<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   FORM 10--K/A

(Mark one)

[X]  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

                      FOR THE YEAR ENDED DECEMBER 31, 1996

[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

                   For the transition period from ________ to ________

                         Commission file number: 0-24336

                        INPHYNET MEDICAL MANAGEMENT INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          DELAWARE                                               65-0501896
------------------------------                              -------------------
State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                              Identification No.)


1200 SOUTH PINE ISLAND ROAD, SUITE 600, FORT LAUDERDALE, FLORIDA     33324-4460
----------------------------------------------------------------     ----------
         (Address of principal executive offices)                    (Zip Code)

       Registrant's telephone number, including area code: (954) 475-1300

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

          Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $0.01 par value

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

                                                               Yes [X]   No [ ]

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

                                                                            [ ]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 24, 1997 was $380,393,735. The aggregate market value was
computed by reference to the closing price as of that date. (For purposes of
calculating this amount only, all directors, executive officers and greater than
10% shareholders of the Registrant are treated as affiliates.)

The number of shares outstanding of the Registrant's common stock as of March
24, 1997, was 16,365,293.







<PAGE>   2



                                TABLE OF CONTENTS

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                                                                                                        Page
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<S>               <C>                                                                                     <C
PART I

Item 1.           Business..............................................................................   1

Item 2.           Properties............................................................................   9

Item 3.           Legal Proceedings.....................................................................   9

Item 4.           Submission of Matters to a Vote of Securities Holders ................................   9


PART II

Item 5.           Market for Registrant's Common Equity and Related Stockholder Matters.................  10

Item 6.           Selected Consolidated Financial Data..................................................  11

Item 7.           Management's Discussion and Analysis of Financial Condition and
                     Results of Operations..............................................................  12

Item 8.           Consolidated Financial Statements and Supplementary Data..............................  17

Item 9.           Changes in and Disagreements With Accountants on Accounting and
                     Financial Disclosures..............................................................  17

PART III

Item 10.          Directors and Executive Officers of the Registrant....................................  41

Item 11.          Executive Compensation................................................................  43

Item 12.          Security Ownership of Certain Beneficial Owners and Management........................  46

Item 13.          Certain Relationships and Related Transactions........................................  46




</TABLE>


                                      -i-
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                                     PART I

ITEM 1.  BUSINESS

         InPhyNet Medical Management Inc. ("InPhyNet" or the "Company") is one
of the largest physician management organizations in the United States and has
over 22 years of experience in managing physicians for a variety of clients,
including hospitals, health maintenance organizations ("HMOs") and governmental
entities. The Company manages approximately 1,900 physicians and 3,300 other
clinical and administrative personnel. At December 31, 1996, the Company had 131
contracts with hospitals and governmental entities in 21 states and was
responsible for the comprehensive health care needs of approximately 117,000
individuals through capitated fee contracts in 14 states with third-party and
governmental payors. During 1996, the Company delivered services for
approximately 2.7 million patient visits. The Company's total revenue has grown
from $196.5 million in 1992 to $408.5 million in 1996.

         The Company's business consists primarily of managing physicians and
other medical personnel for its two divisions: (i) Hospital Physician Services,
through which the Company delivers emergency medicine, radiology, primary care
and other hospital-based physician services under contracts primarily with
hospitals; and (ii) Capitated Medical Services, through which the Company
manages the delivery of comprehensive medical services under contracts primarily
with HMOs and various state and local correctional institutions and the delivery
of fee-for-service medical services through primary care practices and home
health agencies. Hospital Physician Services and Capitated Medical Services
accounted for 53% and 47%, respectively, of the Company's total revenue in 1996.

INDUSTRY BACKGROUND

         Health care in the United States traditionally has been delivered
through a fragmented system of health care providers, including individual or
small groups of primary care physicians and specialists. According to the
American Medical Association ("AMA"), there are approximately 565,000 practicing
physicians in the United States. A 1993 AMA study estimates that there are over
86,000 physicians practicing in 3,600 multi-specialty group practices (three or
more physicians) and over 82,000 physicians practicing in 12,700 single
specialty group practices in the United States. The majority of the existing
medical groups are small, consisting of 15 physicians or less with 45% having
under five physicians.

         The role of the primary care physician is changing dramatically. While
these physicians continue to control the direct delivery of patient care, the
practice environment has shifted due to increasing cost consciousness, trends
toward managed care and growing demand for primary care. Historically, the lack
of coordination in medical care has contributed to over-utilization of health
care services, increasing health care costs at rates significantly higher than
inflation. In response, third-party payors have been implementing measures to
contain costs and improve the availability of medical services. These measures,
which include limits on the utilization of specialized health care services and
alternative methods of reimbursement, have shifted the health care industry
toward models of managed care. In these models, the primary care physician and
physician management organization are playing increasingly important roles.

         Growth opportunities for physician management organizations have
increased as a result of increased outsourcing by health care institutions,
including hospitals, HMOs and governmental entities. This outsourcing has
increased as a result of concerns over the accelerating costs of health care and
the burdens associated with providing medical care. These burdens include
significant reimbursement pressures, greater administrative burdens and a more
competitive landscape. Physician management organizations, such as the Company,
have expertise in recruiting, scheduling, retaining and managing qualified
physicians, billing and collecting for their services, recordkeeping, risk
management, quality assurance and controlling medical malpractice and other
costs. Hospitals, HMOs and governmental entities, as well as other third-party
payors and intermediaries, increasingly are turning to these outside providers
of physician services to provide cost-effective care. Although this trend to
outsource has been most apparent in hospital emergency departments, the
principles of physician practice management are increasingly being applied to
other hospital-based physician services, such as radiology, anesthesiology and
pediatrics, as well as to primary group practices.




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<PAGE>   4


         In response to the changing practice environment, physicians are
consolidating their practices to increase negotiating leverage and reduce
escalating administrative costs. This trend has led many physicians to affiliate
themselves with organizations such as the Company that provide access to the
capital required to implement information systems and technologies, which often
improve the quality of care and reduce costs. Such organizations also have
practice management expertise as well as the cost accounting and quality
assurance systems necessary to enter into sophisticated risk-sharing contracts
with payors. In addition, larger organizations frequently have ties with other
providers and have an ability to offer a variety of medical services that
smaller organizations do not have.

COMPANY STRATEGY

         The Company's strategy is to develop its business by addressing
significant changes in the role and practice patterns of the physician in the
health care services industry. Elements of this strategy include:

         EXPAND PRESENCE IN CAPITATED MEDICAL SERVICES. The Company has
extensive experience in providing managed care services under contracts with
HMOs, and comprehensive medical services on a capitated basis to state and local
correctional institutions. In addition, the Company has over twelve years of
experience in managing medical care delivery networks, which combine capitated
primary care clinics with affiliated hospitals and subcapitation of independent
specialty groups to provide integrated care on a 24-hour basis. The Company
capitalizes on its experience to expand services provided to existing clients,
obtain new managed care contracts and contracts with correctional institutions
and build and acquire physician practices in targeted geographic markets.

         ENHANCE LEADING FRANCHISE IN HOSPITAL PHYSICIAN SERVICES. The Company
is one of the nation's largest providers of emergency department services. With
the 1995 acquisitions of MetroAmerican Radiology, Inc. ("MetroAmerican") and
Radiology Associates of Hollywood, Inc. ("Radiology Associates"), the Company
believes it has become a leading provider of radiology practice management
services. The Company's existing base of hospital contracts provides
opportunities for internal growth through the cross-selling of services to other
departments. The Company continues to expand its hospital-based services into
other departments such as pediatrics, intensive care, anesthesiology,
neonatology and internal medicine. The Company obtains new hospital clients both
by contracting with hospitals that previously managed their own departments and
by replacing existing practice management companies.

         ACQUIRE, INTEGRATE AND MANAGE PHYSICIAN PRACTICES. The Company develops
new markets and expands in its existing markets through acquisitions of
physician practices. The Company increases revenue in acquired practices by
implementing programs that improve documentation of care delivered, centralize
negotiation of third-party payor contracts, increase the scope of services
offered and, in primary care practices, accelerate the transition of patients
from traditional fee-for-service plans to capitated managed care programs. The
Company has developed a strong physician culture, including highly capable
physician managers with the ability to more efficiently manage their practices.
The Company believes that these factors give it a competitive advantage over
hospitals and HMOs in acquiring, recruiting and managing physician practices.

OPERATING DIVISIONS

CAPITATED MEDICAL SERVICES

         Capitated Medical Services includes the Company's Managed Care and
Corrections operations. Revenue for Capitated Medical Services division was
approximately $191.7 million, $114.7 million and $93.4 million for the years
ended December 31, 1996, 1995 and 1994, respectively.

         MANAGED CARE. The Company sub-contracts with HMOs to manage the
delivery of comprehensive medical services to their enrollees. At December 31,
1996, the Company managed the delivery of such services to approximately 76,000
HMO enrollees and to fee-for-service patients at its 14 clinics in South Florida
and through its agreements with Physician Corporation of America and Kaiser
Permanente (See Item 1. "Recent Developments"). The Company either employs
primary care physicians or contracts for primary care physician services for HMO
enrollees and typically provides for other services with hospitals and medical
specialists on a sub-capitated or discounted fee-for-service basis. The Company
is at risk for the cost of providing comprehensive health care services.
InPhyNet uses two methods to control its financial risk. The first is
subcontracted capitated risk contracting which represents approximately 19% of
total contracted medical costs. The responsibility to provide the required
services and the related financial risk is transferred to a third party. The
second is discounted fee-for-service which represents approximately 



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81% of total contracted medical costs. The Company must concurrently and
carefully manage utilization of hospital and medical specialists. The Company
has developed a utilization management program that tracks and reviews the
medical appropriateness of inpatient days and referrals to medical specialists.
This program is coordinated and maintained through the Company's management
information system. InPhyNet uses this information to provide concurrent medical
review and to provide, on a retrospective basis, feedback to physicians in order
to increase productivity and improve the quality of medical care. The systems
permit the Company to track a physician with fee-for-service relationships with
the Company to assess the physicians practice patterns, compliance with
protocols and patient outcomes.

         The Company believes that it will have significant opportunities to
expand its managed care business primarily as a result of two factors. First,
practice management organizations are better qualified than most third-party
payors to recruit, manage and retain physicians and deliver services on a high
quality, cost-effective basis. Second, the Company believes that the HMO segment
of the managed care industry offers one of the best long-term solutions to
controlling health care costs because of the independence and flexibility it
offers primary care physicians.

         Under the Company's HMO contracts, the Company receives a fixed,
prepaid monthly fee for each covered life in exchange for assuming
responsibility for the provision of medical services, subject to certain
limitations. To the extent that enrollees require more frequent or extensive
care than was anticipated by the Company, the revenue to the Company under a
contract may be insufficient to cover the costs of the care provided.

         CORRECTIONAL CARE. The Company provides comprehensive medical services,
including mental health and dental services, to inmates in various state and
local correctional institutions. The Company provides primary care physician
services directly and typically subcontracts other services with hospitals and
medical specialists on either a capitated or discounted fee-for-service basis.
At December 31, 1996, the Company had contracts with 40 correctional
institutions and managed the health care services provided to approximately
41,000 inmates at 60 sites. During 1996, the Company acquired substantially all
the assets of NHS National Health Services, Inc. (NHS) including 6 contracts at
13 sites, and was awarded 6 new contracts with correctional institutions
covering 14 sites.

         Four factors have created growth opportunities for the Company in
correctional care. First, correctional institutions throughout the country are
increasingly contracting with private companies to manage the provision of
medical services to inmates to control health care costs. Second, difficulties
in recruiting and managing physicians and related support staffs have compelled
governmental agencies to contract with physician management organizations to
deliver on-site health care services to inmates. Third, the outsourcing of such
health care services allows governmental agencies to shift the financial risk
associated with the delivery of medical services to inmates to private physician
management organizations, which have greater experience in managing such risks.
Fourth, physician management companies have experience in meeting federal and
state mandated healthcare requirements. Moreover, the Company has established
itself as a physician management organization that can satisfy the various
criteria that serve as barriers to entry in this field. These criteria include
requirements that physician management organizations have a minimum of five
years experience in the corrections environment, current references in
correctional care, the posting of performance bonds or letters of credit in
order to secure the Company's performance and prior success in obtaining
National Commission of Correctional Health Care accreditation for correctional
institutions.

         Under correctional care contracts, the Company is paid monthly on the
basis of each correctional institution's average daily inmate population.
Typically, the Company is also entitled to additional reimbursement for any
health care related expenditures incurred above a certain dollar amount of
outside medical expenses per inmate per year, as well as reimbursement for the
cost of treating inmates in connection with certain extraordinary events.

HOSPITAL PHYSICIAN SERVICES

         Hospital Physician Services includes emergency physician and other
contract staffing services and certain related business services. Revenue for
the Hospital Physician Services division was approximately $216.8 million,
$210.7 million, and $177.0 million for the years ended December 31, 1996, 1995
and 1994, respectively.

         EMERGENCY PHYSICIAN AND OTHER CONTRACT STAFFING. The Company contracts
with hospitals throughout the United States to provide physicians and other
medical personnel. The Company provides staffing primarily to emergency and
radiology departments, as well as pediatrics, anesthesiology, intensive care,
neonatology and internal medicine departments. In most cases, the Company is
contractually required to provide physician staffing coverage at a 


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hospital facility on a 24-hour basis, 365 days a year. At December 31, 1996, the
Company provided management and physician services under 131 contracts with
hospitals and governmental entities in 21 states.

         Hospitals turn to organizations such as the Company because the
outsourcing of physician management services relieves hospital administrators of
the burden of providing physician coverage. The Company is better qualified than
most hospitals to recruit, manage and retain physicians, bill and collect for
medical professional services, deliver services on a cost-effective basis and
control medical malpractice costs. As a result, the Company believes that it
offers hospitals an attractive alternative for meeting the medical staffing
needs of hospitals' emergency, radiology and other departments, while
maintaining a consistently high level of quality care. Demand for emergency care
has increased as patients who do not have access to a primary care physician
turn to emergency rooms for primary care services as well as for urgent medical
problems. According to the American Hospital Association, the total number of
emergency department visits in 1993 was approximately 97 million, in comparison
to less than 80 million visits in 1984.

         Under its Hospital Physician Services contracts, the Company generally
assumes the risk for physician staffing to meet the medical needs of the
hospitals' patients. The Company is paid for its services on either a
fee-for-service or flat-fee basis. As of December 31, 1996, approximately 72% of
Hospital Physician Services' revenue was derived from fee-for-service contracts.
Under its fee-for-service agreements, the Company directly bills and collects
the fee component of the charges for medical services rendered by the Company's
health care professionals. The Company accepts and assumes the financial risks
relating to patient volume and payor mix and delays related to reimbursement
through government sponsored programs or third-party payors. Under certain
contracts, the Company bills hospital patients directly for the medical services
rendered by its health care professionals and also receives a contractual
subsidy from the hospital to supplement revenue from direct billing. Under its
flat-fee contracts, the Company is paid a fixed amount for providing the
required medical staffing services.

         The Company has expanded its scope of hospital-based management
services to include radiology services. In July 1995, the Company acquired
MetroAmerican, a hospital-based radiology practice management business
headquartered in the Raleigh-Durham area of North Carolina, with fee-for-service
contracts at hospitals and clinics located in nine states. In September 1995,
the Company acquired Radiology Associates, located in Hollywood, Florida, which
provides radiology and management services to hospitals, outpatient centers,
radiation oncology centers and a regional teleradiology reading facility (see
"Recent Developments").

         DEPARTMENT OF DEFENSE AND OTHER SERVICES. The Company provides
physicians, nurse and clerical support services for active duty and retired
military personnel and their dependents in emergency departments, ambulatory
care centers and primary care clinics operated by the Department of Defense.
Under Department of Defense contracts, the Company is generally paid a fixed
amount, per patient visit or per hour of service, without regard to the scope of
professional services provided. Under per patient fixed fee arrangements, the
Company assumes the risk if patient volume is below expectations. At December
31, 1996, the Company's military medical services were provided under 9
contracts with the Department of Defense.

         The Company also offers medical record transcription services and
provides professional billing and collection services to physician practice
groups. In addition, the Company provides physicians on a temporary, or locum
tenens, basis to various clients.

RECENT DEVELOPMENTS

         On January 21, 1997, the Company and MedPartners, Inc. announced they
have agreed to merge the two companies in a pooling of interests. MedPartners,
Inc. is the largest physician practice management company in the nation and
operates the country's largest independent prescription benefits management
service. The Company expects that the merger will take place although there can
be no assurance that the transaction will be consummated.

         On September 5, 1996, the Company entered into a five-year agreement
(the "PCA Agreement"), with an option for an additional five years, with
Physician Corporation of America ("PCA"). Under the agreement, InPhyNet will
manage independent primary care physicians in South Florida and the Tampa Bay
region. At December 31, 1996, physicians provided primary care services to
approximately 50,500 covered lives: 24,500 in South Florida and 26,000 in the
Tampa Bay area. PCA provides comprehensive health care service through its
Health Maintenance 


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Organizations, Life and Property and Casualty Insurance Carriers and Worker's
compensation administrators located throughout the southeastern United States
and the Caribbean.

         On September 21, 1995, the Company entered into an exclusive agreement
with Kaiser Permanente (Kaiser) in Ohio to develop and operate a primary care
and specialty physician network on a capitated basis in Summit and Stark
counties of Northeast Ohio. Kaiser provides comprehensive healthcare services to
approximately 190,000 Northeast Ohio residents. Kaiser Permanente's 12 regions
provide care for more than 6.5 million people in 16 states and the District of
Columbia.


THE COMPANY'S RECENT ACQUISITIONS ARE AS FOLLOWS:

<TABLE>
<CAPTION>
                                                                                               REVENUE IN
                                                                                                  LAST
                                                                                                FULL YEAR
                                                                                 NUMBER         PRIOR TO
DATE OF  ACQUISITION             COMPANY                     BUSINESS           OF SITES      ACQUISITION
--------------------             -------                     --------           --------      -----------
                                                                                             (IN MILLIONS)
<S>                        <C>                           <C>                     <C>          <C>    
January 1997               Emergency Management          Physician Staffing        3            $   5.1
                             Specialists, Inc. 

