<PAGE>
================================================================================

                      U.S. SECURITIES EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               ------------------
                                   FORM 10-KSB

(Mark One)
[X]           ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
              ACT OF 1934 
              For the fiscal year ended December 31,1998

[ ]           TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
              EXCHANGE ACT OF 1934 
              For the transition period from ________________to ________________

                         Commission file number: 0-24640

                        COMMUNITY MEDICAL TRANSPORT, INC.
                        ---------------------------------
              (Exact name of small business issuer in its charter)

             Delaware                                         13-3507464
             --------                                         ----------
  (State or other jurisdiction of                          (I.R.S. Employer
  incorporation or organization)                         Identification No.)

                  4 Gannett Drive, White Plains, New York 10604
                -------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number (914) 697-9233

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

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.001 par value
                          -----------------------------
                                (Title of Class)

               Redeemable Warrants expiring on September 29, 1999
               --------------------------------------------------
                                (Title of Class)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes__X__ No._____

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained herein, and no disclosure will be
contained, to the best of issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

         Issuer's revenues for the year ended December 31, 1998 are $18,245,000

         The aggregate market value of the voting and non-voting common stock
held by nonaffiliates of the issuer is $2,996,826 (as of March 30, 1999).

         The number of shares outstanding of the issuer's common stock is
998,942 (as of March 30, 1998).

                       DOCUMENTS INCORPORATED BY REFERENCE

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


<PAGE>



                                     PART I


Item 1.  Description of Business

Introduction

         Community Medical Transport, Inc. (the "Company"), through its
subsidiaries, provides medical transportation and other specialized
transportation services in the New York-New Jersey metropolitan area. These
services include specialized transportation for the handicapped, disabled,
mentally retarded, elderly and chronically ill to and from day treatment
centers, day care programs, hospitals, nursing homes, dialysis centers, and
other health care facilities. This service is provided in ambulettes -
specialized vans that contain ramps and other equipment designed to secure and
safely transport wheelchair bound passengers. These services also include
emergency and non-emergency ambulance transportation services, including limited
"911" emergency service, for patients who require basic medical care or
supervision during transport to and from hospitals, nursing homes and other
health care facilities.

         As overall demand for ambulance and ambulette services is increasing,
contracting parties and regulatory authorities are imposing more stringent
requirements in terms of quality of care and cost of service. Ambulance and
ambulette service providers are facing increasing demand to deploy vehicles more
efficiently, employ more highly trained personnel and otherwise operate more
cost-efficiently. These requirements and their associated costs are producing
consolidation opportunities as smaller service providers seek to combine with
larger providers to gain access to greater financial, technological and
managerial resources to improve dispatch systems, fleet maintenance, training of
personnel, accounts receivable recovery and marketing capability. In addition,
there are significant barriers to entry into this industry, particularly with
respect to ambulance services.

         The principal executive offices of the Company are located at 4 Gannett
Drive, White Plains, New York 10604 and its telephone number is (914) 697-9233.

         Unless the context otherwise requires, references to the "Company"
contained in this Annual Report include the subsidiaries of the Company.

         Share information herein retroactively reflects a one for six reverse
stock split of the Company's common stock effected in November 1998.


                                       1





<PAGE>


Recent Developments

         Beginning in 1997 and continuing during 1998 the Company took steps to
consolidate its separate operating entities, resulting from several
acquisitions, into one operating entity. The consolidation of the companies was
completed during 1998. The Company determined not to pursue any additional
acquisitions for several reasons including the completion of the consolidation
of its separate operating entities into one operation was completed.

         At December 31, 1997, the Company was not in compliance with several
financial covenants of its existing loan agreement. The lenders provided a
waiver in connection with an amendment to the loan agreement, on April 14, 1998.
As a result of such amendment, the lenders amended certain financial covenants
at future measurement dates to accommodate the Company's then current financial
status. The lenders also extended the maturity date of the revolving credit
arrangement to January 18, 1999 and in conjunction with such revisions, reduced
the amount under the revolving credit arrangement from $6,500,000 to $3,500,000.
In February 1999 the Company entered into a new financing arrangement with
Finova Capital Corporation. The Company obtained a term loan of $3,950,000, a
revolving credit line of $4,000,000 and availability of $1,000,000 for future
equipment acquisitions. The prior loan was satisfied with the proceeds of the
Finova loan.

         On March 29, 1999 the Company announced that it signed a letter of
intent with Lifestar Response Corporation ("Lifestar") for a merger of Lifestar
and the Company.

Industry Background

         Based on the Company's review of publicly available documents produced
by other service providers, the Company believes that costs of operating
ambulance and ambulette services in the United States have grown approximately
10% per year over the last decade. Although the ambulance service industry has
recently experienced an increase in consolidation by large national companies,
the Company believes that the medical transportation industry continues to be
highly fragmented.

         The Company believes that the increase in costs for ambulance services
has been a result of an increase in both the number of ambulance transports and
the average expenditures per transport. The growth and aging of the U.S.
population have increased demand for medical services, including general
ambulance and ambulette services. In addition, a greater emphasis on cost
containment through earlier hospital discharge and on the use of outpatient
facilities and home care therapy has resulted in an increased need for ambulance
and ambulette services to provide patients with transportation under medical
supervision. The enactment of the Americans with Disabilities Act in 1990 has
also resulted in a greater need for para-transit services.


                                       2


<PAGE>




Strategy

         As overall demand for ambulance and ambulette services increases,
contracting parties and regulatory authorities are imposing more stringent
requirements in terms of quality of care and cost of service. Ambulance and
ambulette service providers are facing increasing demand to deploy vehicles more
efficiently, employ more highly trained personnel and otherwise operate more
cost-efficiently. These requirements and their associated costs are producing
consolidation opportunities as smaller service providers seek to combine with
larger providers to gain access to greater financial, technological and
managerial resources to improve dispatch systems, fleet maintenance, training of
personnel, accounts receivable recovery and marketing capability. In addition,
there are significant barriers to entry into this industry, particularly with
respect to ambulance services. As a result, the Company believes that
well-established transportation providers with a strong customer base, a
reputation for high quality service, and profitable operations will have
considerable opportunity to expand their operations through acquiring and
consolidating smaller local providers.

