over
the fair market value of the assets has been allocated to goodwill.

     Effective  October 5, 2000, the Company acquired a 10% general  partnership
interest in San Jacinto Surgery Center,  Ltd. (San Jacinto) for $150,000 in cash
and a payable of $170,000.

     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.

     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.

<PAGE>

                                 SURGICARE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                           December 31, 2000 and 1999


Note 3 - Earnings Per Share

     Earnings per share  represent net earnings (after a pro forma provision for
income  taxes in 1999 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 weighted average number of common shares outstanding
during the period.  (Pro forma weighted  average shares in 1999 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  conversion of preferred  stock to common stock is
anti-dilutive.

  ...........................................        For the Year Ended
  ...........................................           December 31,
                                                     2000          1999
------------------------------------------------------------------------------
  ...........................................    (proforma - unaudited)
------------------------------------------------------------------------------
Earnings Per Share:
------------------------------------------------------------------------------
   Earnings before federal income tax expense $ 1,723,419    $1,836,520
------------------------------------------------------------------------------
   Federal income tax .......................     633,304       624,417
------------------------------------------------------------------------------
   Net earnings .............................   1,090,115     1,212,103
------------------------------------------------------------------------------
   Less: Preferred dividends ................     634,000       326,000
------------------------------------------------------------------------------
   Net earnings available for common sharehold$   456,115    $  886,103
------------------------------------------------------------------------------
   Weighted average shares outstanding ......  12,860,029    11,755,422
------------------------------------------------------------------------------
   Net earnings per share - basic and diluted $       .04    $      .08
------------------------------------------------------------------------------


Note 4 - Debt
--------------------------------------------------------------------------------
    ...........................................        December 31,
                                                     2000          1999
------------------------------------------------------------------------------
Short-Term Debt:
------------------------------------------------------------------------------
Current portion of capital lease obligations  $    79,383    $   21,464
------------------------------------------------------------------------------
Current maturities of long-term debt ........   1,651,711       633,764
------------------------------------------------------------------------------
$400,000 revolving line-of-credit with a bank,
secured by accountsreceivable, bearing interest
at the prime rate, monthly payments of
interest due until maturity in April, 2001 ..     353,140
------------------------------------------------------------------------------
                                              $ 2,084,234    $  655,228
------------------------------------------------------------------------------

<PAGE>

                                 SURGICARE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                           December 31, 2000 and 1999


-------------------------------------------------------------------------------
  ...........................................          December 31,
------------------------------------------------------------------------------
                                                     2000          1999
------------------------------------------------------------------------------
Long-Term Debt:
------------------------------------------------------------------------------
$3,750,000 Note payable to a financial
 institution, secured by all assets of
 the Company, interest imputed at 11.5%,
 interest only due monthly through April,
 2001, monthly installments of principal
 and interest of $81,068, due April, 2006 ... $ 3,675,000
------------------------------------------------------------------------------
12% Note payable to a financial institution,
secured by all assets of the Company, interest
 only until maturity in April, 2001 .........     750,000
------------------------------------------------------------------------------
$1,000,000 revolving line-of-credit with a
financial institution,secured by all the
 assets of the Company, interest at the prime
 rate plus 2%, matures October, 2002 ........     731,359
------------------------------------------------------------------------------
11.5% Note payable to a financial institution,
secured by inventory and equipment, due in
monthly installments of $44,482 including
interest, maturing November, 2002
                                                 921,291
------------------------------------------------------------------------------
9.5% Note payable to a financial institution,
secured by inventory and equipment, due in
monthly installments of $3,280 including interest,
maturing November, 2002
                                                   68,727
------------------------------------------------------------------------------
11.1% Note payable to a financial institution,
secured by inventory and equipment, due in
monthly installments of $1,739 including
interest, maturing November, 2002
                                                   36,154
------------------------------------------------------------------------------
9.5% Note payable to a bank, secured by an
automobile, due on demand or in monthly
installments of principal and interest
of $691 until September, 2004
                                                   26,073
------------------------------------------------------------------------------
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 $13,398 through
March, 2002, repaid in 2000
                                                                329,202
------------------------------------------------------------------------------
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,
repaid in 2000
                                                                102,000
------------------------------------------------------------------------------