July 1996                   NHS National Health          Physician Staffing       13            $  20.5
                             Services, Inc. 

January 1996                 Sachs, Morris &                Primary Care           2            $   1.8
                               Sklaver, Inc.                 Practices

September 1995              Radiology Associates of      Physician Staffing       16            $  16.9
                             Hollywood, Inc. 

July 1995                    MetroAmerican               Physician Staffing       21            $  13.1
                              Radiology, Inc      
                             

February-April 1995              Various                 Five Primary Care         8            $  20.8
                                                            Practices

</TABLE>

         Effective January 15, 1997, the Company acquired Emergency Management
Specialists, Inc. As a result of the transaction, the Company acquired contracts
to provide physician staffing, management and consulting services to various
hospitals and clinics. The transaction was accounted for as a pooling of
interests.

         Effective July 2, 1996, the Company acquired certain of the assets of
NHS. As a result of this transaction, the Company acquired contracts to provide
medical care to inmates in correctional institutions. The transaction was
accounted for as a purchase.

         Effective January 16, 1996, the Company acquired Sachs, Morris &
Sklaver, Inc. ("SMS"). As a result of this transaction, the Company added two
medical centers to its base of primary care practices. The transaction was
accounted for as a purchase.

         Effective September 1, 1995, the Company acquired Radiology Associates.
Radiology Associates, provides radiology and management services to hospitals,
outpatient centers, radiation oncology centers and a regional teleradiology
reading facility. The transaction was accounted for as a pooling of interests.

         Effective July 1, 1995, the Company acquired MetroAmerican. As a result
of this transactions, the Company acquired contracts to provide radiology
services on a fee-for-service basis at hospitals and clinics located in nine
states. The transaction was accounted for as a pooling of interests.


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         As a result of the acquisitions of Radiology Associates and
MetroAmerican (the "Poolings"), combined with the Company's existing operations,
the Company believes it has become a leading provider of radiology practice
management services in the United States with approximately 100 radiologists
operating in nine states.

         During 1995, the Company acquired five primary care physician practices
(the "Primary Care Practices"), operating at eight sites. All of such
acquisitions have been accounted for as purchases.

CORPORATE OPERATIONS

         PHYSICIAN RECRUITING. The Company maintains an extensive proprietary
database of physician information which enables it to identify and select
qualified candidates for practice opportunities as staffing needs arise.
Candidates are recruited, interviewed and screened by the Company's physicians.
Subsequently, the candidates are assigned to a health care facility, where their
credentials are generally reviewed and verified a second time.

         Contracts with physicians generally have a one-year term and
automatically renew, subject to cancellation by either party for any reason and
at any time with 90 or 180 days' notice. In general, physician contracts are not
tied to a specific location and contain two-year noncompete provisions.

         UTILIZATION MANAGEMENT. The Company has developed and implemented a
utilization management system that has successfully reduced both inpatient days
and referrals to medical specialists. This program is coordinated and maintained
by a management information system that collects data derived from patient
outcomes, physician case management decisions and practice patterns. The Company
uses this information to provide feedback to physicians in order to increase
their productivity and improve the quality of medical care provided.

         RISK MANAGEMENT. The Company has professional liability exposure with
respect to potential negligent acts of its medical professional employees and
contractors. As part of its efforts to reduce such exposure, the Company manages
and monitors the quality and performance of its physicians. Additionally, the
Company maintains a proactive claims management program that employs a dedicated
group of physicians and attorneys who are responsible for handling claims made
against the Company and its agents. A combination of the efficient claims
management program, historical claims experience, shifting business mix from
hospital based emergency medicine to capitated medical services and increased
professional liability insurance buying power (due to the Company's growth) have
enabled the Company to decrease the Company's cost of malpractice insurance as a
percentage of net revenue from 2.3% in 1992 to 1.6% in 1996.

         BILLING AND COLLECTION OPERATIONS. The Company maintains its own
billing and collections operations, in Fort Lauderdale, Florida, and Akron,
Ohio, that were responsible for invoicing approximately 2.8 million patient
visits during 1996. To improve patient care documentation and billing
efficiency, the Company has implemented, where it is commercially feasible,
proprietary voice-activated dictation systems in emergency departments to
enhance the speed and accuracy of the Company's process for filing reimbursement
claims in its fee-for-service operations. In certain other emergency
departments, the Company provides a centralized transcription service to
document, legibly and efficiently, the services rendered. The Company's systems
are designed to enhance its ability to document the providing of physician
services in an environment of increasing scrutiny by third-party payors. The
Company also markets its billing and transcription services to physicians and
administrators employed by outside third parties.

MARKETING

         HOSPITAL-BASED CONTRACTS. The Company maintains a staff of marketing
officers, regional directors and telemarketers to direct the marketing of
hospital physician services. Contracting opportunities generally result from
referrals by hospital administrators, information provided by physicians
(including contracted physicians meeting the temporary staffing needs of
hospitals) and requests for proposals received directly from hospitals. After
visiting a prospective hospital client, the Company develops a proposal based on
an analysis of patient volume, the projected cost of obtaining physician
staffing coverage and the probable collection rate of fee-for-service gross
revenue based upon a review of the local usual and customary rates. Following
such analyses, the Company submits a written proposal with contract terms
tailored to the particular hospital's needs. Contracts typically have terms of
one to three years, subject to termination by either party at any time with 90
days' notice.


                                      -6-
<PAGE>   9


         MANAGED CARE CONTRACTS. Prior to 1996, expansion in the Company's
managed care business resulted primarily from the acquisition of primary care
clinics that have contracts with Humana Medical Plan, Inc. and affiliates
("Humana"). The Company conducts joint marketing programs with Humana which are
designed to increase the number of Humana enrollees in a particular area where
the Company operates primary care clinics. The Company's contracts with Humana
provide that either party may terminate a contract upon 60 days' notice.

         Through its recent diversification of its managed care business to
other third-party payors, the Company has been able to reduce the portion of
managed care revenue derived from contracts with Humana from 84% in 1995 to 53%
in 1996.

         In September 1995, the Company entered into an agreement with Kaiser to
develop and operate a primary care and specialty physician network on a
capitated basis, located in Northeast Ohio. The Company started to provide
services in January 1996. The Company expects that growth in its managed care
business will result from building and acquiring primary care practices in
targeted geographic areas and making arrangements with HMOs in those areas to
provide medical services. The Company maintains frequent contact with Humana and
other HMOs regarding opportunities for the Company to develop managed care
operations in new areas. Additionally, in September 1996, the Company entered
into a five-year agreement with PCA to manage a network of independent primary
care physicians (see Item 1. "Business-Recent Developments").

         CORRECTIONAL CARE AND OTHER GOVERNMENTAL CONTRACTS. The Company obtains
its initial contract with a governmental agency through a competitive bidding
process. Requests for proposals are carefully reviewed to determine which
opportunities are within the Company's capabilities and offer the potential for
an adequate profit margin. The pricing of the bid is based on, among other
things, an analysis of the staffing requirements, projected costs based on the
Company's past experience in providing similar services, salary data from the
specific area and estimates of overhead costs. Contracts are usually awarded for
a period of one year with options to renew for subsequent years. Most contracts
are subject to termination by either party with 60 to 90 days' notice at any
time during the contract.

GOVERNMENT REGULATION

         Current federal and state laws regulate the relationships between
providers and suppliers of health care services, on the one hand, and physicians
and other clinicians, on the other. These laws include the fraud and abuse
provisions of the Medicare and Medicaid statutes, which prohibit solicitation,
payment, receipt or offering of any direct or indirect remuneration for the
referral of Medicare or Medicaid patients or for the ordering or providing of
Medicare or Medicaid covered services, items or equipment. These laws also
impose restrictions on physicians' referrals for designated health services to
entities with which they have financial relationships. Violations of these laws
may result in substantial civil or criminal penalties for individuals or
entities, including large civil monetary penalties and exclusion from
participation in the Medicare and Medicaid programs which could adversely affect
the Company's operations.

         The laws of many states prohibit physicians from splitting fees with
nonphysicians and prohibit business corporations from providing or holding
themselves out as providers of medical care. While the Company believes it
complies in all material respects with state fee splitting and corporate
practice of medicine laws, there can be no assurance that, given varying and
uncertain interpretations of such laws, the Company would be found to be in
compliance with all restrictions on fee splitting and the corporate practice of
all medicine in all states. The Company currently operates in certain states
through professional corporations, and has formed professional corporations or
qualified foreign professional corporations to do business in several other
states where corporate practice or medicine laws may require the Company to
operate through such a structure. As discussed in Note 1 to the Consolidated
Financial Statements, the Company believes it has unilateral and perpetual
control over the assets and operations of the various affiliated professional
corporations. A determination that the Company is in violation of applicable
restrictions on fee splitting and the corporate practice of medicine in any
state in which it operates could have a material adverse effect on the Company.

         Finally, both federal and state laws provide for the award of damages
and the assessment of substantial civil penalties against any person who
knowingly files or causes to be filed or presented a false claim for payment of
services, or the making, using or causing to be made or used a false record in
connection with the filing of a false claim. Violation of the federal False
Claims Act may also result in exclusion from participation in the Medicare and
Medicaid programs. It is not necessary to intend to defraud the government or
have actual knowledge of the falsity of the claim or supporting record for a
violation to occur. It is enough to constitute a "knowing" violation of the
False Claims Act that one acts in "deliberate ignorance" or "reckless disregard"
of the truth or falsity of the information alleged to be false. A 


                                      -7-
<PAGE>   10

violation of and successful action brought under the False Claims Act or similar
state law against the Company or physicians managed by it could have a material
adverse effect on the Company.

FEDERAL GOVERNMENT CONTRACTING REQUIREMENTS

         The Company's federal governmental contracting activities with
government healthcare facilities are subject to substantial regulation under
federal law and by applicable contracting agencies. Contracts with government
agencies are generally complex in nature and require contractors to comply with
exacting technical specifications and numerous administrative regulations.
Substantial penalties can result from noncompliance with the technical
specifications of a contract. Upon failure to perform or violation of applicable
contractual or statutory provisions, a contractor may be barred or suspended
from obtaining future contracts for specified periods of time and/or be the
subject of criminal investigation and prosecution. The Company is subject to
periodic audits and reviews in the ordinary course of business by federal
government audit and review agencies which can result in reductions in contract
payments. Under the Truth in Negotiations Act, the federal government is
entitled for three years after final payment on any negotiated fixed-price
contract to examine all of the Company's cost records with respect to such
contract to determine whether the Company used complete, accurate and current
cost and pricing information in preparing bids on such contract or any
amendments thereto. In addition, the federal government has the right for up to
six years after final payment to recoup payments based upon such examination.
Section 31 of the Federal Acquisition Regulations governs the allowability of
costs incurred by the Company in the performance of its government contracts to
the extent such costs are allocable to its government contracts.

CLASSIFICATION OF PHYSICIANS AS INDEPENDENT CONTRACTORS

         Certain of the Company's affiliates contract with physicians and other
health care professionals as independent contractors. Since these professionals
are regarded as independent contractors, such affiliates do not withhold federal
or state income taxes, make federal or state unemployment tax payments or
provide workers' compensation insurance with respect to such independent
contractors. The payment of applicable taxes is regarded by the Company as the
responsibility of such independent contractors. The Company believes that this
classification of these health care professionals as independent contractors is
proper for federal tax purposes. One such affiliate was audited by the Internal
Revenue Service in 1991 and its classification was not challenged. A contrary
determination by federal taxing authorities either with respect to such
treatment of independent contractors since 1991 or regarding other affiliates'
or such subsidiary's classification of physicians as independent contractors, or
a change in existing law, could have a material adverse effect on the Company's
operating results.

CORPORATE EXPOSURE TO PROFESSIONAL LIABILITIES

         Due to the nature of its business, the Company becomes involved as a
defendant in medical malpractice lawsuits, some of which are currently ongoing,
and is subject to the attendant risk of substantial damage awards. The most
significant source of potential liability in this regard is the negligence of
health care professionals employed or contracted by the Company. To the extent
such health care professionals are employees of the Company or were regarded as
agents of the Company in the practice of medicine, the Company could be held
liable for their negligence. In addition, the Company could be found in certain
instances to have been negligent in performing its contract management services
even if no agency relationship with the health care professional exists. The
Company's contracts with hospitals and governmental agencies generally require
the Company to indemnify such other parties for losses resulting from the
negligence of health care professionals managed by the Company. The Company
maintains professional liability insurance on a claims made basis in amounts
deemed appropriate by management, based upon historical claims and the nature
and risks of its business. There can be no assurance, however, that a future
claim or claims will not exceed the limits of available insurance coverage, that
any insurer will remain solvent and able to meet its obligations to provide
coverage for any claim or claims or that such coverage will continue to be
available, or available with sufficient limits and at a reasonable cost, to
adequately and economically insure the Company's operations in the future.



                                     -8-
<PAGE>   11



COMPETITION

         The provision of physician management services to hospitals, HMOs and
governmental entities is a highly competitive business in which the Company
competes with several national, regional, and local providers of physician
management services. Furthermore, the Company competes with traditional managers
of health care services, such as hospitals, which directly recruit and manage
physicians. Certain of the Company's competitors have access to substantially
greater financial resources than the Company.

         While the bases for competition vary somewhat among business lines,
competition is generally based on quality of care and cost. More specifically,
with respect to nonmilitary hospital physician services, competition is focused
on patient utilization, risk management and service quality. Competition in the
areas of military hospital physician services and correctional institution
services are especially cost sensitive due to the fact that, in each of these
areas, awards of contracts are generally made as a result of a competitive
bidding process. In managed care, the Company believes the market for developing
and providing management of primary care networks which contract with HMOs and
employers will increasingly be based on patient access, quality of care,
outcomes management and cost.

EMPLOYEES

          At December 31, 1996, the Company employed or contracted with
approximately 5,200 people on a full and part-time basis. Approximately 1,900 of
these individuals are physicians (including physician managers) and 3,300 are
nonphysician clinical and administrative professionals.


ITEM 2.  PROPERTIES

         The Company leases its headquarters in Fort Lauderdale, Florida
(approximately 58,200 square feet). In addition, the Company leases space for
its billing and management information services department in Plantation,
Florida (approximately 28,000 square feet) and for its billing operations in
Akron, Ohio (approximately 22,700 square feet).

ITEM 3.  LEGAL PROCEEDINGS

         The Company is involved in various legal proceedings incidental to its
business, substantially all of which involve claims related to the alleged
malpractice of employed and contracted medical professionals. In the opinion of
the Company's management, no individual item of litigation or group of similar
items of litigation, taking into account the insurance coverage maintained by
the Company, is likely to have a material adverse effect on the Company's
financial position.

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

         The Company did not submit any matter to a vote of security holders
during the fourth quarter of 1996.




                                      -9-
<PAGE>   12


                                     PART II


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

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

         The common stock of the Company is traded on the Nasdaq National Market
(Nasdaq) under the symbol "IMMI." The following table sets forth, for the
periods indicated, the high and low bid prices of the Company's common stock as
reported on Nasdaq.

                                                    PRICE RANGE
                                                    -----------
                                                  HIGH        LOW
                                                  ----        ---

     YEAR ENDED DECEMBER 31, 1995:
          1st Quarter                         $   18.00   $   11.50
          2nd Quarter                             19.25       14.75
          3rd Quarter                             22.25       18.50
          4th Quarter                             23.75       17.38
     YEAR ENDED DECEMBER 31, 1996:
          1st Quarter                         $   27.00   $   16.38
          2nd Quarter                             24.00       16.50
          3rd Quarter                             19.25       11.00
          4th Quarter                             19.00       15.00



         On March 24, 1997 the last reported sales price for the Company's
common stock was $28.875 per share. As of March 24, 1997 there were 138
registered stockholders and approximately 1,700 beneficial shareholders of the
Company's common stock.

         The Company has not declared cash dividends on its common stock since
prior to its initial public offering effective August 19, 1994 (IPO), and does
not currently anticipate paying any dividends in the foreseeable future. The
Company currently anticipates that it will retain any future earnings for use in
its business. Restrictions contained in the Amended and Restated Revolving
Credit and Reimbursement Agreement (the "Credit Facility"), between the Company
and a bank, limit the payment of cash dividends on its common stock.