         The Company had intended, through such acquisitions and expansion, to
build a network of and become a significant provider of ambulette and ambulance
services in the New York-New Jersey metropolitan and surrounding area. As a
result of its acquisitions prior to 1997, the Company believes it is now a
significant medical transportation provider in the New York-New Jersey
metropolitan area. In 1998, the Company determined not to pursue any additional
acquisitions pending consolidation of its separate operating entities into one
operation. Any resumption of acquisitions will depend upon the availability of
capital, the price of its common stock and various other factors.

         The Company intends to further expand through internal growth after its
consolidation of its separate operating entities into one operation. The Company
intends to achieve this by:

      o  Continuing its commitment to high quality, specialized medical 
         transportation services provided by qualified personnel;

      o  Expansion of services through increased marketing efforts to day care
         centers, nursing homes, hospitals, and other health care facilities and
         providers;

      o  Preserving ties to the local community and providing continuity of
         service and community relations, which may include retaining management
         of its acquired service providers, where necessary.

                                       3

<PAGE>

Ambulette Services

The Company provides specialized transportation for the handicapped, disabled,
mentally retarded, elderly and chronically ill to and from day treatment
centers, day care programs, hospitals, nursing homes, dialysis centers, and
other health care facilities in the New York-New Jersey metropolitan area. This
service is provided in ambulettes, which are specialized vans that contain ramps
and other equipment designed to secure and safely transport wheelchair bound
passengers as well as ambulatory passengers. The Company provides two principal
types of ambulette services to its customers: "pre-scheduled" and "scheduled
daily in advance."

The "pre-scheduled" services, which accounted for over 29% of the Company's
revenues during 1997 and approximately 26% of the Company's revenues during
1998, are provided to customers both with and without contracts. Under this
service, the customer or provider typically retains the Company to provide
regularly scheduled transportation services for patients who attend the
provider's facilities on a daily or other regularly scheduled basis.
Transportation is generally between the patient's residence and the customer's
health care facility and is provided five days a week except for long term care
and other specialized situations in which service is provided seven days a week.
Users of such services include; health care facilities such as dialysis centers,
adult day centers that service the elderly, day treatment programs that service
individuals with mental retardation and, in certain cases, other developmental
disabilities and comprehensive health care facilities, which serve as a
long-term "day care" alternative to nursing homes.

         The "scheduled daily in advance" services are provided to nursing homes
and other health care facilities on an "as-needed basis" pursuant to direct
calls from the customer. Transportation for this service is generally between
residences or nursing homes and hospitals or other health care facilities and is
generally requested by the customer not more than one day in advance.

         The Company has entered into an agreement with Union County, New Jersey
in connection with para-transit services (including medical and non-medical
transportation) provided by the county. Drivers required by the county are
provided by the Company pursuant to this agreement. Commencing January 1, 1998,
these services were expanded pursuant to a separate agreement to include
dispatching of the vehicles.

Ambulance Services

         The Company, through its subsidiaries, provides general ambulance
services to patients requiring various levels of medical supervision during
transfer to and from residences and health care facilities. The Company's
ambulance business commenced in February 1994 and was significantly augmented as
a result of acquisitions and marketing efforts.

                                       4

<PAGE>

         Ambulance operations generated approximately 49% and 45% of the
Company's total revenues during the years ended December 31, 1997 and 1998,
respectively. Presently, the Company's ambulance services are provided in New
York City, particularly Manhattan and the Bronx, as well as the Hudson Valley
and Westchester area of the New York-New Jersey Metropolitan area. The Company
initiated limited ambulance services in northern New Jersey in 1996 and
significantly expanded such services in 1997. While limited to basic life
support ("BLS") services under New Jersey regulation, the Company expanded the
northern New Jersey operations to a 24 hour, 7 days per week basis in early
1998.

         The Company is licensed to provide ambulance services in New York City,
Westchester, Rockland, Orange, Putnam, Dutchess, Ulster, Greene, northern New
Jersey and other counties in southeastern New York State. The Company's
ambulances provide both BLS services and advanced life support services ("ALS").
BLS service is utilized by patients requiring a basic level of medical care
during transport. BLS services may include basic airway management, hemorrhage
control and stabilization of fractures. ALS service requires advanced life
support systems such as cardiac monitoring, defibrillators, oxygen delivery and
advanced clinical care.

         The Company currently provides only limited "911" emergency services
because such services are provided by municipal authorities in the geographic
areas in which the Company operates. The Company provides exclusive 911 services
to two townships in Rockland County and on a non-exclusive basis in Ulster
County.

         Ambulance units are staffed by two EMTs and are equipped with medical
supplies, oxygen delivery systems, and equipment necessary to administer first
aid and other medical treatment. ALS ambulance units, staffed by crews of
specially certified EMTs (paramedics), are equipped with advanced life support
equipment, such as cardiac monitors, defibrillators, specialty pharmaceuticals
and medical supplies. The Company's ambulance services are typically provided
pursuant to arrangements with health care facilities and are either scheduled in
advance or provided on an as-needed basis.

Marketing and Sales

         The Company markets its services on the basis of quality of care,
reliability, reputation and cost. The Company efforts are conducted through a
business development department consisting of Craig Sloane and two sales
representatives. Operations managers also assist the business development
department.

         The Company markets its ambulette services principally to day treatment
centers and day care programs which provide programs for the handicapped,
disabled and elderly, as well as other health care facilities that require a
stable and reliable source of medical transportation for its patients. The
Company provides its ambulance services to several major hospitals and nursing
homes in New York City, Rockland, Ulster and Westchester counties. As part of
its marketing strategy, the Company has developed more than two dozen managed
care provider contracts and is seeking to enter into arrangements to become a
single source transportation provider for medical institutions.

                                       5

<PAGE>

Personnel Training and Quality Assurance

         As of December 31, 1998, the Company employed 130 EMTs and 62
paramedics. In general, EMTs furnish basic and emergency treatment while
transporting patients in ambulances. EMTs must be state certified to perform
basic and emergency care services. Certification as an EMT in the geographic
area in which the Company provides services requires completion of a training
program designed by the state. Paramedics providing ALS are required to complete
advanced training courses and obtain New York state and regional certifications
for more advanced emergency care services. The Company carefully screens all job
applicants and is committed to providing consistently high quality transport and
other services. All of the Company's ambulette drivers are subject to state
regulation. They must have a commercial driver's license with a designation to
transport passengers. Each new driver must undergo a physical examination and
testing for controlled substance abuse. Additionally, the Company verifies the
driving record of each new driver.