<PAGE>

                                 SURGICARE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                           December 31, 2000 and 1999


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

Note payable, bearing interest at prime
rate, guaranteed by the shareholders,
payable on demand or in monthly installments of
principal of $5,500 plus interest, due January 1,
2003, repaid in  2000                                           200,000
------------------------------------------------------------------------------
Other .......................................       2,562
------------------------------------------------------------------------------
                                                6,208,605       633,764
------------------------------------------------------------------------------
Less: Current maturities ....................   1,651,711       633,764
------------------------------------------------------------------------------
                                              $ 4,556,894     $
------------------------------------------------------------------------------

------------------------------------------------------------------------------
Long-term debt is payable in the future as follows:

---------------------------------------------------------
                              For the Year Ending
                              December 31,
---------------------------------------------------------
 2001                            $1,651,711
---------------------------------------------------------
 2002                             1,874,357
---------------------------------------------------------
 2003                               700,199
---------------------------------------------------------
 2004                               785,193
---------------------------------------------------------
 2005                               880,504
---------------------------------------------------------
 Thereafter                         316,641
---------------------------------------------------------

                            $     6,208,605
---------------------------------------------------------


     The loan agreement relating to the notes payable to a financial institution
contains  requirements for maintenance of defined minimum financial ratios.  The
Company is in  compliance  with all such  provisions as of December 31, 2000, or
has obtained waivers for non-compliance.

Note 5 - Operating Leases

     The Company leases its treatment  facilities  under operating  leases which
expire in 2003 and  2006.  The  leases  provide  for  annual  operating  expense
increases.  Base  rental  payments  under this lease  agreement  are as follows:

---------- ----------------------------------  --------------------
                   For the Year Ending
                      December 31,
---------- ----------------------------------  --------------------
                          2001                 $           454,093
---------- ----------------------------------  --------------------
                          2002                             459,459
---------- ----------------------------------  --------------------
                          2003                             349,059
---------- ----------------------------------  --------------------
                          2004                             270,201
---------- ----------------------------------  --------------------
                          2005                             270,201
---------- ----------------------------------  --------------------
                       Thereafter                           72,442
---------- ----------------------------------  --------------------

                                               $         1,875,455
---------- ----------------------------------  --------------------

<PAGE>

                                 SURGICARE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                           December 31, 2000 and 1999


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, 2000:

 ------------------------------------------------ -------- --------------------
                            For the Year Ending December 31,
  ------------------------------------------------ -------- --------------------
                       2001                                $           88,831
  ------------------------------------------------ -------- --------------------
                       2002                                            38,362
  ------------------------------------------------ -------- --------------------
                       2003                                             1,316
  ------------------------------------------------ -------- --------------------
                                                                      128,509
 ------------------------------------------------ -------- --------------------
  --------------------------------------------------------- --------------------
 Less: Amount representing interest                                   (10,743)
  --------------------------------------------------------- --------------------
 Present value of minimum lease payments                              117,766
  ------------------------------------------------ -------- --------------------
 Less: Current obligations                                             79,383
  --------------------------------------------------------- --------------------
 Long-term obligations under capital lease                 $           38,383
 ------------------- ------------------------------------------------ --------

Note 7 - Management and Affiliation 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
$168,969  in  1999.  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, Bellaire SurgiCare, Inc.
signed an affiliation agreement with the same 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.  Bellaire SurgiCare,  Inc. pays 2% of cash collections for
these  services.  The  Company  expensed  $81,358  and  $37,366  under  this new
agreement in 2000 and 1999, respectively.