                                      -10-
<PAGE>   13


ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS)

<TABLE>
<CAPTION>
                                            
                                                                          YEARS ENDED DECEMBER 31,
                                                        -----------------------------------------------------------
                                                        1996 (6)       1995          1994         1993         1992
                                                        --------       ----          ----         ----         ----
                                                       (RESTATED)
<S>                                                     <C>          <C>          <C>          <C>          <C>      
STATEMENT OF INCOME DATA:
Total revenue                                           $ 408,520    $ 325,340    $ 270,370    $ 224,205    $ 196,501
Total operating expenses                                  385,689      304,013      253,853      211,611      188,535
                                                        ---------    ---------    ---------    ---------    --------- 
Income from operations                                     22,831       21,327       16,517       12,594        7,966

Total non-operating (income) expense                        1,278        1,234          907          231         (257)
                                                        ---------    ---------    ---------    ---------     --------
Income before minority interest
 and income tax expense                                    21,553       20,093       15,610       12,363        8,223
Minority interest in net income (2)                          --           --          2,711        1,126           73
                                                        ---------    ---------    ---------    ---------     --------
Income before income tax expense                           21,553       20,093       12,899       11,237        8,150
Income tax expense (4)                                      8,512        8,805          153          282          338
                                                        ---------    ---------    ---------    ---------     --------

Net income                                              $  13,041(1) $  11,288(3) $  12,746    $  10,955     $  7,812
                                                        =========    =========    =========    =========     ========

Net income per share                                    $    0.81(1) $    0.75(3)
                                                        =========    =========

Weighted average shares outstanding                        16,021       15,038
                                                        =========    =========

SUPPLEMENTAL STATEMENT OF INCOME DATA (UNAUDITED):
Historical income before income
 tax expense                                                                       $ 12,899    $  11,237     $  8,150
Pro forma purchase of minority interest                                               2,711        1,126           73
                                                                                   --------    ---------     --------
Supplemental income before income
tax expense                                                                          15,610       12,363        8,223
Pro forma income tax expense (4)                                                      6,244        4,945        3,289
                                                                                   --------    ---------     --------

Supplemental net income (5)                                                        $  9,366    $   7,418     $  4,934
                                                                                   ========    =========     ========

Supplemental net income per share                                                  $   0.74    $    0.76
                                                                                   ========    =========

Supplemental weighted average shares
outstanding (5)                                                                      12,703        9,765
                                                                                  =========    =========

BALANCE SHEET DATA:
Working capital                                         $  57,055    $  51,536    $  29,221    $  11,713    $  18,992
                                                        =========    =========    =========    =========    =========

Total assets                                            $ 145,779    $ 123,216    $  96,702    $  68,299    $  55,039
                                                        =========    =========    =========    =========    =========

Long-term debt, net of current portion                  $     339    $   9,617    $   9,635    $  13,246    $  12,495
                                                        =========    =========    =========    =========    =========

Total stockholders' equity                              $  97,911    $  82,368    $  51,192    $  15,278    $  13,960
                                                        =========    =========    =========    =========     ========
</TABLE>
----------

(1)  Net income has been reduced by one time charges consisting of loss on sale
     of physician practices of $682,000 and certain management restructuring
     charges of $250,000 recorded during the three months ended June 30, 1996.
     The effect of these costs, net of tax, is to reduce net income per share by
     $0.04.

(2)  See Notes 1 and 3 to the Company's consolidated financial statements for
     information regarding minority interests.

(3)  Net income has been reduced by transaction costs of $1.7 million incurred
     in connection with the Poolings, and employee severance and other costs of
     $0.8 million. The effect of these costs, net of tax, in addition to $0.9
     million of tax conversion expenses (see Note 7 to the Company's
     consolidated financial statements) is to reduce net income per share by
     $0.16.



                                      -11-
<PAGE>   14



(4)  Prior to August 19, 1994 the Company had elected to be taxed as a
     Subchapter S corporation with respect to federal income taxes, and for
     those states that recognize such tax election, state income taxes. Under
     this election, in lieu of corporate income taxes, the stockholders were
     taxed (rather than the corporation) on the Company's income in accordance
     with their respective ownership interests. The pro forma net income and net
     income per share amounts have been computed as if the Company was subject
     to federal and state income taxes (in those states recognizing such
     election) based on the corporate income tax rates in effect during the
     respective periods.

(5)  Supplemental net income and supplemental weighted average shares
     outstanding were derived by giving effect to the 1994 purchases of minority
     interests of the Company with common stock as if such purchases had
     occurred on January 1, 1992 (see Notes 1 and 3 to the Company's
     consolidated financial statements).

(6)  Restated to reflect the Company's change in the accounting for the costs 
     associated with the PCA Agreement (see Note 4 to the Company's 1996 
     financial statements).

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

OVERVIEW

         The Company commenced operations in 1974 to provide physician practice
management services to hospital emergency departments. Since that time, the
Company has expanded its business to include (i) the Hospital Physician Services
division, through which it delivers emergency medicine, radiology and other
hospital-based physician services, and (ii) the Capitated Medical Services
division, through which it manages the delivery of comprehensive medical
services under contracts with HMOs and correctional institutions and the
delivery of fee-for-service medical services through primary care practices and
home health agencies.

         The Company's contracts with its hospital physician services clients
typically provide for payments on either a fee-for-service basis, whereby the
Company bills patients or third-party payors directly for medical professional
services, or a flat-fee basis, whereby the Company is paid a fixed amount by the
hospital based on the number of hours of medical staffing provided or number of
patients treated. Fee-for-service contracts may, in certain instances, involve
the payment of a subsidy to the Company by the client. Under capitated medical
services contracts, the Company receives a fixed monthly fee (global capitation)
for each covered life in exchange for assuming responsibility for the provision
of medical services. Fee-for-service contracts, which usually require the
Company to assume the financial risks relating to patient volume, payor mix and
reimbursement rates, have longer collection periods than flat-fee and capitated
fee contracts and require the Company to bear the credit risk of collecting from
uninsured individuals.

         Under the Company's fee-for-service contractual arrangements, the fee
schedules for medical services have historically increased on a periodic basis.
Such fee increases result in additional net revenue, but also result in
increased contractual adjustments due to fixed reimbursements from certain
third-party payors, such as Medicare, Medicaid and workers' compensation. The
higher schedules also result in an increase in charity and other adjustments due
to the increase in uncollected amounts that relate to uninsured or underinsured
private payors. In addition, contracts with a higher percentage of indigent
patients also generally result in an increased percentage of charity and other
adjustments.

         On January 21, 1997, the Company and MedPartners, Inc. announced they
have agreed to merge. MedPartners, Inc. is the largest physician practice
management company in the nation and operates the country's largest independent
prescription benefits management service. The Company is hopeful that the merger
will take place although there can be no assurance that the transaction will be
consummated.

         Effective January 15, 1997, the Company acquired Emergency Management
Specialists, Inc. As a result of the transaction, the Company acquired contracts
to provide physician staffing, management and consulting services to various
hospitals and clinics. The transaction was accounted for as a pooling of
interests.

         On September 17, 1996, the Company was endorsed by the Texas Medical
Association (TMA) to offer the provision of practice management, managed care
and consulting services to its over 34,000 physician members. Practice
management services will include the development of physician networks,
marketing, contract negotiations, capitation management, utilization management,
claims adjudication, quality assurance, financial analysis, and accounts
receivable management. Consulting services will include strategic planning,
business plan creation, network development, payor contracting and fee
reimbursement.


                                      -12-


<PAGE>   15




         On September 5, 1996, the Company entered into the PCA Agreement. Under
the agreement, InPhyNet will manage independent primary care physicians in South
Florida and the Tampa Bay region. At December 31, 1996, the physicians provided
primary care services to approximately 50,500 covered lives: 24,500 in South
Florida and 26,000 in the Tampa Bay area. PCA provides comprehensive health care
service through its Health Maintenance Organizations, Life and Property and
Casualty Insurance Carriers and Workers' Compensation administrators located
throughout the southeastern United States and the Caribbean. The Company has
restated its financial statements as of and for the year ended December 31,
1996 to expense as incurred costs relating to the PCA Agreement. (See
Discussion of Total Operating Expenses for the period 1996 compared to 1995)

         Effective July 2, 1996, the Company acquired certain of the assets of
NHS. As a result of this transaction, the Company acquired contracts to provide
medical care to inmates in correctional institutions. The transaction was
accounted for as a purchase.

         Effective January 16, 1996, the Company acquired SMS. As a result of
this transaction, the Company added two medical centers to its base of primary
care practices. The transaction was accounted for as a purchase.

         The following discussion provides an analysis of the Company's results
of operations, and liquidity and capital resources, and should be read in
conjunction with the Company's consolidated financial statements and notes
thereto. The operating results of the periods presented were not significantly
affected by inflation.

RESULTS OF OPERATIONS

The following table sets forth divisional revenue (in thousands):


<TABLE>
<CAPTION>
                                                                        YEARS ENDED DECEMBER 31,
                                                    -------------------------------------------------------------    
                                                                  PERCENT                     PERCENT
                                                     1996         INCREASE        1995        INCREASE       1994
                                                     ----         --------        ----        --------       ----
<S>                                                 <C>              <C>        <C>             <C>       <C>     
Hospital Physician Services Division                $216,819         2.9%       $210,679        19.1%     $176,959

Capitated Medical Services Division:
 Managed Care                                        113,588        61.2%         70,451        64.7%       42,784

 Correctional Care                                    78,113        76.7%         44,210       (12.7)%      50,627
                                                    --------                    --------                  --------
Total Capitated Medical Services Division            191,701        67.2%        114,661        22.8%       93,411
                                                    --------                    --------                  --------
Total Revenue                                       $408,520        25.6%       $325,340        20.3%     $270,370
                                                    ========                    ========                  ========
</TABLE>



1996 COMPARED TO 1995

         TOTAL REVENUE. Total revenue increased by $83.2 million, or 25.6%, to
$408.5 million for the year ended December 31, 1996 from $325.3 million for the
same period in 1995. The increase was primarily due to acquisitions completed
during 1996 (see Item 1. "Recent Developments"), new contract awards and
increased revenue from existing contracts.

         Hospital Physician Services revenue increased by $6.1 million, or 2.9%,
to $216.8 million for the year ended December 31, 1996 from $210.7 million for
the same period in 1995. This was a result of an increase of approximately $10.0
million due to the replacement of certain fee-for-service contracts with new
contracts having higher reimbursement rates per patient visit and to annual fee
schedule increases. This increase was offset by a net loss of 14 Department of
Defense and emergency department contracts representing a net decrease of 50,000
patient visits during 1996 resulting in decreased revenues of approximately $2.7
million.

         Capitated Medical Services revenue increased by $77.0 million, or
67.2%, to $191.7 million for the year ended December 31, 1996 from $114.7
million for the same period in 1995. The increase was due partly to an increase
in Managed Care revenue of $43.1 million, or 61.2%, to $113.6 million from $70.5
million primarily due to the PCA Agreement which added $35.6 million in revenue
and growth in revenue of $4.0 million from the agreement with Kaiser.
Additionally, Correctional Care revenue increased by $33.9 million, or 76.7%, 
to $78.1 million for the year ended December 31, 1996 from $44.2 million for 
the same period in 1995, due primarily to $12.3 



                                      -13-
<PAGE>   16

million in revenue from the acquisition of NHS, and a net increase of 6 other
new Correctional Care contracts started in 1996 and a net increase of 6 new 
contracts started in the last half of 1995 which accounted for the remaining 
$21.6 million increase in revenue.

         TOTAL OPERATING EXPENSES. Operating expenses increased by $81.7
million, or 26.9%, to $385.7 million for the year ended December 31, 1996 from
$304.0 million for the same period in 1995. This was primarily due to higher
compensation expense and related benefits of $26.1 million resulting from an
increase in the number of healthcare and administrative personnel in
correctional care due to the NHS acquisition and the addition of new
Correctional Care contracts from the prior year. Additionally, contracted
medical services expenses were approximately $15.1 million higher due to the
increase in Correctional Care contracts and the acquisition of NHS. This same
category of expenses increased to $40.3 million in Managed Care primarily due to
the addition of the PCA Agreement. Originally, $6.2 million of this expense,
representing management's estimate of certain expected losses, had been
capitalized as deferred acquisition costs associated with provider contracts the
Company was required to assume according to the terms of the agreement. The
deferred acquisition costs was being amortized over the term of the agreement
which is five years. Due to the restatement of its Financial Statements (see
footnote 4), the Company eliminated the deferred acquisition costs and expensed
these costs in the period incurred. An additional amount of $3.1 million had
been capitalized for future costs associated with these provider contracts. Due
to restatement, the $3.1 million was expensed in the first quarter of 1997 and
there will be no amortization expense associated with this contract in 1996 or
any future periods.

         The increase was offset by $1.7 million incurred in 1995 for
transaction expenses associated with the Poolings and $0.8 million of employee
severance and other costs associated with reorganizing certain operations of the
Company. The severance and other charges have been included in compensation and
related benefits, and other operating expense in the Company's consolidated
statements of income.

         INCOME BEFORE INCOME TAX EXPENSE. Income before income tax expense
increased by $1.5 million, or 7.5%, to $21.6 million for the year ended December
31, 1996 from $20.1 million for the same period in 1995 due to the factors set
forth above.

         INCOME TAX EXPENSE. Income tax expense decreased by $0.3 million, or
3.4%, to $8.5 million for the year ended December 31, 1996 from $8.8 million for
the same period in 1995. The decrease was due to a 1995 tax charge of
approximately $0.9 million from the conversion of one of the Company's
subsidiaries from an S Corporation to a C Corporation upon it's acquisition. The
decrease was partially offset by the increase in income before tax expense.

         NET INCOME. Net income increased by $1.7 million, or 15.0 %, to $13.0
million for the year ended December 31, 1996, from $11.3 million for the same
period in 1995 due to the factors discussed above.

1995 COMPARED TO 1994

         TOTAL REVENUE. Total revenue increased by $54.9 million, or 20.3%, to
$325.3 million for the year ended December 31, 1995 from $270.4 million for the
same period in 1994. The increase was primarily due to acquisitions completed
during 1994 and 1995 (see Item 1. "Recent Developments"), new contract
awards and increased revenues from existing contracts.

         Hospital Physician Services revenue increased by $33.7 million, or
19.1%, to $210.7 million for the year ended December 31, 1995 from $177.0
million for the same period in 1994. The increase was primarily a result of the
MetroAmerican acquisition, which added $13.8 million of revenue, and an increase
of $16.0 million from annual fee schedule increases offset by a decrease of $4.5
million due to a decrease in patient volume of approximately 70,000 visits.
Contract gains and losses were relatively flat in 1995 and the last half of
1994.

         Capitated Medical Services revenue increased by $21.3 million, or
22.8%, to $114.7 million for the year ended December 31, 1995 from $93.4 million
for the same period in 1994. This was a result of an increase in Managed Care
revenue of $27.7 million, or 64.7%, to $70.5 million from $42.8 million
primarily due to the acquisition of five primary care practices operating at
eight sites, which generated approximately $17.0 million in revenues, with the
remainder of the increase due to having a full year's revenue from other managed
care acquisitions completed during 1994. The increase was offset by reduced
Correctional Care revenue of $6.4 million due primarily to a net increase of 10
new Correctional Care contracts accounting for approximately $12.6 million in
revenues, offset by the loss of the Massachusetts Department of Corrections
contracts at June 30, 1994, which would have generated approximately $19.0
million during the last half of 1994.

         TOTAL OPERATING EXPENSES. Operating expenses increased by $50.1
million, or 19.7%, to $304.0 million for the year ended December 31, 1995 from
$253.9 million for the same period in 1994. The increase was primarily due to an
increase in compensation expense and related benefits of $30.0 million resulting
from an increase in the number of healthcare and administrative personnel
associated with the MetroAmerican acquisition, the acquisition of the five
primary care practices and new contracts, an increase in contracted medical
services of $16.1 million due primarily to 


                                      -14-
<PAGE>   17

the growth in managed health care services offset by a decrease in insurance
expense of $1.7 million due to a favorable shift in business mix and a favorable
policy renewal for professional liability insurance.

         The increase was also due to $1.7 million in transaction expenses
associated with the Poolings and $0.8 million of employee severance and other
costs associated with reorganizing certain operations of the Company. The
severance and other amounts have been included in compensation and related
benefits, and other operating expense in the Company's consolidated statements
of income.

         MINORITY INTEREST IN NET INCOME. There was no minority interest for the
year ended December 31, 1995 versus $2.7 million for the same period in 1994.
This was due to the Company's purchase of minority interests at the time of the
Company's IPO (see Notes 1 and 3 to the Company's consolidated financial
statements).

         INCOME BEFORE INCOME TAX EXPENSE. Income before income tax expense
increased by $7.2 million, or 55.8%, to $20.1 million for the year ended
December 31, 1995 from $12.9 million for the same period in 1994 due to the
factors set forth above.

         INCOME TAX EXPENSE. Income tax expense increased to $8.8 million for
the year ended December 31, 1995 from $0.2 million for the same period in 1994.
This is due to the fact that the Company had elected to be taxed as a Subchapter
S corporation, and was not subject to federal and state income taxes, until the
time of the IPO, when the Company converted to C corporation status. In the
current year the Company incurred an additional $0.9 million in income tax
expense due to the conversion of MetroAmerican to a C corporation (see Note 7 to
the Company's consolidated financial statements).

         NET INCOME. Net income decreased by $1.4 million, or 11.0 %, to $11.3
million for the year ended December 31, 1995, from $12.7 million for the same
period in 1994 due to the factors set forth above.

         SUPPLEMENTAL NET INCOME. After giving effect to the supplemental
adjustments which assume that minority interests were purchased for common stock
of the Company as of January 1, 1994 and that the Company was subject to federal
and state income taxes prior to the IPO, net income increased by $1.9 million,
or 20.2%, to $11.3 million for the year ended December 31, 1995, from $9.4
million, on a supplemental basis, for the same period in 1994.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has met its cash requirements through cash generated by its
operating activities, bank borrowings and equity offerings. The Company's
principal uses of cash have been to support its operations, which generated
$16.7 million in 1996, fund acquisitions, acquire capital equipment and repay
outstanding debt. Prior to the IPO, the Company paid dividends to its
stockholders and distributions to minority interests. These dividends and
distributions were primarily for payment of taxes on income, includable by the
stockholders and partners in their personal income tax returns, as a result of
the Company's predecessor and affiliated partnerships being a Subchapter S
corporation and limited partnerships, respectively.

YEAR ENDED DECEMBER 31, 1996

         Net cash provided by operating activities was $16.7 million for the
year ended December 31, 1996, due primarily to cash generated by operations, a
$17.2 million increase in accrued medical claims expense associated with the PCA
Agreement, offset by a $14.4 million increase in accounts receivable primarily
due to the start up of several new corrections contracts and a $3.5 million
decrease in the reserve for self-insured claims from the payment of expiring
professional liability reserves relating to the Company's Self Insured Retention
(SIR).

         Net cash used in investing activities of $6.8 million was due to
expenditures of $3.1 million for acquisitions and purchases of capital equipment
of $4.7 million.

         Net cash used in financing activities of $7.5 million was due to $18.9
million of principal payments offset by borrowings of $9.7 million on the Credit
Facility and proceeds from the exercise of stock options of $1.7 million.