Billing and Collection

         The Company derives a substantial majority of its revenue from
reimbursement by third-party payors, particularly Medicaid and Medicare,
typically invoicing and collecting payments directly from the third party payor.
During the fiscal years ended December 31, 1997 and 1998, the Company derived
approximately 44% and 39%, respectively, of its net revenues from Medicaid and
Medicare; 9% and 11%, respectively, of its net revenues pursuant to contracts
with Beth Abraham Hospital (the Company's only fixed-cost provider); and 47% and
50%, respectively, of its net revenues from private insurers and other
non-governmental sources.

         The Company has only two contracts with municipalities or health care
facilities which require the Company to provide services without regard to a
patient's insurance coverage or ability to pay. Such requirements are generally
imposed on ambulance services which provide "911" or other emergency services on
an exclusive basis. The Company provides 911 services to two towns in Rockland
County. Overall, the Company believes that on an ongoing basis, uncompensated
trips will not be significant. See "Description of Business - Recent
Developments."

         The Company has developed an expertise in processing claims to
third-party payors. The Company uses specialized software systems to
specifically tailor and electronically submit most claims to Medicaid, Medicare
and certain other third-party payors. The Company believes that its expertise in
processing third-party claims reduces the collection time on its receivables and
results in fewer rejected claims based on incomplete or inaccurate information.
See "Description of Business--Recent Developments" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" for information
with respect to this write down.

                                       6

<PAGE>

Principal Customers

         During 1998 the majority of the Company's services are provided
pursuant to written agreements. Most of these agreements are for a one year
renewable term and designate the Company as a preferred provider. The Company
provides ambulette services to a significant customer, Beth Abraham Hospital
(and affiliates) located in Bronx County, New York, pursuant to written
contracts since 1988. Under these contracts, the Company provides ambulette
services on an exclusive basis for two programs of the hospital: an adult day
treatment center and a comprehensive care management center, an innovative
alternative to nursing home care for many people who are elderly and have
physical disabilities. These agreements, as amended, will expire on December 31,
1999. During the years ended December 31, 1997 and 1998, the Company derived
approximately 9% and 12%, respectively, of its revenues from services provided
on behalf of Beth Abraham Hospital and its affiliates including amounts
reimbursed by third parties. Dean Sloane, President of the Company, serves as
honorary director of Beth Abraham Hospital, without compensation.

         The Company provides para-transit transportation services to the County
of Union, New Jersey pursuant to written contracts, which have been extended
through December 31, 1999. During the years ended December 31, 1997 and 1998,
the Company derived approximately 6% and 9%, respectively, of its revenues from
services provided to the County of Union, New Jersey. The Company's revenues
from this source increased for the fiscal year ending 1998 since the Company
provided additional services to the County of Union, New Jersey.

         The Company provides transportation services to several day treatment
centers. In some cases, the majority of the people transported live in group
homes, which are operated by either voluntary or state agencies. The Company
negotiates separate arrangements with the group homes and day treatment centers
for the transportation needs of their clients.

Competition

         The ambulance and ambulette service industry is highly competitive.
Principal participants include government entities, large regional ambulance
service providers, hospitals and numerous local providers. The Company competes
with several large firms in its New York City market, including American Medical
Response (a subsidiary of Laidlaw), Transcare and Metropolitan Ambulance as well
as Mobile Life Support in the Hudson Valley region. The Company also encounters
competition, particularly with respect to ambulette services, from small
commercial providers operating in the New York - New Jersey metropolitan area.
The Company believes that health care facilities in the geographic area serviced
by the Company consider quality of care, reliability and reputation to be the
most important factors in utilizing a medical transportation provider, although
other factors such as financial stability, personnel policies and practices and
cost are also considered. In addition to present competition, other companies
that do not currently operate ambulance or ambulette services may enter the
ambulance or ambulette service business. There can be no assurance that health
care facilities that presently contract for ambulance or ambulette services will
not choose to provide ambulance or ambulette services directly in the future.

                                       7

<PAGE>

         Due to difficulties in obtaining a license, persons or entities seeking
to enter the ambulance industries have typically been required to acquire an
existing entity already in possession of an ambulance license. Consequently, the
Company believes that competition has been occurring in the environment of a
substantially fixed number of ambulance licenses.

         The Company believes that it may encounter significant competition for
acquisitions of other medical transportation service providers, particularly as
the industry consolidates. There are many companies with greater capital and
other resources than the Company which are actively seeking to acquire ambulance
service providers. Prospective acquirers of ambulance and ambulette service
providers compete primarily on the basis of price, form of consideration,
operating synergy opportunities and management. Competition for acquisition
candidates is intensifying within the ambulance service industry as the industry
consolidates. Such competition may result in the inflation of purchase prices to
levels which exceed the Company's financial capability or otherwise inhibit its
acquisition program.

Government Regulation

         The ambulance and ambulette service industry is subject to governmental
regulation at the federal, state and local levels. At the federal level, the
Company is subject to regulations under the Occupational Safety and Health Act
designed to protect employees of the Company. The federal government also
recommends standards for ambulance design and construction, medical training
curriculum, and designation of appropriate trauma facilities, which standards
may be modified by state agencies.

         Various aspects of the Company's operations are subject to and
regulated by New York State law. State requirements govern the licensing or
certification of ambulance service providers, training and certification of
medical personnel, the scope of services that may be provided by medical
personnel, staffing requirements, medical control, medical procedures,
communication systems, license and qualification of drivers and vehicles and
equipment.


                                       8

<PAGE>

         In addition, the operation of the Company's ambulette services are
subject to regulation by various state and local agencies. These regulations
encompass the licensing and qualification of drivers, vehicles, and equipment.

         Applicable federal, state and local laws and regulations are subject to
change. The Company currently believes that it is substantially in compliance
with regulatory requirements applicable to its ambulance and ambulette service
business. These regulatory requirements, however, may require the Company in the
future to increase its capital and operating expenditures in order to maintain
current operations or initiate new operations.