     The Company has contracted with affiliated  outpatient  surgical centers to
manage the  operation of the  treatment  facilities.  Under the  contracts,  the
Company  receives  fees  ranging  from  2% to 5% of  revenues  collected  by the
facilities under contract.  During 2000, the Company recorded fees in the amount
of  $19,391  from San  Jacinto  Surgery  Center,  Ltd.  All  other  intercompany
management fees have been eliminated in consolidation.

<PAGE>

                                 SURGICARE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                           December 31, 2000 and 1999


Note 8 - Related Party Transactions

     As of  December  31, 2000 and 1999,  the  Company had  non-interest-bearing
receivables  from  shareholders  of $8,250 and  $27,500,  respectively,  for the
purchase of stock.

     As of  December  31,  2000,  the  Company  had  other  non-interest-bearing
receivables from shareholders of $244,500.

     As of December 31,  2000,  the Company had a payable of $170,000 due to San
Jacinto for the purchase of a 10% general partnership interest. In addition, the
Company had a receivable from San Jacinto of $7,107 for management fees.

See Footnote 7 for a description of the management fees paid to a shareholder.

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  Statements  of
Earnings for the years ended December 31, 2000 and 1999:

------------------------------------------------------------------------------
                                                     2000          1999
------------------------------------------------------------------------------
Federal income tax expense at statutory rate  $   585,962    $  624,417
------------------------------------------------------------------------------
S corporation earnings ......................                  (341,700)
------------------------------------------------------------------------------
Deferred taxes provided for change in tax stat                  429,000
------------------------------------------------------------------------------
Other .......................................      47,342           (80)
------------------------------------------------------------------------------
                                              $   633,304    $  711,637

<PAGE>

                                 SURGICARE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                           December 31, 2000 and 1999


     The components of the deferred tax asset and tax liabilities as of December
31, 2000 and 1999, are as follows:

                                                     2000          1999
Deferred tax asset:
------------------------------------------------------------------------------
   Franchise tax accrual .................... $    19,000
------------------------------------------------------------------------------
                                                   19,000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Deferred tax liabilities:
------------------------------------------------------------------------------
   Investment in Memorial Village Surgery Cent$   (18,000)
------------------------------------------------------------------------------
   Accrual to cash conversion ...............    (791,000)   $ (546,000)
------------------------------------------------------------------------------
   Accumulated depreciation .................      (5,000)
------------------------------------------------------------------------------
                                                 (814,000)     (546,000)
------------------------------------------------------------------------------
       Net deferred tax liability ........... $  (795,000)   $ (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 stock also has a liquidation preference of
$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. Effective December,  2000, the dividends
on the preferred stock were suspended.

Note 11 - Warrants

     In  connection  with the  issuance of debt,  warrants  to purchase  200,000
shares of common  stock at $3.00  were  issued to a  lender.  The  warrants  are
exercisable through April, 2007, and were valued at $75,000.






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  performed  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  performed  an
independent audit for Bellaire, for both 1997 and 1998.

     After the completion of the reverse merger in July 1999,  Weinstein Spira &
Company was 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
 <TABLE>
<CAPTION>
 SurgiCare's Directors and Executive Officers are as follows:

<S>                        <C>                               <C>
Name /Address ...........              Position               Age

David Blumfield .........    President and Chief Executive
                                        Officer
                                        Director              42
------------------------- ----------------------------------- --
Jeffery Penso ...........           Vice-President            45

------------------------- ----------------------------------- --
Sherman Nagler ..........              Secretary              45

------------------------- ----------------------------------- --
Son Nguyen    ...........              Treasurer              45

------------------------- ----------------------------------- --
Charles S. Cohen ........       Chief Operating Officer       39
------------------------- ----------------------------------- --
Bruce Miller                           Director               52
------------------------- ----------------------------------- --
Michael Mineo ...........              Director               57
------------------------- ----------------------------------- --
William Bradbury                       Director               50
------------------------- ----------------------------------- --
Joe "Buddy" Huffmyer                   Director               56
------------------------- ----------------------------------- --

</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.