         As a result of the factors discussed above, cash increased by $2.3
million to $3.6 million at December 31, 1996 from $1.3 million at December 31,
1995.


                                      -15-

<PAGE>   18

YEAR ENDED DECEMBER 31, 1995

         Net cash used in operating activities was $5.8 million for the year
ended December 31, 1995, due primarily to an increase in accounts receivable of
approximately $13.3 million caused by the start-up of new Corrections contracts,
the implementation of a new fee-for-service billing system, the modification of
the Company's professional liability insurance policy to provide for first
dollar coverage and payments of expiring policy SIR expense reserves and the
increase in income tax payments due to the Company becoming a C Corporation at
the time of the IPO, offset by cash generated from operations.

         Net cash used in investing activities of $9.6 million was primarily the
result of expenditures of $7.0 million for acquisitions and purchases of capital
equipment for $4.0 million.

         Net cash provided by financing activities of $15.3 million was
primarily the result of $16.2 million in net proceeds from the Company's second
public offering which was effective November 1995, $0.9 million in proceeds from
the exercise of stock options, and borrowings of $26.2 million under the Credit
Facility, offset by payments of $27.9 million on the Credit Facility.

         As a result of the factors discussed above, cash decreased to $1.3
million at December 31, 1995 from $1.4 million at December 31, 1994.

GENERAL

         The Company's number of days of revenue in average outstanding trade
receivables for the years ended December 31, 1996, 1995 and 1994 were 70, 69,
and 64 days, respectively. The higher number of days in outstanding receivables
at December 31, 1996 and 1995 is due to the start-up of several new
fee-for-service and Corrections contracts in 1996 and 1995.

         In November 1995, the Company executed an amendment with its bank to
increase the amount available under the Credit Facility to $60.0 million. The
Credit Facility matures September 30, 1998. At December 31, 1996, no amounts
were outstanding under the Credit Facility. At December 31, 1995, there was $9.0
million outstanding under the Credit Facility.

         The Company expects to satisfy its anticipated demands and commitments
for cash in the next twelve months from existing cash, cash provided by
operations and amounts available under its Credit Facility. If the Company's
requirements for working capital and capital expenditures, including future
acquisitions, exceed currently anticipated levels, the Company may be required
to obtain additional funds, if available, in the credit or capital markets.





                                      -16-
<PAGE>   19


ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated financial statements and supplementary data required by this item
can be found at the pages listed in the following index:

<TABLE>
<CAPTION>

                                                                                             Page
                                                                                             ----
<S>                                                                                          <C>
Report of Independent Certified Public Accountants............................................18

Consolidated Balance Sheets at December 31, 1996 (restated) and 1995..........................19

Consolidated Statements of Income for the years ended
  December 31, 1996 (restated), 1995 and 1994.................................................20

Consolidated Statement of Changes in Stockholders' Equity for
  the years ended December 31, 1996 (restated), 1995 and 1994.................................21

Consolidated Statements of Cash Flows for the years ended
  December 31, 1996 (restated), 1995 and 1994.................................................22

Notes to Consolidated Financial Statements (restated for 1996)................................24

Supplementary Data: Consolidated Quarterly Financial
  Information (unaudited) (restated)..........................................................40

</TABLE>

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

The Company has not changed independent accountants within the 24 months prior
to December 31, 1996.





                                      -17-

<PAGE>   20





               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
InPhyNet Medical Management Inc.

         We have audited the accompanying consolidated balance sheets of
InPhyNet Medical Management Inc. and Subsidiaries (the "Company") as of December
31, 1996 and 1995, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. Our audits also included the financial statement
schedule listed in the index at Item 14(a)(2). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
InPhyNet Medical Management Inc. and Subsidiaries at December 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

         As discussed in Note 4 the Company has restated its financial
statements to expense as incurred costs associated with the PCA Agreement.



                                                 ERNST & YOUNG LLP

Miami, Florida
February 14, 1997, except
for the second paragraph
of Note 4, as to which the 
date is May 20, 1997





                                      -18-


<PAGE>   21


                INPHYNET MEDICAL MANAGEMENT INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                           DECEMBER 31,
                                                                                        ------------------
                                                                                        1996          1995
                                                                                        ----          ----
                                                                                     (RESTATED)
<S>                                                                                   <C>           <C>     
ASSETS
Current assets:
   Cash                                                                               $  3,618      $  1,305
   Accounts receivable, net of allowances of approximately $83,000 and
      $91,000 at December 31, 1996 and 1995                                             84,300        69,759
   Accounts receivable from affiliates                                                     202           559
                                                                                      --------      --------
                                                                                        84,502        70,318

   Deferred income taxes                                                                   741         2,014
   Prepaid expenses                                                                      8,945         4,633
   Other current assets                                                                  5,819         3,559
                                                                                      --------      --------
Total current assets                                                                   103,625        81,829

Equipment, furniture and leasehold improvements, net                                    11,709        11,186

Other assets:
    Cost in excess of net assets acquired, net of accumulated amortization of
        approximately $2,391 and $1,413 at December 31, 1996
        and 1995, respectively                                                          27,773        26,111
    Other assets                                                                         2,672         4,090
                                                                                      --------      --------
                                                                                        30,445        30,201
                                                                                      --------      --------
Total assets                                                                          $145,779      $123,216
                                                                                      ========      ========

LIABILITIES AND STOCKHOLDERS' EQUITY 
Current liabilities:
    Accrued compensation and related benefits                                         $ 15,713      $ 15,096
    Accounts payable and other current liabilities                                       8,472         6,517
    Accrued medical claims                                                              18,693         1,501
    Reserve for self-insured claims                                                      3,692         7,179
                                                                                      --------      --------
Total current liabilities                                                               46,570        30,293

Long-term debt, net of current portion                                                     339         9,617

Deferred income taxes                                                                      959           938

Stockholders' equity:
   Common stock, par value -- $0.01; 50,000 shares authorized,
     15,821 and 15,690 issued and outstanding at December 31, 1996 
     and 1995, respectively                                                                158           157
   Additional paid-in capital                                                           66,386        63,731
   Retained earnings                                                                    31,367        18,480
                                                                                      --------      --------
Total stockholders' equity                                                              97,911        82,368
                                                                                      --------      --------
Total liabilities and stockholders' equity                                            $145,779      $123,216
                                                                                      ========      ========

</TABLE>



          See accompanying notes to Consolidated Financial Statements.


                                      -19-

<PAGE>   22


                INPHYNET MEDICAL MANAGEMENT INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                  (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                                YEARS ENDED DECEMBER 31,
                                                                       -----------------------------------------
                                                                         1996            1995             1994
                                                                         ----            ----             ----
                                                                      (RESTATED)
<S>                                                                    <C>             <C>             <C>      
Net revenue                                                            $ 407,239       $ 323,782       $ 267,401
Revenue from affiliates                                                    1,281           1,558           2,969
                                                                       ---------       ---------       ---------

Total revenue                                                            408,520         325,340         270,370

Expenses:
    Compensation and related benefits                                    235,299         209,194         179,223
    Contracted medical services                                          104,514          49,111          33,029
    Insurance                                                             12,252          11,784          13,522
    Acquisition costs associated with poolings of interests
      (Note 3)                                                              --             1,700            --
    Other                                                                 33,624          32,224          28,079
                                                                       ---------       ---------       ---------

Total operating expenses                                                 385,689         304,013         253,853
                                                                       ---------       ---------       ---------

Income from operations                                                    22,831          21,327          16,517

Nonoperating (income) expense:
     Interest income                                                        (349)           (417)           (326)
     Interest expense                                                      1,134           1,910           1,305
     Loss on sale of Physician Practices                                     682            --              --
     Other non-operating income                                             (189)           (259)            (72)
                                                                       ---------       ---------       ---------
Total nonoperating expense                                                 1,278           1,234             907
                                                                       ---------       ---------       ---------

Income before minority interest and income tax expense                    21,553          20,093          15,610
Minority interest in net income                                             --              --             2,711
                                                                       ---------       ---------       ---------
Income before income tax expense                                          21,553          20,093          12,899
Income tax expense (Note 7)                                                8,512           8,805             153
                                                                       ---------       ---------       ---------

Net income                                                             $  13,041       $  11,288       $  12,746
                                                                       =========       =========       =========
Net income per share                                                   $    0.81       $    0.75
                                                                       =========       =========
Weighted average shares outstanding                                       16,021          15,038
                                                                       =========       =========

SUPPLEMENTAL DATA (UNAUDITED) (NOTE 1):
Historical income before income taxes                                                                  $  12,899
Pro forma purchase of minority interest                                                                    2,711
                                                                                                       ---------
Supplemental  income before income tax expense                                                            15,610
Pro forma income tax expense                                                                               6,244
                                                                                                       ---------
Supplemental net income                                                                                $   9,366
                                                                                                       =========
Supplemental net income per share                                                                      $    0.74
                                                                                                       =========
Supplemental weighted average shares outstanding                                                          12,703
                                                                                                       =========

</TABLE>




           See accompanying notes to Consolidated Financial Statements


                                      -20-
<PAGE>   23


                INPHYNET MEDICAL MANAGEMENT INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                             (AMOUNTS IN THOUSANDS)




<TABLE>
<CAPTION>
                                                      NUMBER                   ADDITIONAL                      TOTAL
                                                        OF           COMMON      PAID-IN      RETAINED      STOCKHOLDERS'
                                                      SHARES         STOCK       CAPITAL      EARNINGS         EQUITY
                                                      ------         -----       -------      --------      -------------
<S>                                                   <C>         <C>           <C>            <C>            <C>     
BALANCE AT JANUARY 1, 1994                            8,502       $     85      $     81       $ 15,112       $ 15,278
Adjustment to reflect change in
    accounting method for equity
    investments                                        --             --            --              696            696
Net income                                             --             --            --           12,746         12,746
Offering, net of expenses                             2,100             21        21,609           --           21,630
Dividends                                              --             --            --           (4,254)        (4,254)
Transfer of predecessor company
    retained earnings to additional
    paid-in capital upon conversion
    from an S to a C corporation                       --             --          16,277        (16,277)          --
Issued in connection with acquisitions                3,256             33         5,794           --            5,827
Unrealized holding losses on available-
    for-sale investments                               --             --            --             (704)          (704)
Other                                                   140              1            (1)           (27)           (27)
                                                   --------       --------      --------       --------       --------

BALANCE AT DECEMBER 31, 1994                         13,998            140        43,760          7,292         51,192
Adjustments to beginning balances
    for the acquisition of
    MetroAmerican Radiology, Inc.                       473              5          --            1,780          1,785
Net income                                             --             --            --           11,288         11,288
Offering, net of expenses                             1,000             10        16,213           --           16,223
Transfer of acquired company
    retained earnings to additional
    paid-in capital upon conversion
    from an S to a C corporation                       --             --           1,780         (1,780)          --
Exercise of stock options                               204              2         1,209           --            1,211
Issued in connection with acquisitions                   57           --             775           --              775
Unrealized appreciation on available-
    for-sale investments                               --             --            --               41             41
Other                                                   (42)          --              (6)          (141)          (147)
                                                   --------       --------      --------       --------       --------

BALANCE AT DECEMBER 31, 1995                         15,690            157        63,731         18,480         82,368
Net income (restated)                                  --             --            --           13,041         13,041
Exercise of stock options                               131              1         2,655           --            2,656
Unrealized depreciation on
   available-for-sale investments                      --             --            --             (154)          (154)
                                                   --------       --------      --------       --------       --------

BALANCE AT DECEMBER 31, 1996 
(RESTATED)                                           15,821       $    158      $ 66,386       $ 31,367       $ 97,911
                                                   ========       ========      ========       ========       ========
</TABLE>



           See accompanying notes to Consolidated Financial Statements


                                      -21-
<PAGE>   24


                INPHYNET MEDICAL MANAGEMENT INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)


<TABLE>
<CAPTION>

                                                                         YEARS ENDED DECEMBER 31,
                                                              ------------------------------------------
                                                                 1996            1995            1994
                                                                 ----            ----            ----
                                                              (Restated)
<S>                                                           <C>             <C>             <C>      
OPERATING ACTIVITIES:
Cash received from services rendered                          $ 394,466       $ 312,239       $ 259,064
Cash paid for compensation and related benefits                (234,942)       (208,680)       (176,956)
Cash paid for contracted medical services                       (83,680)        (48,825)        (31,727)
Cash paid for insurance                                         (17,746)        (14,412)        (12,808)
Cash paid for other operating expenses                          (36,161)        (34,516)        (25,539)
Interest received                                                   349             420             326
Interest paid                                                    (1,119)         (1,910)         (1,305)
Income taxes paid                                                (4,503)        (10,119)         (2,228)
                                                              ---------       ---------       ---------

Net cash provided by (used in) operating activities              16,664          (5,803)          8,827

INVESTING ACTIVITIES:

Acquisitions, net of cash acquired                               (3,089)         (7,012)         (8,052)
Purchases of equipment                                           (4,746)         (3,973)         (3,454)
Other investing activities                                        1,009           1,418          (1,249)
                                                              ---------       ---------       ---------

Net cash used in investing activities                            (6,826)         (9,567)        (12,755)

FINANCING ACTIVITIES:

Proceeds from stock offering                                       --            16,223          22,028
Proceeds from exercise of stock options                           1,684             897            --
Proceeds from borrowings of long-term debt                        9,700          26,152          15,851
Principal payments on long-term debt                            (18,909)        (27,872)        (23,196)
Dividends                                                          --              --            (7,860)
Partnership distributions to minority interests                    --              --            (2,930)
Stock redemptions                                                  --              (147)            (28)
                                                              ---------       ---------       ---------

Net cash provided by (used in) financing activities              (7,525)         15,253           3,865
                                                              ---------       ---------       ---------

Net increase (decrease) in cash                                   2,313            (117)            (63)

Cash at beginning of period                                       1,305           1,422           1,485
                                                              ---------       ---------       ---------

Cash at end of period                                         $   3,618       $   1,305       $   1,422
                                                              =========       =========       =========



                              See accompanying notes to Consolidated Financial Statements.

</TABLE>

                                      -22-
<PAGE>   25


                INPHYNET MEDICAL MANAGEMENT INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                             (AMOUNTS IN THOUSANDS )



<TABLE>
<CAPTION>

                                                                             YEARS ENDED DECEMBER 31,
                                                                   --------------------------------------
                                                                      1996           1995            1994
                                                                      ----           ----            ----
                                                                   (RESTATED)
<S>                                                                  <C>            <C>            <C>     
RECONCILIATION OF NET INCOME TO NET CASH
  PROVIDED BY (USED IN) OPERATING ACTIVITIES:

Net income                                                           $ 13,041       $ 11,288       $ 12,746

Adjustments to reconcile net income to net
  cash provided by (used in) operating activities:
     Depreciation                                                       3,140          2,518          1,865
     Amortization                                                       1,510          1,220            687
     Loss on sale of physician practices                                  682           --             --
     Other non-cash charges (credits) to operations, net                  385           (178)           (72)
     Increase in accounts receivable                                  (14,411)       (13,292)       (12,077)
     Decrease in accounts receivable from affiliates                      357            192            771
     (Increase) decrease in prepaid expenses and
        other current assets                                           (2,615)        (5,079)            20
     Increase (decrease) in accounts payable                              799         (1,679)         2,153
     Increase (decrease) in accrued medical claims                     17,192            282           (953)
     Increase in accrued compensation and related benefits                357            515          2,267
     Increase (decrease) in reserve for
        self-insured claims                                            (3,487)        (2,505)           784
     Increase (decrease) in income taxes payable                       (1,580)            64            121
     Increase (decrease) in deferred income taxes                       1,294            851         (2,196)
     Minority interest in net income                                     --             --            2,711
                                                                     --------       --------       --------
Net cash provided by (used in) operating activities                  $ 16,664       $ (5,803)      $  8,827
                                                                     ========       ========       ========



</TABLE>




          See accompanying notes to Consolidated Financial Statements.


                                      -23-

<PAGE>   26


                INPHYNET MEDICAL MANAGEMENT INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (RESTATED)


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

         InPhyNet Medical Management Inc. (together with its Subsidiaries,
"InPhyNet" or the "Company") was incorporated in May 1994 as the successor to
Emergency Medical Services Associates, Inc. ("EMSA") which commenced operations
in 1974 to provide physician management services to hospital emergency
departments. Since that time, the Company has expanded the range and scope of
its services and its business now consists of (i) Hospital Physician Services,
through which it delivers emergency medicine and other hospital-based physician
services under contracts with hospitals and the United States Department of
Defense and (ii) Capitated Medical Services, through which it manages the
delivery of comprehensive medical services under contracts with Health
Maintenance Organizations ("HMOs") and state and local correctional
institutions.

         In August 1994, the Company completed an initial public offering (the
"IPO") of 2,415,000 shares of its common stock at a price of $12.00 per share.
Of the shares offered, 2,100,000 shares were offered by the Company and 315,000
shares were offered by certain stockholders of the Company (the "Offering
Stockholders"). Net proceeds to the Company were approximately $21,630,000 after
deducting underwriting commissions of approximately $1,773,000 and offering
expenses of approximately $1,797,000. The net proceeds were used to reduce the
Company's long-term debt. The Company did not receive any of the proceeds from
the shares sold by the Offering Stockholders.

         In November 1995, the Company completed a public offering of 3,225,000
shares of its common stock at a price of $18.00 per share. Of the shares
offered, 1,000,000 shares were offered by the Company and 2,225,000 shares were
offered by certain stockholders of the Company (the "Selling Stockholders"). Net
proceeds to the Company were approximately $16,223,000 after deducting
underwriting commissions of approximately $900,000 and offering expenses of
approximately $877,000. The net proceeds were used to reduce the Company's
long-term debt. The Company did not receive any of the proceeds from the shares
sold by the Selling Stockholders.

REVENUE

         Revenue is recorded in the period services are rendered as determined
by the respective contract with each health care provider.

         The Company directly contracts with hospitals, HMO's, various state and
local government agencies and the United States Department of Defense to provide
medical services.