Reimbursement

         The Company must comply with various requirements in connection with
its participation in the Medicaid and Medicare programs. Medicaid is a combined
federal-state program for medical assistance to impoverished individuals who are
aged, blind, disabled or members of families with dependent children. The
various authorities of Medicare/Medicaid, including the New York State
Department of Social Services have the authority to set levels of reimbursement
within federal guidelines. The Company receives from its customers that are
covered by Medicaid, only the reimbursement permitted by Medicaid and is not
permitted to collect from the patient any difference between its customary
charge to such customers and the amount reimbursed. Any difference between the
Company's customary charge to its customers that are covered by Medicaid and
amounts reimbursed by Medicaid are not material to the Company's operating
results because the Company's customary charges to such customers generally do
not exceed amounts reimbursable by Medicaid.

         Medicare is a federal health insurance program for the elderly and for
chronically disabled individuals, which pays for ambulance services when
medically necessary. Medicare uses a charge-based reimbursement system for
ambulance services and reimburses 80% of charges determined to be reasonable by
Medicare, subject to the limits fixed for the particular geographic area. The
patient, Medicaid or secondary insurer is responsible for paying the remaining
20%, and Medicare requires the Company to expend reasonable efforts to collect
the balance. Medicare does not reimburse the Company for amounts the Company can
not collect from the patient. In determining reasonable charges, Medicare
considers and applies the lowest of various charge factors including the actual
charge, the customary charge, the prevailing charge in the same locality, the
amount of reimbursement for comparable services or the inflation-indexed charge
limit.


                                       9

<PAGE>

         The Company, like other Medicaid and Medicare providers, is subject to
governmental audits of its Medicaid and Medicare reimbursement claims. To date
the Company has not experienced significant adjustments as a result of any such
audit. As a provider of services under the Medicaid and Medicare programs, the
Company is also subject to the Medicaid and Medicare fraud and abuse laws. The
laws prohibit any bribe, kickback or rebate in return for the referral of
Medicaid or Medicare patients. Violations of these prohibitions may result in
civil and criminal penalties and exclusion from participation in the Medicaid
and Medicare programs.

         Pursuant to the federal/state statutory schemes for the regulation and
administration of the Medicaid program, each state has a Medicaid Fraud Control
Unit. The Company believes that it has complied with all appropriate
regulations.

         Government funding for health care programs is subject to statutory and
regulatory changes, administrative rulings, interpretations of policy,
determinations by intermediaries and governmental funding restrictions, all of
which could materially increase or decrease program reimbursements for ambulance
services. In recent years, Congress has consistently attempted to curb federal
spending on such programs. Amounts under reimbursement programs are subject to
administrative interpretation and enforcement policies. Currently, several
agencies have taken restrictive positions concerning Medicaid reimbursement. It
is likely that future funding levels for Medicare and Medicaid programs will be
reduced from present levels. The current Congress and various states are
considering proposals to reduce expenditures under various reimbursement
programs. Government agencies in the areas in which the Company operates have
proposed extensive budgetary reductions and rule changes for these programs.
The Company can not predict the overall effect on it as a result of any budget
or policy cuts, but such actions could adversely affect the Company.

         Moreover, the Company anticipates that Congress and state and local
legislatures will continue to review and assess alternative health care delivery
systems and cost-control measures, and public debate of these issues will likely
continue in the future. The Company cannot predict the effect any measures, if
adopted in the future, will have on the Company's business.

Insurance

         The Company carries a broad range of general liability, comprehensive
property damage, worker's compensation, professional liability, automobile and
other insurance coverage that management considers adequate for the protection
of its assets and operations, although there can be no assurance that the
coverage limits of such policies will be adequate. A successful claim against
the Company in excess of its insurance coverage could have a material adverse
effect on the Company and its financial condition. Claims against the Company,
regardless of their merit or outcome, may also have an adverse effect on the
Company's reputation and business. The Company is also subject to accident
claims as a result of the normal operation of its fleet of vehicles.


                                       10

<PAGE>

         Equipment As of December 31, 1998, the Company's fleet included 110
ambulettes and 39 ambulances. Except for 31 leased vehicles, the Company owns
all of its vehicles.

Employees

         As of December 31, 1998, the Company had a total of 450 employees of
which approximately 349 were full-time and 101 were part-time employees. Of
these, 396 employees were involved in medical transport services and 54
management, administrative and clerical personnel. Prior to the acquisition of
A-1 Ambulance Service, Inc. ("A-1"), the Company was not a party to any
collective bargaining agreements. The drivers, EMTs and paramedics of A-1 were
subject to a collective bargaining agreement until 1997 when they voted to
decertify the union. During 1997, ambulance drivers located in Yonkers, New York
and ambulette drivers located in Yonkers, New York and Union, New Jersey voted
to be unionized. As of December 31, 1998, the Company had negotiated and signed
agreements with the unions for the ambulette drivers located in Yonkers, New
York and Union, New Jersey and was in the final phase of negotiating a formal
agreement with the union for the ambulance drivers located in Yonkers, New York.
The Company considers its relations with employees to be good.

Item 2.  Description of Property

         The Company leases approximately 7,600 square feet in a facility
located in White Plains, New York, utilized for the Company's executive offices
and administrative purposes (accounts receivable collection, dispatch and
related functions). The base rental expense for the facility is currently
$159,600 per year, increasing $1,896 per year each second year commencing in
2000.
The lease for the facility expires in March 2005.

         The Company leases a facility located in Yonkers, New York, for
dispatch and vehicle basing, garaging and maintenance. The base rental expense
for the facility is currently $120,000 per year, increasing approximately $3,600
per year each year commencing in 1998. The lease for the facility expires in
March 2002.

         The Company leases a small office in Union, New Jersey for the
administration, including dispatch, of its Union County para-transit contract.

         In conjunction with the Elite Acquisition, the subsidiary of the
Company entered into a lease for garage and operating facilities in Orange, New
Jersey. This facility consists of garage, dispatch and office facilities. At
December 31, 1998, these facilities consist of the following: the facility in
Orange is 16,000 square feet for office space and a garage at an annual rental
of $57,000 pursuant to a lease that expires in March 1999.