     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.  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.

     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.

     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. Bruce  Miller,  D.P.M.  has been in private  practice for 25 years.  He
received his undergraduate degree in 1969 at Temple University and then attended
the  Pennsylvania  College of  Podiatric  Medicine He has been a Diplomat of the
American Board of Podiatric Surgery since 1986.

     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. William Bradbury, D.P.M. has been in private practice for 23 years. He
received  his  undergraduate  degree in 1977 at  University  of Houston and then
attended the California College of Podiatric Medicine. He has been a Diplomat of
the American Board of Podiatric Surgery since 1986.

     Dr. Joe "Buddy"  Huffmyer,  D.P.M. is a practicing  podiatrist and has been
President and CEO of Surgery  Centers of America II, L.L.C.  (SCOA2) since 1994.
Dr. Huffmyer  graduated from the Ohio College of Podiatric  Medicine in 1974 and
has been board  certified  since 1979.  He  currently  practices  at his clinic,
Oklahoma Foot and Ankle Clinic, in Edmond, Oklahoma.

         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         2000   $     24,000
-------------------------- ------------------------- --------- -----------------
                                                        1999   $     24,000
-------------------------- ------------------------- --------- -----------------
        Charles Cohen         Chief Operating Officer   2000   $     75,000
-------------------------- ------------------------- --------- -----------------
                                                        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 March 28,  2001,  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
<S>                  <C>                     <C>                         <C>

Common Stock ....... SCOA                    1,095,556                   7.851%
                     1930 S. Bryant
                     Edmond, OK 73013

Common Stock ....... David Blumfield         817,248                     5.857%
Series A Preferred . 7400 Fannin # 1100      100,000 (b)                 7.142%
                     Houston, TX 77056

Common Stock ....... Sherman Nagler          807,944                     5.790%
Series A Preferred . 1200 Binz               100,000 (b)                 7.142%
                     Houston, TX 77004

Common Stock ....... William Bradbury        804,444                     5.765%
Series A Preferred . 7400 Fannin #1100       100,000 (b)                 7.142%
                     Houston, TX 77056

Common Stock ....... Robert Parker           819,042                     5.869%
Series A Preferred . 14441 Memorial #16      100,000 (b)                 7.142%
                     Houston, TX 77079

Common Stock ....... Jeffery Penso           804,444                     5.765%
Series A Preferred . 11006 Westheimer        100,000 (b)                 7.142%
                     Houston, TX 77042

Common Stock ....... Gregory Mangum          804,444                     5.765%
Series A Preferred . 4754 Beechnut           100,000 (b)                 7.142%
                     Houston, TX 77096

Common Stock ....... Jeffrey Ross            804,444                     5.765%
Series A Preferred . 6624 Fannin #2450       100,000 (b)                 7.142%
                     Houston, TX 77030

Common Stock ....... Michael Mineo           811,743                     5.817%
Series A Preferred . 6699 Chimney Rock       100,000 (b)                 7.142%
                     Houston, TX 77081

Common Stock ....... Bruce Miller            808,444                     5.793%
Series A Preferred . 13737 S.W. Freeway      100,000 (b)                 7.142%
                     Sugarland, TX 77478

Common Stock ....... Brian Zale              804,444                     5.765%
Series A Preferred . 11320 S. Post Oak #1    100,000 (b)                 7.142%
                     Houston, TX 77035

Common Stock ....... Son Nguyen              804,444                     5.765%
Series A Preferred . 1120-A Dennis           100,000 (b)                 7.142%
                     Houston, TX 77004

Common Stock ....... Long Nguyen             804,444                     5.765%
Series A Preferred . 4007 Bellaire #FF       100,000 (b)                 7.142%
                     Houston, TX 77025