         The Company's contracts with its hospital physician services clients
(approximately 53% of total Company revenue at December 31, 1996) typically
provide for payments on either a fee-for-service basis (72% of hospital
physician services revenue at December 31, 1996), whereby the Company bills
patients or third-party payors directly for medical services, or a flat-fee
basis (28% of hospital physician services revenue at December 31, 1996), whereby
the Company is paid a fixed amount based on the number of hours of medical
staffing or number of patient visits provided. Fee-for-service contracts also
may, in certain instances, involve the payment of a subsidy to the Company by
the client. Fee-for-service contracts, which usually require the Company to
assume the financial risks relating to patient volume, payor mix and
reimbursement rates, have longer collection periods than flat-fee and capitated
fee contracts and require the Company to bear the credit risk of uninsured
individuals.

         The Company's contracts with the Department of Defense provide for
payment to the Company based on the number of patient visits or the number of
hours worked. The Company is at risk for the medical services provided if the
number of patient visits or hours worked exceed certain limits as defined in the
contracts.




                                      -24-
<PAGE>   27


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Under the Company's contracts with HMO's (approximately 28% of total
Company revenue at December 31, 1996), the Company receives a fixed, monthly fee
from third-party payors for each covered life in exchange for assuming
responsibility for the provision of medical services. To the extent that
enrollees require more frequent or extensive care than was anticipated by the
Company, revenue to the Company under a contract may be insufficient to cover
the costs of care provided.

         When it is probable that expected future health care costs and
maintenance costs under a contract or group of existing contracts will exceed
anticipated capitation revenue on those contracts the Company recognizes losses
on its prepaid healthcare services with HMOs.

         The Company provides comprehensive medical services, including mental
health and dental services, to inmates in various state and local correctional
institutions (approximately 19% of total Company revenue at December 31, 1996).
The Company provides primary care physician services directly and typically
subcontracts other services with hospitals and medical specialists on either a
capitated or discounted fee-for-service basis.

         Approximately 93% of InPhyNet's revenue is earned through contracts
which are directly between the payor (i.e. HMO, hospital, correctional facility
or Department of Defense) and InPhyNet or a wholly owned subsidiary of InPhyNet.
In these cases, the contractual revenue is earned by InPhyNet or a consolidated
subsidiary in which InPhyNet owns a direct and majority voting interest.

         Approximately 7% of InPhyNet's revenue relates to contracts with
hospitals to which a Controlled Entity (as defined below), rather than InPhyNet
or a wholly owned subsidiary of InPhyNet, is a party.

MEDICAL COSTS

         The Company employs or subcontracts with physicians on an hourly or
salary basis to provide medical services under the Company's hospital, HMO,
correctional and Department of Defense contracts. Additionally, some physicians
may receive a bonus at the discretion of the Company.

         The Company provides for claims incurred but not yet reported based on
past experience together with current factors. Estimates are adjusted as changes
in these factors occur and such adjustments are reported in the year of
determination. Although considerable variability is inherent in such estimates,
management believes that these reserves are adequate.

PRINCIPLES OF CONSOLIDATION

         The Company's consolidated financial statements include the accounts of
InPhyNet, investments in which it has a greater than 50% voting interest and
Controlled Entities (as defined below). All significant intercompany accounts
and transactions have been eliminated in consolidation.

         The Company has entered into management contracts and stock transfer
restriction agreements (the "Transfer Agreements") with professional
corporations ("Controlled Entities") owned by one or more physicians. The
management and Transfer Agreements may not be terminated by the Controlled
Entities for any reason. The physician(s) that own the Controlled Entities are
generally treated as employees of the Company and are solely responsible for the
practice of medicine and delivery of medical services. The management contracts
provide that the Company shall be responsible for the general management and
administration of the day to day operations of the Controlled Entities,
including but not limited to business planning, financial management,
bookkeeping, accounting, data processing as well as human resources management.
The management contracts also provide that the Company shall have the exclusive
right to select the individuals serving as directors of Controlled Entities. The
Transfer Agreements provide that all shares of the Controlled Entities are
required to be transferred to a "Designated Transferee" for a nominal amount
paid to the transferor at the Company's sole option, at any time and for any
reason. These agreements provide the Company with unilateral and perpetual
control over the assets and business operations of the entities.



                                      -25-

<PAGE>   28


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Notwithstanding the lack of legal record ownership of the Controlled
Entities, consolidation of the entities is necessary to present fairly the
financial position and results of operations of the Company because of the
existence of a parent-subsidiary relationship by means other than record
ownership by the Company of the Controlled Entities voting stock.

         Investments in unconsolidated joint ventures ("Affiliates") in which a
20% to 50% voting interest is owned by the Company are carried at cost plus
equity in earnings since the date of acquisition.

USE OF ESTIMATES

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

CASH

         Deposits in banks may exceed the amount of insurance provided on such
deposits. The Company performs reviews of the credit worthiness of its
depository banks. The Company has not experienced any losses on its deposits of
cash.

ACCOUNTS RECEIVABLE

         Accounts receivable result primarily from medical services provided to
patients on a fee-for-service basis and on a fixed compensation or capitated
basis from hospitals, military facilities and prison systems where the Company
provides medical services. Fee-for-service amounts are paid by government
sponsored health care programs (primarily Medicare and Medicaid), insurance
companies, self-insured employees and patients. These receivables are
geographically dispersed throughout the United States.

         Accounts receivable include an allowance for contractual adjustments,
charity and other adjustments. Contractual adjustments result from differences
between the rates charged for the service performed and amounts reimbursed under
government sponsored health care programs and insurance contracts. Charity and
other adjustments represent services provided to patients for which fees are not
expected to be collected at the time the service is provided.

AVAILABLE-FOR-SALE SECURITIES

         Available-for-sale securities, which are included in other assets, are
carried at fair market value, with resulting unrealized holding gains and losses
reported as a separate component of stockholders' equity. Realized gains and
losses and declines in value judged to be other-than-temporary on
available-for-sale securities are included in investment income. The cost of
securities sold is based on the specific identification method. Interest and
dividends on securities classified as available-for-sale are included in
investment income (see Note 16).

STOCK BASED COMPENSATION

         The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under Financial Accounting
Standards Board (FASB) Statement No. 123, "Accounting for Stock-Based
Compensation", requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options generally equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized (see Note 12).


                                      -26-

<PAGE>   29

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

EQUIPMENT, FURNITURE AND LEASEHOLD IMPROVEMENTS

         Equipment, furniture and leasehold improvements are recorded at cost
and depreciated using the straight-line method over the estimated useful lives
of the assets. Equipment and furniture are depreciated over a 5 - 7 year period.
Leasehold improvements are amortized over the underlying assets' useful lives or
the term of the lease, whichever is shorter.

COSTS IN EXCESS OF NET ASSETS ACQUIRED

         Costs in excess of net assets acquired are stated net of accumulated
amortization and are amortized on a straight-line basis over periods ranging
from ten to forty years. The Company periodically evaluates the recovery of the
carrying amount of costs in excess of net assets acquired by determining if any
impairment indicators are present. These indicators include duplication of
resources resulting from acquisitions, income derived from businesses acquired,
the estimated undiscounted cash flows of the entity over the remaining
amortization period and other factors.

INCOME TAXES

         Prior to the IPO, EMSA was taxed under the provisions of Subchapter S
of the Internal Revenue Code, which generally provides that in lieu of corporate
income taxes, stockholders are taxed on the Company's taxable income in
accordance with their ownership interests. As a result, the accompanying
financial statements include no provision for income taxes related to EMSA's
income prior to the completion of the IPO.

         Concurrent with the IPO, EMSA converted to C corporation status and
became an accrual basis taxpayer with respect to federal income taxes and, for
those states that recognize such tax election, state income taxes. Accordingly,
for the year ended December 31, 1994, the consolidated statement of income
includes pro forma adjustments (unaudited) for income tax expense which would
have been recorded had EMSA been a taxable corporation based on the tax laws in
effect during that period.

         Prior to its acquisition, MetroAmerican was taxed under the provisions
of Subchapter S of the Internal Revenue Code. Concurrent with the acquisition of
MetroAmerican, MetroAmerican converted to C corporation status and became an
accrual basis taxpayer with respect to federal income taxes and, for those
states that recognize such tax election, state income taxes. Income tax expense
that would have been recorded if the Company had been subject to corporate
income taxes for that period is not significant.

         Deferred income taxes have been provided in accordance with the
provisions of FASB Statement No. 109, "Accounting for Income Taxes" (Statement
109) (see Note 7).

LONG LIVED ASSETS

         FASB Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of" ("Statement 121"), requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amounts. The
Company adopted Statement 121 in 1996 and, based on current circumstances, does
not believe that any impairment indicators are present.

NET INCOME PER SHARE

         The computation of net income per share is based upon the weighted
average number of common shares and common stock equivalents, primarily from
stock options, outstanding during the period using the treasury stock method.
Weighted average shares outstanding gives effect to the shares of common stock
issued in connection with the Radiology Associates acquisition which was
accounted for as a pooling of interests, as if the shares were outstanding for
all periods presented. Shares issued in connection with the acquisition of
MetroAmerican, which was accounted for as an immaterial pooling of interests,
were treated as outstanding as of January 1, 1995 (see Note 3).


                                      -27-
<PAGE>   30

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SUPPLEMENTAL NET INCOME AND SUPPLEMENTAL NET INCOME PER SHARE (UNAUDITED)

         Supplemental net income is calculated assuming the minority interests
were purchased for common stock of the Company on January 1, 1994 and the
Company was a taxable entity for all periods presented.

         The supplemental weighted average number of shares outstanding gives
effect to the issuance of common stock in connection with the acquisition of the
minority interests as if these transactions occurred on January 1, 1994.

RECLASSIFICATIONS

         Certain amounts in the prior years' consolidated financial statements
have been reclassified to conform to the current year's presentation.

2.  PROPOSED MERGER AGREEMENT

         On January 21, 1997, the Company and MedPartners, Inc. ("MedPartners")
announced they have agreed to merge. Upon consummation of the merger, each share
of the Company's common stock will be exchanged for shares of MedPartners
common stock. Also, all of the Company's options will vest and will be converted
into options of MedPartners based on the exchange ratio. The consummation of the
merger is subject to, among other things, performance by each party under the
merger plan and regulatory approval. In addition, the approval of the
transaction requires approval by the shareholders of the Company and the Board
of Directors of MedPartners.

3.  ACQUISITIONS

         Effective May 1, 1994, in a transaction accounted for as a purchase,
the Company acquired substantially all the assets of Fox Healthcare Services
Inc. and affiliated entities ("Fox Healthcare") for $5,000,000 in cash,
excluding expenses associated with the acquisition of approximately $100,000,
and a preferred limited partnership interest in the Company. At the time of the
IPO, the preferred limited partnership interest was exchanged for $2,750,000 of
the Company's common stock at the initial offering price of $12 per share. Costs
in excess of net assets acquired were approximately $7,750,000. Fox Healthcare
provides medical care to members of Humana Medical Plan, Inc. through the
Company's clinics and also contracts with other medical providers for other
medical services such as inpatient care and certain diagnostic procedures.

         Effective May 24, 1994, the Company acquired, in a purchase
transaction, the common stock of two home health care companies ("AmCare") for
$1,800,000 in cash and a $600,000 promissory note. Costs in excess of net assets
acquired were approximately $2,500,000.

         Contemporaneous with the completion of the IPO, the Company exchanged
127,090 shares of its common stock for the 1.79% limited partnership interest in
the Company. This transaction, which was accounted for as a purchase, resulted
in costs in excess of net assets acquired of approximately $880,000.

         The following unaudited pro forma summary (in thousands) combines the
consolidated results of operations of the Company, Fox Healthcare, AmCare and
the acquisition of the minority interests and the preferred limited partnership
interest in the Company, as if these transactions had occurred at January 1,
1994, after giving effect to certain adjustments including the amortization of
goodwill, among others. The unaudited pro forma summary does not purport to be
indicative of the results which may have been obtained had the acquisitions been
consummated at the dates assumed, or of future results of operations of the
consolidated companies.




                                      -28-
<PAGE>   31


3.  ACQUISITIONS (CONTINUED)


                                                          FOR THE YEAR ENDED
                                                           DECEMBER 31, 1994
                                                          ------------------
                                                              (UNAUDITED)
Total revenue                                                  $  279,777
                                                               ==========
Income before income tax expense                               $   15,717
                                                               ==========
Net income                                                     $    9,430
                                                               ==========
Net income per share                                           $     0.74
                                                               ==========

         During the year ended December 31, 1995, the Company acquired, in
transactions accounted for as purchases, substantially all the assets and
operations of five primary care practices for approximately $6.7 million and
approximately 57,000 shares of the Company's common stock valued at $17.68 per
share. Costs in excess of net assets acquired were approximately $7.5 million.
The pro forma effects of these acquisitions on total revenue, net income and
earnings per share are not material.

         Effective July 1, 1995, in a transaction accounted for as a pooling of
interests, the Company acquired MetroAmerican Radiology, Inc. and an affiliated
entity ("MetroAmerican"). The accounts and results of operations of
MetroAmerican have not been included in the accompanying financial statements
prior to January 1, 1995, because the restatement would not have a material
effect on the Company's consolidated financial statements. In connection with
the transaction, the Company exchanged approximately 473,000 shares of Common
Stock for all of the outstanding shares of MetroAmerican. As a result of this
transaction, the Company acquired contracts to provide radiology services on a
fee-for-service basis. The expenses associated with the transaction were
approximately $500,000.

         Effective September 1, 1995, in a transaction accounted for as a
pooling of interests, the Company acquired Radiology Associates of Hollywood,
Inc. and affiliated entities ("Radiology Associates"). As a result, the
accompanying financial statements include the accounts and results of operations
of Radiology Associates for all periods presented. In connection with the
transaction, the Company exchanged 1,625,000 shares of Common Stock for all of
the outstanding shares of Radiology Associates. Radiology Associates, provides
radiology and management services to hospitals, outpatient centers, radiation
oncology centers and a regional teleradiology reading facility. Expenses
associated with the transaction were approximately $1,200,000.

Prior to the date of the acquisition, total revenue and net income (loss) for
the Company and the pooled entities are as follows:

<TABLE>
<CAPTION>
                                                    INPHYNET
                                                     MEDICAL               POOLED
                                                  MANAGEMENT INC.          ENTITIES         CONSOLIDATED
                                                  ---------------          --------         ------------
<S>                                               <C>                    <C>                 <C>       

YEAR ENDED DECEMBER 31, 1995:
Total revenue                                     $    306,455           $   18,885 (1)      $  325,340
                                                  ============           ==========          ==========
Net income (loss)                                 $     11,546           $     (258)(1)      $   11,288
                                                  ============           ==========          ==========
YEAR ENDED DECEMBER 31, 1994:
Total revenue                                     $    253,425           $   16,945 (2)      $  270,370
                                                  ============           ==========          ==========
Net income                                        $     12,542           $      204 (2)      $   12,746
                                                  ============           ==========          ==========

</TABLE>

(1)   Represents results of MetroAmerican and Radiology Associates from
      January 1, 1995 to the date of acquisition.

(2)   MetroAmerican was accounted for as an immaterial pooling of interests
      and accordingly the accounts and results of its operations have not
      been included in the Consolidated Financial Statements prior to January
      1, 1995.

         Effective January 16, 1996, in a transaction accounted for as a
purchase, the Company acquired all of the outstanding stock of Sachs, Morris &
Sklaver, Inc. for approximately $3.1 million. As a result of this transaction,
the Company added two medical centers to its base of primary care practices.
Costs in excess of net assets acquired were 



                                      -29-
<PAGE>   32

3. ACQUISITIONS (CONTINUED)

approximately $3.0 million. The pro forma effects of this acquisition on total
revenue, net income and earnings per share are not material.

         Effective July 2, 1996, in a transaction accounted for as a purchase,
the Company acquired certain assets of NHS National Health Services, Inc. As a
result of this transaction, the Company acquired contracts to provide medical
care to inmates in correctional institutions. The agreement stipulates that
installments of the purchase price be determined on each annual anniversary of
the transaction's effective date over a period of five years based upon the
contracts future operating performance. Accordingly, costs in excess of net
assets acquired will be recognized upon determination of the ultimate purchase
price over the five year period. At closing, the total consideration paid and
costs in excess of net assets acquired was not significant. The pro forma
effects of this acquisition on total revenue, net income and earnings per share
are not material.

4.  SIGNIFICANT AGREEMENTS AND RESTATEMENT

         Effective July 1, 1996, the Company entered into a five-year agreement
(the "PCA Agreement"), with an option for an additional five years, with
Physician Corporation of America ("PCA"). Under the PCA Agreement, InPhyNet will
manage independent primary care physicians in South Florida and the Tampa Bay
region. At December 31, 1996, physicians provided primary care services to
approximately 50,500 covered lives: 24,500 in South Florida and 26,000 in the
Tampa Bay area. PCA provides comprehensive health care service through its
HMO's, Life and Property and Casualty Insurance Carriers and Worker's
Compensation administrators located throughout the southeastern United States
and the Caribbean.

         The Company has restated its financial statements as of and for the
year ended December 31, 1996, to expense as incurred costs relating to the PCA
Agreement. The Company had established a $9.3 million reserve for future
estimated losses associated with the provider contracts the Company was
required to assume under the PCA Agreement. The Company recorded the $9.3
million as deferred contract acquisition costs and was amortizing these costs
over the initial five year life of the contract with PCA. Through December 31,
1996, the Company had charged $6.2 million of losses from the PCA Agreement
against this reserve. As a result of the restatement the reserve for losses
under the PCA Agreement and deferred contract acquisition costs have been
eliminated and costs associated with the PCA Agreement are being expensed as
incurred. This change resulted in a decrease in previously reported 1996 income
from operations of $6.9 million; net income of $3.7 million and income per
share of $0.23.