                                       11

<PAGE>

Item 3.  Legal Proceedings

         In April 1997, a former employee of a subsidiary of the Company
commenced an action against the Company and the subsidiary entitled Allen Bemus
v. Community Medical Transport, Inc. and Empire Ambulance and Ambulette, Inc.,
in the Superior Court of Connecticut (the "Bemus Action"). The Bemus Action
alleges breach of an employment agreement and a covenant not to compete, a
breach of the covenant of good faith and fair dealing in connection with the
aforesaid agreements, defamation, lost wages and negligent infliction of
emotional distress. The Bemus Action seeks damages of approximately $250,000,
plus punitive damages. The Company believes that it has valid and meritorious
defenses to the Bemus Action, as well as offsets against the claims asserted in
the complaint, and has prepared an appropriate answer. The trial, without a jury
has been completed but a decision has not been rendered.

         A second action was filed against the Company and the subsidiary by two
former officers and shareholders of A-1 Ambulance Service ("A-1 Ambulance"). In
June 1996, the Company had acquired from A-1 Ambulance certain assets pursuant
to an asset purchase agreement dated December 29, 1995. That action, entitled
A-1 Ambulance Service, Inc., David J. Warburg and Helen H. Hendrie v. Community
Medical Transport, Inc. and Empire Ambulance and Ambulette, Inc. (the "Warburg
Action"), was filed on June 25, 1997 in the Supreme Court of the State of New
York, County of Westchester and was served upon the Company on July 10, 1997.
The Warburg Action alleges breach of the employment agreements entered into
between the Company and the former shareholders of A-1 Ambulance and seeks
damages, in the aggregate, of approximately $325,000. On September 8, 1997, the
Company served a motion to stay the action and to compel arbitration since the
written agreements upon which the claims in the Warburg Action are based provide
that disputes under those agreements are subject to arbitration. On October 22,
1997, the Company's motion was granted and the Company was awarded statutory
motion costs. As of this date, the plaintiffs in the Warburg Action have not
commenced arbitration. In the event that plaintiffs do commence an arbitration,
the Company believes that it has valid and meritorious defenses to the Warburg
Action, as well as offsets against the claims asserted in the complaint, and it
will continue to vigorously oppose that action.

         In February 1998, the Company filed an action against a provider of day
treatment and/or day rehabilitation services for which the Company previously
had provided ambulette and transportation services pursuant to a transportation
agreement. That action, entitled Community Medical Transport, Inc. v.
Professional Service Centers For The Handicapped, Inc. (the "CMTI Action"), was
filed on February 4, 1998 in Supreme Court of the State of New York, County of
Westchester. The CMTI Action alleges breach of contract by Professional Service
Centers For The Handicapped, Inc. ("PSCH") as a result of its failure and
refusal to pay the Company an outstanding balance of $187,422 for the Company's
services and quantum meruit based upon the reasonable value of those services.
PSCH served an answer which contains one counterclaim for unspecified damages
based upon the PSCH's claim that the Company breached the transportation
agreement. The answer which was served was defective. PSCH's counsel was
promptly notified of the deficiency and requested it to serve a properly signed
pleading. The Company intends to vigorously prosecute this action and oppose the
counterclaim.

                                       12

<PAGE>

         In an action entitled Medical Transportation Corp. v. Community Medical
Transport, Inc., and Community Ambulette Service, Inc., Medical Transportation
Corp. ("Med-Trans") alleges that during the 12 month period commencing December
1, 1996 and ending November 30, 1997, the Company willfully, voluntarily and
deliberately terminated relationships with numerous customers and unilaterally
ceased to provide services to said customers. Med-Trans is the holder of
promissory note from the Company, the principal of which is subject to
adjustment based on total annual revenues from an ambulette business acquired
from Med-Trans. Med-Trans is seeking a payment in the amount of $228,000. The
Company filed an answer to the complaint, together with affirmative defenses,
stating, among other things, that at no time did the Company voluntarily decide
not to service a customer. The Company intends to vigorously oppose this action.

         An action entitled Kenneth P. Silverman, Esq., Trustee of the Estate of
BR Ambulance Service, Inc. d/b/a American Ambulance and Oxygen Service, Inc. v.
Community Medical Transport, Inc., et al., was filed in the Bankruptcy Court for
the Eastern District of New York. By complaint dated February 12, 1998, the
Chapter 7 Trustee of BR Ambulance Service, Inc. ("BR") has sued the Company
alleging that the Company was the recipient of fraudulent conveyances from BR
arising out of an asset purchase agreement between the Company and BR, dated
March 12, 1995, wherein the Company allegedly agreed to purchase the assets of
BR for a base purchase price of $2,000,000 plus additional consideration to be
calculated pursuant to a specified formula. The complaint further alleges that
subsequently BR transferred various assets to the Company but the Company did
not pay the specified consideration and accordingly owes the Trustee of BR not
less than $2,000,000. The Company vigorously disputes the material allegations
of the complaint.

         The Company commenced an action, Community Medical Transport, Inc., et
ano. v. Harvey H. McGeorge Co., Inc. et al. Ambulance and Ambulette, Inc.
("Century") filed in Supreme Court State of New York, County of Westchester
against Harvey H. McGeorge Co., Inc. Richards/Decker Operating Co., Inc.,
Hudvalco, Inc. doing business as Hudson Valley Ambulance, Alan McGeorge, Tor
Avenue Realty, Inc. (all of the foregoing together referred to herein as the
"McGeorge Defendants") and Richard A. Eisner & Company, LLP. The Company alleges
damages of 5.4 million dollars resulting from fraud, negligent and intentional
breech of warranty, breach of contract, material omission, negligent
misrepresentation, fraud in the inducement and violation of the implied covenant
of good faith and fair dealing on the part of the McGeorge Defendants in the
course of disclosures made regarding a business acquired from the McGeorge
Defendants and negligence and breach of contract on the part of defendant
Richard A. Eisner and Company, LLP, in the course of accounting services
rendered relating to the acquisition of the business from the McGeorge
Defendants. The Company intends to vigorously prosecute this action.