Common Stock ....... Larry Likover           862,838                     6.183%
Series A Preferred . 902 Frostwood #902      100,000 (b)                 7.142%
                     Houston, TX

Common Stock ....... Shirley Browne          402,222                     2.882%
Series A Preferred . P.O. Box 247            100,000 (b)                 7.142%
                     Richmond, TX 77406

</TABLE>

a.     As of March 28, 2001, 13,954,320 shares of common stock were issued and
       outstanding. Unless otherwise noted, the security ownership disclosed in
       the table is of record and beneficial.

b.     As of March 28,2001,  1,400,000  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.

    Security ownership of management.

     The  following  table  sets forth  information,  to the best  knowledge  of
SurgiCare as of march 28, 2001, 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        817,248                  5.857%
Series A Preferred .7400 Fannin #1100      100,000 (b)              7.142%
                    Houston, TX 7705

Common Stock .......Jeffery Penso          804,449                  5.675%
Series A Preferred .11006 Westheimer       100,000 (b)              7.142%
                    Houston, TX 77042

Common Stock .......Sherman Nagler         807,944                  5.790%
Series A Preferred .1200 Binz              100,000 (b)              7.142%
                    Houston, TX 77004

Common Stock .......Michael Mineo          811,743                  5.817%
Series A Preferred .6699 Chimney Rock      100,000 (b)              7.142%
                    Houston, TX 77081

Common Stock .......Charles S. Cohen        32,500                  0.237%
                    5947 Bankside
                    Houston, TX 77096

Common Stock ...... Son Nguyen              804,444                 5.675%
Series A Preferred  1120-A Dennis           100,000 (b)             7.142%
                    Houston, TX 77004

Common Stock ...... Bruce Miller           808,444                  5.793%
Series A Preferred  13737 S.W. Freeway     100,000(b)               7.142%
                    Sugarland, TX 77478

Common Stock ...... William Bradbury       804,444                  5.765%
Series A Preferred  7400 Fannin #1100      100,000 (b)              7.142%
                    Houston, TX 77056

Common Stock ....... Dr. Joe Huffmyer     1,095,556                7.851%
                     SCOA II
                     1930 S. Bryant
                     Edmond, OK 73013

All officers and directors              5,978,328 (a)              42.84%
(nine persons).....
</TABLE>


a.     As of March 28,2001, 13,954,320 shares of common stock were issued and
       outstanding. Unless otherwise noted, the security ownership disclosed in
       the table is of record and beneficial.

b.     As of March 28,  2001,  1,400,000  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  31,2000 all
filing requirements applicable to its officers,  directors,  and greater than 10
percent  beneficial  stockholders  were  complied  with  except.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     As of December 31, 2000, the Company was considering a proposed contractual
relationship with its founding physicians,  all of whom are beneficial owners of
5% or more of the  Company's  common  stock,  whereby  the  physicians  would be
retained as an  independent  group to oversee the  activities  of the  physician
staffed medical  executive  committees of each of SurgiCare's  surgery  centers.
While the respective  medical executive  committees  determine medical policy at
their  individual  centers,  the Company  believes that it will  strengthen  the
Company's general supervision and coordination of activities and the delivery of
medical  services at its  centers to have a  centralized  non-employee  group of
physicians  review the  activities  of each of the  centers'  medical  executive
committees  and  periodically  report to the SurgiCare  Board of Directors.  The
Company expects that the  compensation to be paid to the physician group for its
services will be approximately $60,000 per month.

         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  officers 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
10.1 *Agreement, dated July 29,  1999, between SurgiCare, Inc. and
      Surgery Centers of America
10.2 *Letter agreement with SCOA
10.3  Letter of Intent between dated March   , 2001
10.4  Common Stock Prurchase Warrant date October 20, 2000.
  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

     At of December 31, 2000 there were no 8-K filings for the period covered by
     this filing.