5.  EQUIPMENT, FURNITURE, AND LEASEHOLD IMPROVEMENTS

Equipment, furniture, and leasehold improvements are comprised of the following
(in thousands):

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                            ----------------------
                                                             1996           1995
                                                             ----           ----
<S>                                                          <C>           <C>
Equipment                                                   $17,546        $14,683
Furniture                                                     6,306          5,467
Leasehold improvements                                        1,589          1,325
                                                            -------        -------
                                                             25,441         21,475
Less accumulated depreciation                               (13,732)       (10,289)
                                                            -------        -------
Equipment, furniture, and
  leasehold improvements, net                               $11,709        $11,186
                                                            =======        =======
</TABLE>

6.  NET REVENUE

         Net revenue consists of gross charges, net of allowances for
contractual, charity and other adjustments. Contractual adjustments are based on
the difference between charges at established rates and amounts estimated by
management to be reimbursable by the Medicare and Medicaid programs, and public
and private insurance contracts


                                      -30-
<PAGE>   33

6.  NET REVENUE

under applicable laws, regulations and program instructions. Reimbursable
amounts are generally less than the established gross charge.

         Final determination of amounts earned for certain patients is subject
to review by appropriate program representatives. Charity and other adjustments
represent services provided to patients for which fees are not expected to be
collected at the time the service is provided.

Net revenue consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                 FOR THE YEARS ENDED DECEMBER 31,
                                           ------------------------------------------
                                              1996             1995          1994
                                              ----             ----          ----
<S>                                        <C>             <C>             <C>      
Gross revenue                              $ 674,467       $ 567,436       $ 468,281
Less allowances for contractual,
  charity and other adjustments             (267,228)       (243,654)       (200,880)
                                           ---------       ---------       ---------

Net revenue                                $ 407,239       $ 323,782       $ 267,401
                                           =========       =========       =========

</TABLE>


Net revenue attributable to major customers consists of the following (in
thousands):

<TABLE>
<CAPTION>
                                                              FOR THE YEARS ENDED DECEMBER 31,
                                                              1996           1995          1994
                                                              ----           ----          ----
<S>                                                     <C>             <C>              <C>    
Humana Medical Plans, Inc. and its affiliates           $   60,691      $    58,866      $37,199
                                                        ==========      ===========      =======
Department of Corrections, State of
  Massachusetts                                         $     --        $      --        $18,905
                                                        ==========      ===========      =======

</TABLE>

         Effective June 30, 1994, the contract with the Department of
Corrections, State of Massachusetts was not renewed with the Company.

7.  INCOME TAXES

HISTORICAL

         Concurrent with the IPO, the Company converted to C Corporation status
and became an accrual basis taxpayer with respect to federal income taxes and,
for those states that recognize such tax election, state income taxes.

Significant components of income tax expense (benefit) are as follows (in
thousands):

                                 FOR THE YEARS ENDED DECEMBER 31,
                                 --------------------------------
                                 1996         1995          1994
                                 ----         ----          ----
Current:
  Federal                      $ 6,303      $ 6,128      $ 2,411
  State and local                  915        1,826          405
                               -------      -------      -------
Total current                    7,218        7,954        2,816
                               -------      -------      -------
Deferred:
  Federal                        1,071          652       (2,263)
  State and local                  223          199         (400)
                               -------      -------      -------
Total deferred                   1,294          851       (2,663)
                               -------      -------      -------
                               $ 8,512      $ 8,805      $   153
                               =======      =======      =======

         Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.


                                      -31-
<PAGE>   34


7.  INCOME TAXES (CONTINUED)

The Company's net deferred tax assets (liabilities) are comprised of the
following (in thousands):

                                                     DECEMBER 31,
                                                ---------------------
                                                  1996          1995
                                                  ----          ----
Current deferred income taxes:
    Deferred tax assets                         $ 2,538       $ 4,408
    Deferred tax liabilities                     (1,797)       (2,394)
                                                -------       -------
                                                    741         2,014
                                                -------       -------
Long-term deferred income taxes:
    Deferred tax assets                             419           473
    Deferred tax liabilities                     (1,378)       (1,411)
                                                -------       -------
                                                   (959)         (938)
                                                -------       -------
Net deferred tax assets (liabilities)           $  (218)      $ 1,076
                                                =======       =======


Significant components of the Company's deferred tax assets and liabilities are
as follows (in thousands):

                                                            DECEMBER 31,
                                                        -------------------
                                                        1996           1995
                                                        ----           ----
Insurance reserves                                    $ 1,382       $ 2,770
Allowance for charity and other adjustments            (1,104)           95
Change in accounting method for income
   taxes from cash to accrual                            (628)       (2,745)
Other                                                     132           956
                                                      -------       -------
Net deferred tax assets (liabilities)                 $  (218)      $ 1,076
                                                      =======       =======


The reconciliation of income tax attributable to net income computed at federal
statutory rates to income tax expense is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                   FOR THE YEARS ENDED DECEMBER 31,
                                             ------------------------------------------------------------------------------
                                                     1996                         1995                       1994
                                                     ----                         ----                       ----
                                             AMOUNT         PERCENT      AMOUNT         PERCENT      AMOUNT         PERCENT
                                             ------         -------      ------         -------      ------         -------
<S>                                         <C>                <C>      <C>                <C>      <C>                <C>
Tax at U.S. statutory rate                  $ 7,544            35%      $ 6,832            34%      $ 4,386            34%
                                                                                                        
State and local income taxes, net
    of federal tax benefit                      968             5%        1,324             6%          253             2%
                                                                                                                      
Taxes on income earned prior to
    revocation of Subchapter S 
    election                                   --            --            (243)         --          (1,871)         (15)%
                                                                                                                   
     Tax expense (benefit) from
         conversion to C corporation           --            --             892             4%       (2,615)         (21)%
                                            -------       -------       -------       -------       -------        ------
                                            $ 8,512            40%      $ 8,805            44%      $   153          --
                                            =======       =======       =======       =======       =======        ======

</TABLE>


         Prior to July 1, 1995, MetroAmerican was a Subchapter S corporation
and, accordingly, was not subject to corporate income taxes. Concurrent with the
acquisition of MetroAmerican on July 1, 1995, MetroAmerican converted to C
corporation status and became an accrual basis taxpayer with respect to federal
income taxes and, for those states that recognize such tax election, state
income taxes. Accordingly, at the date of the transaction, the Company recorded
a charge to income tax expense of approximately $892,000 to reflect the
cumulative effect of adopting Statement 109.


                                      -32-
<PAGE>   35



7.  INCOME TAXES (CONTINUED)

SUPPLEMENTAL INCOME TAXES

The following unaudited supplemental information reflects income tax expense
that would have been incurred during the year ended December 31, 1994 had the
Company and its subsidiaries been subject to income taxes (in thousands):

CURRENT:
  Federal                             $4,721
  State and local                      1,249
                                      ------
Total current                          5,970
                                      ------
DEFERRED:
  Federal
                                         217
  State and local                         57
                                      ------
Total deferred                           274
                                      ------
                                      $6,244
                                      ======


The unaudited pro forma income tax expense differed from the amounts computed by
applying the federal statutory rate of 34% to income before income taxes as
follows (in thousands) for the year ended December 31, 1994:

                                       AMOUNT         PERCENT
                                       ------         -------
Tax at U.S. statutory rate            $  5,307           34%
State and local income taxes,
   net of federal tax benefit              937            6%
                                      --------         ----
                                      $  6,244           40%
                                      ========         ====

8.  PROFESSIONAL LIABILITY LOSS RESERVE

         In August 1995, the Company renewed substantially all of its
professional liability coverage with a commercial insurance company. The new
policy is on a claims made basis with a prefunded extended reporting
endorsement. The extended reporting endorsement effectively provides for first
dollar coverage for professional liability claims. The policy expires in August
1999.

         Historically, the Company maintained professional liability coverage
for the Company and its employee and independent contractor physicians with a
commercial insurance company on a claims made basis. The policy included a
self-insured retention and the Company has recorded an estimate of its liability
for this self-insured portion of its professional liability claims.

         The Company is involved in various legal proceedings incidental to its
business, substantially all of which involve claims related to the alleged
malpractice of employed and contracted medical professionals. In the opinion of
the Company's management, no individual item of litigation or group of similar
items of litigation, taking into account the insurance coverage maintained by
the Company, is likely to have a material adverse effect on the Company's
financial position, results of operations and liquidity.

9.  LONG-TERM DEBT

         On November 22, 1995, the Company entered into an Amended and Restated
Revolving Credit and Reimbursement Agreement (the "Agreement") with its bank.
The Agreement superseded the former term loan facility and extended to the
Company an unsecured revolving loan commitment of up to $60,000,000. The maximum
amount available to the Company is reduced by outstanding letters of credit (see
Note 10).




                                      -33-
<PAGE>   36

9.  LONG-TERM DEBT (CONTINUED)

Long-term debt is comprised of the following (in thousands):

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                              ------------------------
                                                                  1996          1995
                                                                  ----          ----
<S>                                                           <C>              <C>
$60,000 revolving credit and reimbursement
   arrangement, variable interest
   rate as selected by the Company (ranging
   from 6.765% to 7.25% as of December 31, 1995) 
   Interest payments are due on the last day of an
   interest period, as defined in the Agreement
   (at least quarterly) with the entire amount
   outstanding due September 30, 1998                        $   --         $  9,000
Other                                                             851          1,019
                                                             --------       --------
                                                                  851         10,019
Current portion                                                  (512)          (402)
                                                             --------       --------
                                                             $    339       $  9,617
                                                             ========       ========
</TABLE>


         Under the terms of the Agreement, among other restrictive covenants,
the Company must maintain, on a consolidated basis, certain financial ratios
relating to leverage, working capital, and net worth. The Agreement also
restricts, among other things, the amount of loans and investments in any entity
which is not part of the consolidated group, capital expenditures, additional
indebtedness and limits the payment of cash dividends on its common stock to
twenty-five percent of current period net income.

Long-term debt as of December 31, 1996 matures as follows (in thousands):

           1997                           $  512
           1998                              219
           1999                              120
           2000                                -
           2001                                -
                                          ------
                                          $  851
                                          ======

10.  LETTERS OF CREDIT

Unused outstanding letters of credit are comprised of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                        ----------------------
                                                                        1996            1995
                                                                        ----            ----
<S>                                                                    <C>             <C>    
Outstanding under state regulations
    as collateral for the self-insured portion of the
    Company's worker's compensation programs                           $   100         $   200
Available to insurance carrier
    as collateral for the company's professional
    liability insurance program                                          1,000           1,000
Available as collateral
    for corrections contracts                                              650             650
Available as collateral
    for PCA Agreement                                                   13,310               -
                                                                       -------         -------
                                                                       $15,060         $ 1,850
                                                                       =======         =======
</TABLE>

All of the unused outstanding letters of credit expire during 1997. The Company
intends to renew each letter of credit as they expire.




                                      -34-
<PAGE>   37


11.  RETIREMENT PLAN

         The Company maintains the EMSA 401(k) Profit Sharing Plan (the "Plan"),
a deferred profit sharing plan which covers substantially all full time
employees and provides for discretionary employer contributions in such amounts
as the Board of Directors may annually determine. Employer contributions vest
ratably over five years. The Plan may be terminated at any time without further
obligation by the Company. However, should the plan be terminated, employees
will become 100% vested with respect to the employer contributions.

         The Company's contribution to the Plan for the years ended December 31,
1996, 1995 and 1994 was approximately $455,000, $321,000 and $296,000,
respectively.

12.  STOCKHOLDERS' EQUITY

COMMON STOCK

         The Company is authorized to issue 50,000,000 shares of common stock,
par value $0.01 per share. In May 1994, the Board of Directors of EMSA declared
a 165.1 to 1 stock split which became effective on the effective date of the
IPO. The Company's consolidated financial statements have been retroactively
restated to reflect 1) the stock split, 2) the increase in the number of
authorized shares, and 3) the shares issued in connection with the Poolings as
of the date the respective transactions are recorded in the Company's
consolidated financial statements.

PREFERRED STOCK

         The Company is authorized to issue 20,000,000 shares of preferred
stock, par value $0.10 per share. The Company has no present plans to issue any
shares of preferred stock. In August 1995 the Board of Directors adopted a
Shareholder Rights Plan (the "Rights Plan"). In order to implement the Rights
Plan, the Board of Directors declared a dividend of one Right for each share of
the Company's common stock to stockholders of record on September 1, 1995. Each
Right, when exercisable, represents the right to purchase one one-thousandth of
a share of a newly issued series of Preferred Stock of the Company designated
"Series A Junior Participating Preferred Stock," par value $.10 per share. The
exercise price of the Rights is $85.00 per Right, the redemption price is $0.01
per Right, and the Rights expire on August 23, 2005. In the event that any
person or entity, together with affiliates or associates, acquires more than a
certain specified percentage of voting stock of the Company, each Right will
entitle the holder (other than an acquiring person and its affiliates or
associates) to acquire, in certain circumstances, additional shares of voting
stock at less than the prevailing market price. The Company has reserved 50,000
shares of the Series A Junior Participating Preferred Stock for issuance upon
exercise of the Rights.

DIVIDENDS AND PARTNERSHIP DISTRIBUTIONS

         Prior to the IPO, when the Company was taxed as an S Corporation, the
Board of Directors of the Company approved dividends and partnership
distributions in the following amounts (in thousands) during the year ended
December 31, 1994:

<TABLE>
<CAPTION>

<S>                                                               <C>    
          Dividends                                              $ 4,254
          Partnership distributions to minority interests          1,746
                                                                 -------
                                                                 $ 6,000
                                                                 =======

</TABLE>

STOCK OPTION PLANS

         During 1994, the Company adopted the 1994 Stock Incentive Plan ("Stock
Incentive Plan") and the Non-Employee Director Stock Option Plan ("Directors
Plan"). Under the Stock Incentive Plan and the Directors Plan, the Company is
authorized to issue options to purchase 2,500,000 and 200,000 shares of the
Company's common stock, respectively.


                                      -35-
<PAGE>   38


12.  STOCKHOLDERS' EQUITY (CONTINUED)

         Stock Incentive Plan options are granted at the discretion of the
Compensation Committee of the Company and typically expire ten years after the
date of the grant. The exercise price of options issued is determined by the
Compensation Committee in accordance with the provisions of the plan document.
Under the Stock Incentive Plan, the Company is authorized to grant stock
options, stock appreciation right, restricted stock award, phantom stock awards
and performance share units. In the event that there is a change in control of
the Company, the plan stipulates that all outstanding options will become fully
vested and exercisable.

         Directors Plan options are granted at the fair market value on the date
of the grant and expire ten years from the date of grant. Concurrent with being
elected as a director, each non-employee director is granted an option to
purchase 10,000 shares of common stock, and is automatically granted an option
to purchase an additional 2,500 shares of common stock each year at the annual
shareholders meeting. In the event that there is a change in control of the
Company, the plan stipulates that all outstanding options will become fully
vested and exercisable.

         In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("Statement 123"),
which provides an alternative to APB No. 25. Statement 123 allows for a fair
value based method of accounting for stock options. However, for companies that
continue to account for stock-based compensation arrangements under APB 25, such
as the Company, Statement 123 requires disclosure of the pro forma effect on net
income and earnings per share of its fair value based accounting for those
arrangements. The fair value for these options was estimated at the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions for 1996, 1995 and 1994, respectively; risk free
interest rates of 6.04%, 5.24% and 6.49%, dividend yields of 0%, volatility
factors of the expected market price of the Company's common stock of .601 and a
weighted-average expected life of the options of 3 years. As of December 31,
1996, the weighted average remaining contractual life of all options outstanding
was 4.25 years.

         The following unaudited pro forma summary presents the Company's net
income and earnings per share as if the estimated fair value of the options were
amortized to expense over the options' vesting period (in thousands except
earnings per share information):

                                                 FOR THE YEARS ENDED
                                                       DECEMBER 31,
                                              --------------------------
                                               1996              1995
                                               ----              ----

Pro forma net income                          $11,605            $11,156
                                              =======            =======

Pro forma net income per share                $  0.72            $  0.74
                                              =======            =======



The pro forma effect of compensation expense from stock option awards on pro
forma net income reflects the vesting of 1995 option awards in 1995 and 1996,
and 1996 option awards in 1996, in accordance with Statement 123. Because pro
forma compensation expense associated with a stock option award is recognized
over the vesting period, the initial impact of applying Statement 123 may not be
indicative of pro forma compensation expense in future years, when the effect of
multiple awards will be reflected in pro forma net income.