         In an action entitled Oxford Health Plans (NY), Inc. v. Community
Medical Transport, Inc., filed in the Supreme Court, New York County, the
plaintiff claims $140,000 in health insurance premiums. The company vigorously
disputes the material allegations of the complaint and intends to interpose a
counterclaim for outstanding claims for transportation services authorized by
Oxford.


                                       13

<PAGE>

         In an action filed in the Supreme Court, Bronx County, the plaintiff, a
former employee of defendant is suing for commissions and severance pay pursuant
to an employment contract. The plaintiff also demands statutory damages pursuant
to the New York Labor Law. The Company vigorously disputes the material
allegations of the complaint.

         From time to time the Company is a party to litigation arising in the
ordinary course of business. There can be no assurance that the Company's
insurance coverage will be adequate to cover all liabilities occurring out of
such claims. In the opinion of management and except as described above, the
Company is not engaged in any legal proceedings expected to have a material
adverse effect on the financial condition or results of operations of the
Company.

Item 4.  Submission of Matters to a Vote of Security Holders


At a Meeting of Stockholders held on December 2, 1998, two matters were
presented to and voted upon by the Company's stockholders as follows:

         1. A proposal to approve a reverse stock split of six shares to one:

For:  3,053,458        Against: 309,663           Abstain: 2,000

         2. A proposal to adopt an amendment to the certificate of incorporation
            to reduce the authorized shares of the Company and eliminate a class
            of shares:

            The votes above reflect pre-split shares of common stock.

For:  3,059,752        Withheld: 299,363          Abstain: 2,000

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

         The Company's common stock and redeemable warrants are currently traded
on The Nasdaq Small Cap Market under the symbols "CMTI" and "CMTIW",
respectively.

         Prior to August 1997, the Company's common stock and redeemable
warrants were listed on The Nasdaq National Market. Although the Company did not
agree with the decision to terminate the listing of the Company's securities
from The Nasdaq National Market, in the view of The Nasdaq Stock Market Inc.,
the Company did not comply with certain Nasdaq criteria, the criteria was
unrelated to the financial condition of the Company.

                                       14

<PAGE>

         Set forth below are the high and low bids for the Company's common
stock and redeemable warrants on The Nasdaq Small Cap Market between August 1,
1997 and December 31, 1998. Such quotations reflect interdealer prices without
retail mark-up, mark-down or commissions, and may not reflect actual
transactions. Also set forth below are the high and low sales prices for the
Company's common stock and redeemable warrants on The Nasdaq National Market
between January 1, 1997 and July 31, 1997, restated for the six to one reverse
stock spilt.

<TABLE>
<CAPTION>

                                         Common Stock                           Redeemable Warrants
                                  --------------------------                -------------------------
                                    High               Low                   High               Low
                                  --------           -------                ------             ------
1998
----
<S>                               <C> <C>            <C> <C>                <C>  <C>           <C>  <C>
First Quarter                     $ 7-1/2            $ 4-7/8                $1-7/8             $0-3/4
Second Quarter                      7-1/8              4-1/2                 1-1/2              0-3/4
Third Quarter                       6-3/8              3-3/4                 0-3/4              0-3/8
Fourth Quarter                      4-1/8              2-5/8                 0-3/8              0-3/8

1997
----
First Quarter                     $25-1/2            $19-1/8                 8-1/4              4-1/8
Second Quarter                     19-7/8             16-1/2                 4-7/8              3-15/16
Third Quarter                      18                 12                     3-15/16            2-5/8
Fourth Quarter                     12-3/4              6-9/16                2-13/16            0-3/4
</TABLE>

         As of December 31, 1998, there were approximately 66 recordholders of
the Company's common stock and 7 record holders of redeemable warrants, although
the Company believes that there are more than 1,000 beneficial owners of its
common stock.

         The Company plans to retain any future earnings for use in its business
and, accordingly, the Company does not anticipate paying dividends in the
foreseeable future to its common stockholders. Payment of dividends is within
the discretion of the Company's Board of Directors and will depend, among other
factors, upon the Company's earnings, financial condition and capital
requirements.


                                       15


<PAGE>


Item. 6. Management's Discussion and Analysis of Financial Condition and 
         Results of Operations

Introduction

         For all periods presented, the following financial information includes
the accounts of all operating subsidiaries of the Company.

         The Company's total revenue, which is comprised primarily of ambulette
and ambulance service fees charged to Medicare, Medicaid, other third party
payers such as private insurance carriers and health maintenance organizations,
and directly to patients, is presented net of contractual adjustments. The
reimbursement from Medicare and Medicaid has been reduced as a percentage of
revenues from 44% in 1997 to 39% in 1998, while the reimbursement from private
insurers and other non governmental agencies has increased from 47% in 1997 to
50% in 1998.

Forward Looking Statements

The following statements and certain other statements in this annual report on
Form 10-KSB are based on current expectations. Such statements are forward
looking statements that involve a number of risks and uncertainties. Factors
that could cause actual results to differ materially include, but are not
limited to the following (i) general economic conditions, (ii) competitive
market influences (iii) third party reimbursement rate changes (iv) availability
of insurance at reasonable cost (v) customer relations and (vi) increased
competition.

Results of Operations

         Year Ended December 31, 1998 as Compared with Year Ended December 31, 
1997

         Revenues decreased by $4,569,000, or 20.0%, to $18,245,000 in 1998 from
$22,814,000 in 1997. The decrease is due substantially to the Company declining
certain services, previously performed by operations of acquired business, that
had become unprofitable as a result of the Company's stricter interpretations of
reimbursement regulations and reduction in reimbursement rates. These stricter
interpretations caused changes in relationships with certain customers thereby
reducing revenues and increasing competition.

         Operating expenses decreased by $3,028,000, or 18.4%, to $13,438,000 in
1998 from $16,466,000 in 1997. Total operating expenses as a percentage of
revenue for 1998 was 73.7% as compared to 72.2% in 1997. The increase of 1.5% as
a percentage of revenue was primarily due to an increase in depreciation
combined with certain fixed costs remaining constant as revenue decreased. As a
result of the foregoing, gross profit decreased minimally as a percentage of
revenues from 27.8% to 26.3% while gross profit decreased by $1,541,000 or
24.3%, to $4,807,000 in 1998 from $6,348,000 in 1997.