                                      -36-
<PAGE>   39


12.  STOCKHOLDERS' EQUITY (CONTINUED)

A summary of the Company's stock option activity, and related information for
the years ended December 31 is as follows:

<TABLE>
<CAPTION>

                                      1996                      1995                       1994
                             -----------------------   ------------------------   -----------------------
                                            WEIGHTED                  WEIGHTED                   WEIGHTED
                                            AVERAGE                   AVERAGE                    AVERAGE
                             OPTIONS FOR    EXERCISE   OPTIONS FOR    EXERCISE    OPTIONS FOR    EXERCISE
                             SHARES (000)   PRICE ($)  SHARES (000)   PRICE ($)   SHARES (000)   PRICE ($)
                             ------------  ---------   ------------   ---------   ------------  ---------
<S>                               <C>         <C>           <C>         <C>              <C>        <C> 
Outstanding-Beginning
 of year                          1,454       13.55         1,030       10.81            347        9.08
Granted                             684       16.90           522       18.13            706       11.70
Exercised                          (128)      13.29           (79)      11.10              -        -
Forfeited                           (34)      15.73           (19)      12.00            (23)      12.00
                             ----------                ----------                 ----------

Outstanding-end of
 year                             1,976       14.62         1,454       13.55          1,030       10.81
                             ==========                ==========                 ==========

Exercisable at end of
 year                               730                       639                        347
                             ==========                ==========                 ==========
Weighted-average fair
 value of options
 granted during the year     $     6.37                $     8.57                 $     4.69
                             ==========                ==========                 ==========

</TABLE>

Options outstanding and exercisable at December 31, 1996 are as follows:

<TABLE>
<CAPTION>
                                        Options Outstanding                               Options Exercisable
                        -------------------------------------------------        -------------------------------

                                             Weighted
                                             Average            Weighted                               Weighted
                          Options           Remaining            Average            Options            Average
                        Outstanding        Contractual          Exercise          Exercisable          Exercise
                          (000's)              Life               Price             (000's)             Price
                        -----------        -----------          --------          -----------          --------
<C>                          <C>               <C>               <C>                    <C>           <C>       
$ 9.08 - $15.00              915               4.5 yrs.          $  10.88               659           $   10.50

$15.01 - $23.53            1,061               4.7 yrs.          $  17.84                71           $   17.81
                           -----                                                     ------

                           1,976                                                        730
                           =====                                                     ======

</TABLE>



Options available for grant at December 31, 1996 are as follows (in thousands):

             Stock Incentive Plan                               281
             Directors Plan                                     160
                                                                ---
                                                                441
                                                                ===




                                      -37-
<PAGE>   40


13.  PRO FORMA HISTORICAL NET INCOME PER SHARE

         The pro forma historical net income per share amounts, as required by
generally accepted accounting principles, after giving effect to the pro forma
income tax adjustments as described in Note 1, are as follows for the year ended
December 31, 1994 (in thousands, except per share data):

Historical income before income tax expense                         $ 12,899
Pro forma income tax expense                                           5,160
                                                                    --------

Pro forma net income                                                $  7,739
                                                                    ========

Pro forma net income per share                                      $   0.72
                                                                    ========
Historical weighted average shares outstanding                        10,785
                                                                    ========


14.  RELATED PARTY TRANSACTIONS

         One of the buildings used for corporate offices of the Company is
leased from a Florida limited partnership. In consideration for signing the
lease, the Company was granted an 8 percent limited partnership interest in the
partnership which owns and operates the building. In addition, this limited
partnership has two limited partners who are directors, officers and
stockholders of the Company. The lease provides for the payment of a
proportionate share of increases in operating expenses over the base year in
addition to the monthly rent. The lease term expires December 31, 1997. The
amounts paid during the years ended December 31, 1996, 1995 and 1994 were
approximately $443,000, $413,000 and $ 408,000, respectively.

         In September 1993, the Company assumed a lease for office space in a
building that is owned by certain stockholders of the Company. The lease term
expires December 31, 2000. The amounts paid during the years ended December 31,
1996, 1995 and 1994 were approximately $332,000, $354,000, and $298,000 ,
respectively.

         The Company received income of approximately $1,281,000, $1,558,000,
and $2,969,000 for the years ended December 31, 1996, 1995 and 1994,
respectively, for administrative, consulting, and billing fees provided to
Affiliates. At December 31, 1996 and 1995, accounts receivable from Affiliates
related to the above services were approximately $202,000 and $559,000,
respectively.

         The Company incurred professional fees of approximately $97,000,
$220,000 and $441,000 for financial advisory services provided to the Company
during the years ended December 31, 1996, 1995, and 1994, respectively, by the
Company's financial advisor. A general partner of the Company's financial
advisor is a member of the Company's Board of Directors. In addition, a brother
of the Company's Chief Financial Officer is a general partner in the same
financial advisory firm.

         During 1995, the Company incurred approximately $100,000 for services
provided by a consulting firm, a partner of which is a member of the Company's
Board of Directors. Upon termination of the consulting services, the individual
serving as a director accepted a position as the Company's Chief Operating
Officer.




                                      -38-
<PAGE>   41


15.  OPERATING LEASES

         The Company is obligated under various noncancelable operating leases.
The minimum future obligation under these agreements at December 31, 1996 is as
follows (in thousands):

          1997                                     $   3,886
          1998                                         3,068
          1999                                         2,777
          2000                                         1,654
          2001                                         1,186
          2002 and thereafter                              -
                                                   ---------
                                                    $ 12,571
                                                   =========

         Rent expense for the years ended December 31, 1996, 1995 and 1994 was
approximately $3,792,000, $3,453,000, and $2,736,000, respectively. Certain of
the Company's operating leases contain rent escalation clauses and renewal
options as defined in the respective agreements.

16.  EQUITY SECURITIES

         In May 1993 the FASB issued Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities (the
"Statement"). The Company adopted the provisions of the statement for
investments held as of or acquired after January 1, 1994. In accordance with the
Statement, prior period financial statements have not been restated to reflect
the change in accounting principle. The cumulative effect as of January 1, 1994
of adopting the Statement increased the opening balance of stockholders' equity
by approximately $696,000 to reflect the net unrealized holding gains on
securities classified as available-for-sale previously carried at lower of cost
or market. No unrealized holding losses on investments have been reflected in
1994 net income. As of December 31, 1996, the fair market value and cost of the
Company's marketable equity securities were approximately $300,000 and $500,000,
respectively.

17.  FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

CASH

The carrying amount reported in the balance sheet for cash approximates its fair
value.

ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE

The carrying amounts reported in the balance sheet for accounts receivable and
accounts payable approximate their fair value.

INVESTMENT SECURITIES

The fair values for equity securities are based on quoted market prices.

LONG TERM DEBT

The carrying amount of the Company's long term debt approximates their fair
value. The Credit Facility contains borrowing options of 1 to 6 months at which
time borrowed amounts are repaid or reborrowed at new interest rates based on
prime or LIBOR.





                                      -39-
<PAGE>   42



                INPHYNET MEDICAL MANAGEMENT INC. AND SUBSIDIARIES
                               SUPPLEMENTARY DATA
                                   (UNAUDITED)

CONSOLIDATED QUARTERLY FINANCIAL INFORMATION (IN THOUSANDS)(EXCEPT PER SHARE
DATA):

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED
                                             -------------------------------------------------------------
                                             MARCH 31       JUNE 30        SEPTEMBER 30      DECEMBER 31
                                             --------       -------        ------------      -----------
                                                                            (Restated)       (Restated)
<S>                                          <C>           <C>              <C>              <C>     

YEAR ENDED DECEMBER 31, 1996
Total revenue                                $ 87,903      $ 90,466         $113,340         $116,811
Operating expenses                             81,545        83,864          108,076(3)       112,204(3)
                                             --------      --------         --------         --------
Income from operations                       $  6,358      $  6,602         $  5,264(3)      $  4,607(3)
                                             ========      ========         ========         ========
Net income                                   $  3,650      $  3,590(1)      $  3,127(3)      $  2,674(3)
                                             ========      ========         ========         ========
Net income per share                         $   0.23      $   0.22(1)      $   0.20(3)      $   0.16(3)
                                             ========      ========         ========         ========

Weighted average number of
  common shares outstanding                    16,067        16,061           15,966           16,002
                                             ========      ========         ========         ========

YEAR ENDED DECEMBER 31, 1995
Total revenue                                $ 77,106      $ 81,858         $ 82,034         $ 84,342
Operating expenses                             71,767        76,412           78,133           77,701
                                             --------      --------         --------         --------
Income from operations                       $  5,339      $  5,446         $  3,901         $  6,641
                                             ========      ========         ========         ========
Net income                                   $  2,823      $  3,169         $  1,208(2)      $  4,088
                                             ========      ========         ========         ========
Net income per  share
                                             $   0.19      $   0.21         $   0.08(2)      $   0.26
                                             ========      ========         ========         ========
Weighted average  number of common
shares outstanding                             14,629        14,810           15,026           15,614
                                             ========      ========         ========         ========
</TABLE>

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

(1)   Net income has been reduced by one time charges consisting of the loss on
      the sale of physician practices of $0.7 million and certain management
      restructuring charges of $0.3 million recorded during the three months
      ended June 30, 1996. The effect of these costs, net of tax, is to reduce
      net income per share by $0.04.

(2)   Net income has been reduced by acquisition costs incurred in connection
      with poolings of interest of $1.7 million and employee severance and other
      costs of $0.8 million. The effect of these costs, net of tax, in addition
      to $0.9 million of tax conversion charge (see Note 7 to the Company's
      consolidated financial statements) is to reduce net income per share by
      $0.16.

(3)   Restated to reflect the Company's change in accounting for the costs 
      associated with the PCA Agreement. See Note 4 to the Company's 1996
      financial statements.




                                      -40-
<PAGE>   43



                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The table below sets forth the names, ages and titles of the persons who are
directors and executive officers of the Company:

<TABLE>
<CAPTION>


                NAME                    AGE                               POSITION
                ----                    ---                               --------
<S>                                     <C>     <C>
Clifford Findeiss..................      56    Chairman of the Board, President and Chief Executive Officer
Erie D. Chapman, III ..............      53    Senior Executive Vice President, Chief Operating Officer and Director
George W. McCleary, Jr.............      45    Executive  Vice  President,  Chief  Financial  Officer,  Secretary  and
                                                 Director
Jere D. Creed......................      55    Senior Vice President, Hospital Physician Services and Director
Marta Prado........................      45    Senior Vice President, Capitated Medical Services and Director
Neil J. Principe...................      51    Senior Vice President, Hospital Physician Services - Business
                                                 Development and Director
Victor J. Weinstein................      51    Senior Vice President, Mergers and Acquisitions, Treasurer and Director
Thomas E. Dewey, Jr. (1)(2)........      64    Director
Donald C. Wegmiller (1)(2).........      58    Director

</TABLE>

----------
(1) Member of the Compensation Committee of the Board of Directors.

(2) Member of the Audit Committee of the Board of Directors.

         CLIFFORD FINDEISS, Chairman of the Board of Directors since August
1994, has served as President and Chief Executive Officer of the Company since
1974. He was a founder of the Company. Dr. Findeiss holds a B.S. in Mechanical
Engineering from Northwestern University (1964), an M.D. from Northwestern
University Medical School (1968), and an M.S. in Pharmacology from Northwestern
University (1969).

         ERIE D. CHAPMAN, III, a Director since May 1995, was appointed Chief
Operating Officer of the Company in November 1995. He was President and Chief
Executive Officer of U.S. Health Corporation, an Ohio not for profit company he
co-founded, from 1984 until June 1995, and was Chief Executive Officer and Vice
Chairman (1992-1994) and President and Chief Executive Officer (1983-1992) of
Riverside Methodist Hospitals, Columbus, Ohio. Mr. Chapman currently serves as a
director of 13 privately held corporations. He holds a B.S. degree from
Northwestern University (1965) and a J.D. from George Washington University
(1968). He is a member of the Ohio Bar Association.

         GEORGE W. MCCLEARY, JR., a Director since August 1994, has served as
Executive Vice President, Chief Financial Officer and Secretary since August
1994. He has been employed by the Company since December 1983. Mr. McCleary
holds a B.A. from Boston University (1974), a Masters degree in International
Business from the American Graduate School of International Management (1975),
and a J.D. from Stetson University College of Law (1979). He is a member of the
Florida Bar Association.

         JERE D. CREED, a Director since August 1994, has served as Senior Vice
President, Hospital Physician Services since September 1993. He was a founder of
the Company and has been an executive officer since 1974. Dr. Creed holds a B.A.
from Youngstown University (1964) and an M.D. from the University of Miami
School of Medicine (1970). He is certified by the ABEM and is an examiner for
the ABEM. Dr. Creed serves as a Clinical Associate Professor of Medicine at the
University of Miami School of Medicine.

         MARTA PRADO, a Director since August 1994, was appointed to Senior Vice
President, Capitated Medical Services in November 1995. Ms. Prado had served as
Senior Vice President, Correctional Care since September 1993. She has been
employed by the Company since 1980. Ms. Prado holds a B.S. in Nursing from the
University of Miami School of Nursing and Medicine (1971).


                                      -41-
<PAGE>   44


         NEIL J. PRINCIPE, a Director since August 1994, was appointed Senior
Vice President, Hospital Physician Services-Business Development in November
1995. Dr. Principe had served as Vice President, Recruitment since September
1993. He has been an executive officer of the Company since 1974. He holds a
B.A. from Cornell University (1967), and an M.D. from the State University of
New York Downstate Medical College (1971). He has completed a residency in
internal medicine and is certified by the ABEM and by the ABIM.

         VICTOR J. WEINSTEIN, a Director since August 1994, was appointed Senior
Vice President, Mergers and Acquisitions, and Treasurer in November 1995. He has
been affiliated with the Company since 1976. Dr. Weinstein holds a B.A. from
Tulane University (1966) and an M.D. from Tulane University Medical School
(1970). He has completed a residency in internal medicine and is certified by
the ABEM and by the ABIM.

         THOMAS E. DEWEY JR., a Director since August 1994, has been a General
Partner of McFarland Dewey & Co., a financial advisory services firm since 1989.
Prior to the formation of McFarland Dewey & Co., he was President of Thomas E.
Dewey, Jr. & Co., Inc., a financial advisory services firm, from 1976 to 1989,
and a General Partner of Kuhn, Loeb & Co. from 1965 to 1975. Mr. Dewey is a
director of Northwest Natural Gas Company and Chairman Emeritus of Lenox Hill
Hospital, New York, N.Y. He holds an A.B. from Princeton University (1954) and
an M.B.A. from Harvard University (1958).

         DONALD C. WEGMILLER, a Director since August 1994, has been President
of the Management Compensation Group/Healthcare, a consulting firm that
specializes in compensation and benefit programs for health care executives and
physicians, since April 1993. From 1978 to April 1993, Mr. Wegmiller was
President and Chief Executive Officer of Health Span Health Services (a
successor to Health One Corporation), a Minneapolis-based health care system.
Mr. Wegmiller also served as Chairman of the Board of American Hospital
Association and currently serves as a director of Possis Medical, Inc.,
Minnesota Power & Light Company, HBO & Company, and Medical Graphics
Corporation. He holds a B.A. from the University of Minnesota (1960), and an
M.A. from the University of Minnesota (1962).

CLASSIFICATION OF BOARD OF DIRECTORS

         The Company's Board of Directors is divided into three classes -- Class
I, Class II and Class III -- which must be as equal in number of members as
possible. Each class of directors serves for a three year term and is elected on
a rotating three-year basis.

         The Class I Directors (Clifford Findeiss, George W. McCleary, Jr., Neil
J. Principe and Erie D. Chapman, III) hold office until the 1998 annual
shareholders meeting. The Class II Directors (Jere D. Creed, Thomas E. Dewey,
Jr., Marta Prado and Victor J. Weinstein) hold office until the 1999 annual
shareholders meeting. The Class III Director (Donald C. Wegmiller) holds office
until the 1997 annual shareholders meeting.





                                      -42-
<PAGE>   45


ITEM 11.  EXECUTIVE COMPENSATION

The following table sets forth the compensation received by the Company's Chief
Executive Officer and the four other most highly compensated executive officers
of the Company (collectively, the "Named Executive Officers") for services in
all capacities for the years ended December 31, 1996, 1995 and 1994:

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                                LONG TERM
                                                                           COMPENSATION AWARDS
                                                                           --------------------
                                                                        RESTRICTED     SECURITIES
                                                ANNUAL COMPENSATION       STOCK        UNDERLYING       ALL OTHER
       NAME AND PRINCIPAL POSITION      YEAR    SALARY ($)  BONUS ($)   AWARDS ($)    OPTIONS (#)   COMPENSATION ($)
       ---------------------------      ----    ----------  ---------   ----------    -----------   ----------------
<S>                                     <C>        <C>                                                          
Clifford Findeiss                       1996       362,500         --          --            --              --
  Chairman of the Board of Directors,   1995       420,826         --          --            --              --
  Chief Executive Officer and           1994       388,317         --          --            --             144
  President

Erie D. Chapman, III (1)                1996       275,000         --      57,035 (2)         --         251,876 (3)
  Senior Executive Vice President,      1995        27,500         --          --        210,000              --
  Chief Operating Officer and           1994            -          --          --             --              --
  Director

George W. McCleary, Jr.                 1996       350,000         --          --         75,000              --
  Executive Vice President,             1995       375,000         --          --         12,000              --
  Chief Financial Officer,              1994       374,999     35,000          --         25,000              51
  Secretary and Director

Jere D. Creed                           1996       253,750         --          --             --              --
  Senior Vice President, Hospital       1995       350,000         --          --             --              --
  Physician Services and Director       1994       353,029         --          --             --             144

Marta Prado                             1996       290,000         --          --         75,000         156,700 (3)
  Senior Vice President, Capitated      1995       238,114         --          --          8,000              --
  Medical Services and Director         1994       200,000     25,000          --         20,000              51


</TABLE>


------------------------------
(1) Mr. Chapman assumed his position with the Company on November 17, 1995.

(2) Under the terms of Mr. Chapman's employment agreement, he received 3,202
    shares of restricted stock that vest ratably over 12 months. At December
    31, 1996, Mr. Chapman owned 3,202 shares of restricted stock.

(3) Represents compensation from the exercise of stock options.

STOCK OPTION GRANTS IN 1996

The following tables set forth, with respect to any of the Named Executive
Officers, options granted during the Company's last fiscal year and the future
potential realized value of such options at assumed annual rates of stock price
appreciation:

                           STOCK OPTION GRANTS IN 1996


<TABLE>
<CAPTION>
                                                                                             POTENTIAL REALIZED
                          NUMBER OF   PERCENT OF                                          VALUE AT ASSUMED ANNUAL
                         SECURITIES  TOTAL OPTIONS              MARKET                     RATES OF STOCK PRICE
                         UNDERLYING   GRANTED TO   EXERCISE     PRICE                     APPRECIATION FOR OPTION TERM
                           OPTIONS   EMPLOYEES IN    PRICE     AT DATE OF   EXPIRATION  ------------------------------
NAME                      GRANTED(#)  FISCAL YEAR  PER SHARE    GRANT(2)        DATE       0%($)     5%($)     10% ($)
----                    -----------  -----------  ---------  ----------- -------------  -------     -----      -------
<S>                        <C>            <C>        <C>        <C>                <C>    <C>       <C>        <C>    
George W. McCleary, Jr.    75,000(1)      11.79%     $17.20     $17.75     January 2002   41,250    413,598    865,218
Marta Prado                75,000(1)      11.79%     $17.20     $17.75     January 2002   41,250    413,598    865,218


</TABLE>

------------------------------
(1)  These options were granted in December 1996 under the 1994 Stock Incentive
     Plan. One-third of the options granted became fully vested and exercisable
     on January 2, 1997, and one-third of the options granted will vest and
     become exercisable on each of January 2, 1998 and January 2, 1999,
     respectively.

(2)  As reported on the Nasdaq National Market on the date of grant.



                                      -43-
<PAGE>   46

AGGREGATED OPTION EXERCISES AND OPTION VALUES

The following table provides certain information concerning the exercise of
options during fiscal 1996, the number of securities underlying unexercised
options held by any of the Named Executive Officers and the value of each such
officer's unexercised options at December 31, 1996:


                 AGGREGATED OPTION EXERCISES IN 1996 AND FISCAL
                             YEAR-END OPTION VALUES


<TABLE>
<CAPTION>
                                                              NUMBER OF SECURITIES            VALUE OF UNEXERCISED
                                                             UNDERLYING UNEXERCISED          IN-THE-MONEY OPTIONS AT
                       SHARES ACQUIRED                     OPTIONS AT FISCAL YEAR-END            FISCAL YEAR-END
NAME                    ON EXERCISE(#)   VALUE REALIZED ($)  EXERCISABLE/UNEXERCISABLE(#)   EXERCISABLE/UNEXERCISABLE($)
----                    --------------   ------------------  ----------------------------   ----------------------------
<S>                      <C>               <C>                <C>                             <C>
Erie D. Chapman, III         40,000         251,876             43,333  / 126,667             31,666  /  88,334
George W. McCleary, Jr.          --              --            231,295  /  95,335          2,014,490  / 110,010
Marta Prado                  10,000         156,700            135,412  /  89,668          1,168,946  / 100,008


</TABLE>

EMPLOYMENT AGREEMENTS

         The Company is a party to employment agreements with each of its Named
Executive Officers. The provisions of the employment agreements are
substantially identical, except for Mr. Chapman's (which is described below).
The employment agreements, other than Mr. Chapman's, have terms of three years,
expiring on December 1, 1999. The employment agreements with Messrs. Findeiss,
Chapman, McCleary, Creed and Ms. Prado, provide for base annualized salaried
compensation of $362,500, $275,000, $350,000, $253,750, and $290,000,
respectively, for such persons through December 1, 1999. Each employment
agreement requires the officer to devote substantially all of his time and
attention to the Company's business. The Company may terminate the employment
agreements for any reason at any time. In the event of a termination by the
Company without cause, the officer is entitled to one year's salary plus a
prorated portion of any bonus the officer would have earned. The employment
agreements provide that for one year after termination of employment with the
Company for any reason, the officer will not directly or indirectly, own,
manage, operate, join, control or participate in or be connected with, as an
officer, employee, partner, stockholder, or otherwise, any business, individual,
partnership, firm, or corporation which is at the time engaged principally or
significantly in a business which is, directly or indirectly, at the time in
competition with the business of the Company (or any subsidiary or affiliate) in
an area in which the Company (or such subsidiary or affiliate) then conducts
business.



                                      -44-
<PAGE>   47


         Mr. Chapman's employment agreement is for a term of three years
expiring on December 31, 1998, with the Company's option to extend for two
additional one-year terms. Under the terms of Mr. Chapman's employment
agreement, the Company agreed to grant Mr. Chapman 3,202 shares of stock each
January 1st over the term of the employment agreement. Each grant vests at the
rate of one-twelfth on the last day of each month, during the year of each
grant. Mr. Chapman is also to be paid a quarterly bonus of $18,750, if the
Company meets or exceeds the projected street consensus of the Company's
quarterly earnings per share as listed on First Call Research Network on the
first day of the fiscal year and an annual bonus of $50,000 if the Company meets
or exceeds its budgeted annual revenues for a fiscal year, excluding revenues
attributable to any entities acquired in transactions accounted for as poolings
of interests with respect to periods prior to the acquisition date. The
employment agreement of Mr. Chapman has a change of control provision that
provides for a severance payment in an amount equal to his annual compensation
if, during the six months following a change in control, he is terminated
without cause or, in certain circumstances, there is a substantial diminution in
his duties.

     In the event that there is a change of control in the Company, certain
provisions of executive employment agreements and stock option plans will become
effective. Each Named Executive Officers' respective employment agreement
provides (except in the case of Erie D. Chapman, III) for severance payments in
an amount equal to (i) 1.5 times each such officer's annual salary if, within 12
months following a change of control, the officer terminates his employment for
any reason or the Surviving Corporation terminates such officer's employment
other than for disability or cause, and (ii) 0.5 times such officer's annual
salary, if at least 12 but not more than 25 months following a change of
control, the Surviving Corporation terminates such officer's employment other
than for disability or cause or if the officer terminates his employment for
good reason.

         In addition, at December 31, 1996, the Named Executive Officers have
current option grants, the vesting of which will accelerate upon a change of
control of the Company, including Erie D. Chapman, III (126,667 options at
exercise prices ranging from $16.00 to $17.375 per share), George W. McCleary,
Jr. (95,335 options at exercise prices ranging from $12.00 to $19.76 per share)
and Marta Prado (89,668 options at exercise prices ranging from $12.00 to $19.76
per share).

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         The Compensation Committee of the Board of Directors determines
executive compensation, subject to the terms of each executive officer's
employment agreement with the Company. No executive officer of the Company
served on any board of directors or compensation committee of any entity other
than the Company with which any member of the Compensation Committee is
affiliated.




                                      -45-
<PAGE>   48


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of March 13, 1997 by: (i) each
person known to the Company to beneficially own more than 5% of the common
stock; (ii) each director and nominee for director of the Company; (iii) each
executive officer named in the Summary Compensation Table; and (iv) all
directors and executive officers of the Company as a group. Except as otherwise
indicated, each shareholder named has sole voting and investment power with
respect to such shareholder's shares.

<TABLE>
<CAPTION>
                                                               AMOUNT OF BENEFICIAL OWNERSHIP
                                                                       OF COMMON STOCK
                                                 ------------------------------------------------------------------
                                                 NUMBER          STOCK OPTIONS       TOTAL SHARES    PERCENTAGE OF
                                                   OF             EXERCISABLE        BENEFICIALLY     OUTSTANDING
                                                 SHARES       WITHIN 60 DAYS (3)       OWNED            SHARES
                                                ---------    ------------------     ---------        -------------
<S>                                            <C>            <C>                   <C>                <C>  
Clifford Findeiss (1)                          1,028,666              --            1,028,666          6.30%
Joseph J. Badal                                  983,872              --              983,872          6.03%
Jere D. Creed (1)                                974,669              --              974,669          5.97%
T. Rowe Price Associates, Inc.                   936,800              --              936,800          5.74%
Neil J. Principe                                 489,320              --              489,320          3.00%
Victor J. Weinstein (1)                          451,303              --              451,303          2.76%
George W. McCleary, Jr                           155,932           262,295            418,227          2.52%
Marta Prado                                       87,325           164,412            251,737          1.53%
Erie D. Chapman, III                               4,269(2)         43,333             47,602            *
Donald C. Wegmiller                                 --               7,499              7,499            *
Thomas E. Dewey, Jr                                 --               7,499              7,499            *
All directors and executive officers as a
  group (nine persons)                         3,191,484           485,034          3,676,518         21.87%


</TABLE>

------------------------------
*    Less than 1%.

(1)      The shares beneficially owned by Drs. Findeiss, Creed and Weinstein are
         held through the J. Clifford Findeiss Revocable Trust, the Jere D.
         Creed Revocable Trust and the Victor Jerome Weinstein Revocable Trust,
         respectively.

(2)      Includes 534 shares of Common Stock that will vest through May 1, 1997
         pursuant to the January 1, 1997 grant of 3,202 shares of Common Stock
         in accordance with Mr. Chapman's employment agreement (see Employment
         Agreements).

(3)      Includes all vested options and options that will vest within 60 days.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          One of the buildings used for the Company's corporate offices is
leased from Barr-Bell Limited, a Florida limited partnership. The Company
acquired an 8 percent limited partnership interest in the partnership which owns
and operates the building. Clifford Findeiss, the Company's Chief Executive
Officer, President and Chairman of the Board of Directors, and Neil J. Principe,
a Senior Vice President of Business Development and Director, are Barr-Bell
limited partners. The total rent paid during the year ended December 31, 1996
was approximately $443,000, which will increase annually in proportion to
increases in the Consumer Price Index. The lease provides for the payment by the
Company of a proportionate share of increases in operating expenses over the
base year in addition to the monthly rent. The lease term expires December 31,
1997.

          During 1996, the Company incurred professional fees in an aggregate
amount of approximately $97,000 for financial advisory services provided to the
Company by McFarland Dewey & Co. ("McFarland Dewey"). Thomas E. Dewey, Jr.,
became a member of the Company's Board of Directors subsequent to the completion
of the IPO and is a general partner in McFarland Dewey. In addition, a brother
of the Company's Chief Financial Officer is a general partner in McFarland
Dewey.

      The Company believes that the terms of the transactions described above
are fair to the Company and comparable to what would have been obtained in arms'
length negotiations with unaffiliated parties.



                                      -46-
<PAGE>   49


                      COMPLIANCE WITH SECTION 16(A) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


          Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10
percent of the Common Stock, to file with the Securities and Exchange Commission
("SEC") and the Nasdaq National Market initial reports of beneficial ownership
and changes in beneficial ownership of the Common Stock. Such persons are also
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. To the Company's knowledge, based solely on a review of
the copies of such reports furnished to the Company and written representations
as to transactions for which reports are required, all Section 16(a) filing
requirements applicable to such individuals were complied with during 1996.


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA, FINANCIAL 
          STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

    (a)    The following documents are filed as part of this report:

           (1)  Financial Statements

           The list of financial statements required by this item is set forth
           in Item 8, "Consolidated financial Statements and Supplementary Data"

           (2)  Financial Statement Schedule
                                                                         Page
                                                                         ----
          Schedule II - Valuation and Qualifying Accounts                 48

All other schedules have been omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedules.

           (3)  Exhibits

                The exhibits filed herewith or incorporated by reference are
                listed on the index at pages 49 and 50.

           (b)  Reports on Form 8-K

                The Company filed no reports on Form 8-K during 1996.





                                      -47-
<PAGE>   50




                INPHYNET MEDICAL MANAGEMENT INC. AND SUBSIDIARIES
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                  ADDITIONS
                                                           -----------------------
                                             BALANCE AT    CHARGED TO   CHARGED TO                     BALANCE
                                              BEGINNING    COSTS AND     OTHER                        AT END OF
             DESCRIPTION                     OF PERIOD     EXPENSES    ACCOUNTS(1)  DEDUCTIONS(2)      PERIOD
             -----------                     -----------  ----------   -----------  -------------    ----------
<S>                                           <C>                     <C>            <C>             <C>      
YEAR ENDED DECEMBER 31, 1996
Allowances for contractual,
  charity and other adjustments               $  91,000        -      $ 267,000      $(275,000)      $  83,000

YEAR ENDED DECEMBER 31, 1995
Allowances for contractual,
  charity and other adjustments               $  63,000        -      $ 244,000      $(216,000)      $  91,000

YEAR ENDED DECEMBER 31, 1994
Allowances for contractual,
  charity and other adjustments               $  47,000        -      $ 201,000      $(185,000)      $  63,000

</TABLE>


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

(1)     See Note 6 to the Consolidated Financial Statements

(2)     Accounts written off, net of recoveries





                                      -48-
<PAGE>   51


                INPHYNET MEDICAL MANAGEMENT INC. AND SUBSIDIARIES
                                INDEX TO EXHIBITS
                                 (ITEM 14(A)(3))


<TABLE>
<CAPTION>

Exhibit
  No.          Description
--------       -----------

<S>            <C>
 2.1           Agreement and Plan of Merger, dated as of August 31, 1995, between InPhyNet Medical Management
               Inc., IMMI Radiology Acquisition Corporation, Rosendorf, Margulies, Boroshok and Schoenbaum
               Radiology Associates of Hollywood, Inc., Imaging Health Services, Inc., Hollywood Professional
               Collections, Inc. and the shareholders of Rosendorf, Margulies, Boroshok and Schoenbaum Radiology
               Associates of Hollywood, Inc., Imaging Health Services, Inc. and Hollywood Professional
               Collections, Inc. listed on Exhibit A thereto.***

 2.2           Agreement and plan of merger dated as of January 20, 1997 by and among MedPartners, Inc., Seabird
               Merger Corporation and InPhyNet Medical Management Inc.

 3.1           Certificate of Incorporation of the Registrant*

 3.2           Bylaws of the Registrant*

 4.1           Specimen Common Stock certificate*

 4.2           Rights Agreement, dated as of August 23, 1995, between InPhyNet Medical Management Inc., and State
               Street Bank and Trust Company, as Rights Agent***

10.1           Inphynet Medical Management Inc. 1994 Non-Employee Director Stock Option Plan*

10.2           Inphynet Medical Management Inc.  1994 Stock Incentive Plan*

10.3           Form of Executive Employment Agreement

10.4           Registration Rights Agreement between the Company and the Holders (as defined herein)**

10.5           Agreement of Lease, dated January 16, 1987, between Barr-Bell Ltd., as lessor, and EMSA, as lessee*

10.6           Office Lease for 1200 South Pine Island Road, dated as of March 16, 1992, between Hartford Fire
               Insurance Company, as lessor, and EMSA, as lessee*

10.7           Corporate Center Office Lease, dated as of January 1, 1993, between Ridgewood Miller Partners, as
               lessor, and Acute Care Specialists, Inc., as lessee*

10.8           First Amendment to Lease Agreement, dated June 1, 1993, between Ridgewood Miller Partners, as
               Lessor, and Acute Care Specialists, Inc., as lessee*

10.9           Form of Guaranty and Suretyship Agreement, dated as of September 15, 1994, made by certain of the
               Company's subsidiaries to the banks and agent that are parties to the Amended and Restated
               Revolving Credit and Reimbursement Agreement**

10.10          Amended and Restated Revolving Credit and Reimbursement Agreement, dated September 15, 1994, by
               and among Inphynet Medical Management Inc., NationsBank of Florida, National Association, as
               Lender and NationsBank of Florida, National Association, as Agent**


</TABLE>


                                      -49-
<PAGE>   52

<TABLE>
<S>            <C>
10.11          Amendment No. 1 to amended and Restated Revolving Credit and Reimbursement Agreement, dated
               November 22, 1995, by and among Inphynet Medical Management Inc., NationsBank of Florida, National
               Association, as Lender and NationsBank of Florida, National Association, as Agent****


</TABLE>

                INPHYNET MEDICAL MANAGEMENT INC. AND SUBSIDIARIES
                          INDEX TO EXHIBITS (CONTINUED)
                                 (ITEM 14(A)(3))

<TABLE>
<CAPTION>


Exhibit
  No.          Description
-------        -----------
<S>            <C>
11             Statement Re: Computation of Per Share Earnings+

21             Subsidiaries of the Registrant+

23             Consent of Independent Certified Public Accountants+

*        Incorporated by reference from the Company's Registration Statement in
         Form S-1, No. 33-80106, previously filed with the Securities and
         Exchange Commission (the "Commission") and declared effective on August
         19, 1994.

**       Incorporated by reference from the Company's Quarterly Report on Form
         10-Q for the quarter ended September 30, 1994 and filed with the
         Commission on November 14, 1994.

***      Incorporated by reference to the Registrant's Report on Form 8-K filed on August 28, 1995.

****     Incorporated by reference to the Registrant's Report on Form 10-K for the year ended December 31, 1995.

+        Incorporated by reference to the Registrant's Report on Form 10-K for the year ended December 31, 1996.

</TABLE>





                                      -50-
<PAGE>   53


                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized, on May 23, 1997.

                                INPHYNET MEDICAL MANAGEMENT INC.

                                 By:      /s/  Clifford Findeiss
                                          -------------------------------------
                                 Name:    Clifford Findeiss
                                 Title:   President and Chief Executive Officer,
                                          Chairman of the Board


Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Company and in
the capacities indicated on May 23, 1997.

<TABLE>
<CAPTION>
   Signature                                           Title
   ---------                                           -----

<S>                                                    <C>
/s/                 Clifford Findeiss                  President, Chief Executive Officer and Chairman of the
---------------------------------------------          Board of Directors
                    Clifford Findeiss        


/s/               Erie D. Chapman, III                 Senior Executive Vice President, Chief Operating Officer
----------------------------------------------         and Director
                  Erie D. Chapman, III        


/s/              George W. McCleary, Jr.               Executive Vice President, Chief Financial Officer,
----------------------------------------------         Director and Secretary
                 George W. McCleary, Jr.      

/s/                 Mary Ann Blanford                  Vice President, Chief Accounting Officer
----------------------------------------------              
                    Mary Ann Blanford


/s/                   Jere D. Creed                    Senior Vice President and Director
----------------------------------------------
                      Jere D. Creed


/s/                    Marta Prado                     Senior Vice President and Director
----------------------------------------------
                       Marta Prado


/s/                 Neil J. Principe                   Senior Vice President and Director
----------------------------------------------
                    Neil J. Principe


/s/                Victor J. Weinstein                 Senior Vice President, Treasurer and Director
----------------------------------------------
                   Victor J. Weinstein


</TABLE>



                                      -51-
<PAGE>   54


                             SIGNATURES (CONTINUED)

<TABLE>

<S>                                                    <C>
/s/               Thomas E. Dewey, Jr.                 Director
----------------------------------------------
                  Thomas E. Dewey, Jr.



/s/                Donald C. Wegmiller                 Director
----------------------------------------------
                   Donald C. Wegmiller


</TABLE>





                                      -52-