                                       16

<PAGE>

         Selling, general and administrative expenses decreased by $1,239,000,
or 17.8%, to $5,757,000 in 1998 from $6,996,000 in 1997. The decrease was a
direct result of reductions primarily in administrative operating costs,
marketing salaries and benefits, administrative salaries and benefits, and
amortization of intangibles. This was partially offset by an increase in bad
debt expense. Selling, general and administrative expenses as a percentage of
revenues increased by 0.8% to 31.5% for the year ended December 31, 1998, from
30.7% for the year ended December 31, 1997, primarily as a result of the
increased bad debt provisions as a percentage of revenue, as well as, an
increase in administrative salaries and benefits as a percentage of revenue.

         The charge to earnings for the intangibles write-down of $5,400,000 for
the year ended December 31, 1997 was the result of the reduced operating results
of the Hudson Valley companies and the corresponding measurement of its expected
future discounted cash flows. The increased costs of the Hudson Valley
companies, particularly higher personnel costs and the reductions in service
revenue, caused by changes in relations with certain customers and increased
competition, has led the company to reduce its carrying amount of its intangible
assets to net present value of the expected future cash flows as required by
General Accepted Accounting Principles.

         In 1997, the Company began consolidating its separate operating
entities into one company with separate operating divisions, which included a
consolidation of the billing process. In connection with this process, a
re-evaluation of outstanding accounts receivable resulted in a write-down of
$1,371,000 for the year ended December 31, 1997, principally relating to the
Hudson Valley companies, for revenues billed subsequent to its acquisition. The
Company also charged operations for the year ended December 31, 1997 for
$396,000 primarily relating to severance costs and $843,000 for costs previously
deferred in connection with potential acquisitions, which management believes
were unlikely to be completed.

         Loss from operations increased by $302,000, or 46.6%, to a loss of
$950,000 in 1998 from a loss of $648,000 (exclusive of the intangible and the
accounts receivable write down and the additional charge to earnings aggregating
$8,010,000 in 1997). This increase was a result of the factors described above,
primarily the reduced revenues and the disproportionate increases in operating
expenses and the provision for bad debts. The Company did not incur any
intangible or restructuring write downs in 1998 as compared to 1997.

         There was no other income in 1998 compared to 44,000 in 1997. This was
due to a management fee earned by the Company for the operation of an ambulance
company. The agreement was terminated December 31, 1997.

         Interest expense remained relatively constant with an increase of
$1,000 to $663,000 in 1998 from $662,000 in 1997.

         Interest income decreased by $23,000, or 30.7%, to $52,000 in 1998 from
$75,000 in 1997. The reduction in interest income is primarily due to
expenditures, which reduced available cash.

                                       17

<PAGE>


         The Company's income taxes amounted to a benefit of $516,000 for the
year ended December 31, 1998, compared with a tax benefit of $977,000 for the
year ended December 31, 1997. The 1997 tax benefit resulted from the Company
sustaining a taxable loss for the year ended December 31, 1997. The 1998 tax
benefit results from the recognition of a deferred tax asset as management
believes there is a strong likelihood that such amounts will be realized based
upon their assessment of expected future operations.

         The Company's net loss amounted to $1,045,000 or $1.05 per share, for
the year ended December 31, 1998, as compared to net loss of $8,224,000, or
$9.37 per share, for the year ended December 31, 1997. The net loss in 1997 was
attributable to additional expenses of the acquired entities as discussed above,
including the intangibles write-down and the restructuring costs.

Liquidity and Capital Resources

         Cash provided by operating activities was $926,000 in 1998 compared
with cash provided by operating activities of $96,000 in 1997. The increase in
cash provided by operating activities in 1998, was largely the result of a
decrease in accounts receivable and prepaid taxes receivable, offset partially
by a reduction in accounts payable and accrued expenses. The accounts receivable
decrease was commiserate with the decrease in revenue.

         Cash used in investing activities in 1998 and 1997 was $46,000 and
$705,000, respectively. The decrease in cash used in investing activities was
largely the result of cash being utilized in the prior year for acquisitions.
Cash used in investing activities in 1998 and 1997 was partially offset by
decreases in short-term investments of $312,000 and $597,000 respectively.

         Cash used in financing activities amounted to $1,713,000 for the year
ended December 31, 1998, as compared to cash provided by of $497,000 for the
same period in 1997. The increase in cash used in financing activities was
largely the result of increased repayments of borrowing and capital leases in
1998, as opposed to increased borrowing in 1997.

         In December 1996, the Company entered into a $10,000,000 credit
facility to replace its previously existing $3,200,000 credit facility for
working capital and capital expenditures. A portion of the $10,000,000 credit
facility consists of a $6,500,000 revolving credit arrangement, which may only
be drawn down if the Company has sufficient qualified accounts receivable. The
balance of the credit facility is available under term notes. The Company, at
times was unable to draw down desired amounts because of slow payment by
reimbursement agents resulting in delays in collection. In addition, the
Company was required from time to time to repay a portion of this facility under
the provisions of the credit agreement. At December 31, 1997, there was
$6,260,000 outstanding under this facility consisting of $4,000,000 under the
revolving credit arrangement and $2,260,000 under the term notes.

         At December 31, 1997, the Company was not in compliance with several
financial covenants of its existing loan agreement. The lenders have provided a
waiver in connection with an amendment to the loan agreement, which was
completed on April 14, 1998. As a result of such amendment, the lenders amended
certain financial covenants at future measurement dates to accommodate the
Company's current financial status. The lenders also extended the maturity date
of the revolving credit arrangement to January 18, 1999 and in conjunction with
such revisions, reduced the amount under the revolving credit arrangement from
$6,500,000 to $3,500,000. In February 1999 the Company entered into a new
financing arrangement with Finova Capital Corporation. The Company obtained a
term loan of $3,950,000, a revolving credit line of $4,000,000 and availability
of $1,000,000 for future equipment acquisitions. Under the Revolver, the Company
has approximately a $2.5 million available line of credit may use subject to the
availability of eligible accounts receivable. The prior loan was satisfied with
the proceeds of the Finova loan.

                                       18

<PAGE>

         At December 31, 1998, the Company had working capital of $1,877,000 as
compared to working capital of $3,092,000 at December 31, 1997.

         The Company believes that internally generated funds and the new credit
facility will provide sufficient liquidity to enable it to meet its currently
foreseeable working capital requirements for operations and capital expenditure
requirements for at least the next 12 months.

Inflation

         The Company believes that the relatively moderate rates of inflation in
recent years have not had a significant impact on its net revenues or its
profitability.

Year 2000 Compliance

         The Company leases its billing software from an outside vendor. The
Company believes that this software is currently in compliance with year 2000
issues. The Company is currently assessing the impact of these issues as they
relate to other applications. As the Company is considering upgrading its
information system, such upgrade will encompass any year 2000 compliance issues.
Therefore, the Company believes that the cost of complying with year 2000 issues
will not be material.

Item 7.  Financial Statements

         Reference is made to pages F-1 through F-21 comprising a portion of
this annual Report on Form 10-KSB.

Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

Reports on Form 8-K
         The Company filed a Current Report on Forms 8-K and 8-K/A-1, dated May
18, 1998, relating to items 4 and 7 Form 8-K. Such Current Report includes the
termination of Richard A. Eisner & Company, LLP ("Eisner") as the Company's
independent auditors, and Eisner's response agreeing to the disclosures in such
filing.

         The Company filed a Current Report on Form 8-K, dated June 29, 1998,
relating to items 4 and 7 of Form 8-K. Such Current Report includes the
appointment of Edward Isaacs and Company, LLP ("Isaacs") as the Company's
independent auditors to succeed Eisner.

                                       19

<PAGE>



                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons; 
         Compliance with Section 16(a) of the Exchange Act

         The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>

Name                                Age         Position
----                                ---         --------
<S>                                 <C>         <C>                                       
Dean L. Sloane                      53          President, Chairman of the Board, Chief
                                                Executive Officer and Director

Joseph A. Connell, Sr.              46          Chief Operating Officer

Craig V. Sloane                     48          Vice President-Operations, Secretary 
                                                and Director

Bernard M. Kruger, M.D.             56          Director

Lucius J. Riccio, Ph.D.             51          Director
</TABLE>

         Dean L. Sloane has served as Chairman of the Board, President and Chief
Executive Officer, and a Director of the Company since December 1988. Mr. Sloane
served as Chief Executive Officer of Prime Medical Services Inc. (formerly known
as C.P. Rehab Corp.), a public specialty medical management service company from
1973 through 1988. Mr. Sloane co-founded and served as Chairman of the Board of
National Home Health Care Corp., a public medical management and home care
company, from 1983 to 1986. Mr. Sloane also served as a director of EPIC Health
Group, Inc., a public mail order pharmaceutical company, from 1984 to 1986. He
is currently a director of Community Care Services, Inc. a medical equipment and
goods supplier. Mr. Sloane is a Certified Public Accountant but does not
practice.

         Joseph A. Connell, Sr. has served as Chief Operating Officer of the
Company since August 1997. From 1992 to August 1997, Mr. Connell was Director of
Clinical Services for American Medical Response-MedTrans of New York ("AMR")
supervising the employee health, quality assurance, advanced life support and
general training departments of AMR's Brooklyn and Yonkers facilities. From 1989
to 1992 was a practicing attorney. Mr. Connell is also a certified Physician
Assistant and a certified Emergency Medical Technician-Paramedic in the State of
New York.

         Craig V. Sloane has served as Vice President-Operations and a Director
of the Company since December 1990. From 1985 through October 1990, he was a
futures analyst at Smith Barney Harris & Upham. He is currently a director of
Community Care Services, Inc. a medical equipment and goods supplier.

         Bernard M. Kruger, M.D. has been in the private practice of internal
medicine and medical oncology since 1979, and is affiliated with Lenox Hill
Hospital, Beth Israel Hospital, Mount Sinai Hospital and the Orthopedic
Institute. He is currently a director of Community Care Services, Inc. a medical
equipment and goods supplier.

                                       20

<PAGE>


         Lucius J. Riccio has served as a management consultant on
transportation issues since January 1994. From February 1990 to December 1993 he
served as Commissioner of the New York City Department of Transportation. From
1986 to 1990 he served as Deputy Commissioner, Highway Operations, of the New
York City Department of Transportation.

         Dean L. Sloane and Craig V. Sloane are brothers.

         Section 16(a) of the Securities Exchange Act of 1934 requires that
officers, directors and 10% or greater stockholders of the Company file reports
of their ownership with the Securities and Exchange Commission. No officer,
director or 10% or greater stockholder of the Company was late with his filings.

Item 10. Executive Compensation

         The following table sets forth information concerning compensation paid
or accrued by the Company or its subsidiaries for services rendered during the
fiscal years ended December 31, 1996, 1997 and 1998 to the Company's Chief
Executive Officer and to each executive officer whose compensation exceeded
$100,000 during its fiscal year ended December 31, 1998:

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                                         Long Term 
                                                                                                     Compensation Awards
                                                               Annual Compensation
                                        ---------------------------------------------------------   ----------------------
         Name and                                                                Other Annual       Securities Underlying
    Principal Position           Year       Salary             Bonus           Compensation (1)            Options
    ------------------           ----       ------             -----           ----------------            -------

<S>                              <C>       <C>                <C>              <C>                            <C>
Dean Sloane                      1998      $238,000           $22,000          $26,000                        0
   President and Chief           1997      $225,000                 0          $34,000                        0
   Executive Officer             1996      $225,000                 0          $37,000                        0


Craig Sloane                     1998      $ 97,000                 0          $12,000                    1,667
    Vice- President-             1997      $ 94,000                 0          $12,000                        0
    Operations                   1996      $ 90,000           $15,000          $12,000                    1,667
</TABLE>

(1)      Consists primarily of automobile lease payments.



                                       21
<PAGE>

The following table sets forth information as to options exercised by each of
the named executives during the fiscal year ended December 31, 1998 and the
value of in-the-money options held by such executives at December 31, 1998.


     Option Exercises in Last Fiscal Year and Fiscal Year End Option Values

<TABLE>
<CAPTION>
                       Number of      
                       Shares of   
                      Common Stock                      Number of Shares of Common
                      Acquired on       Value          Stock Underlying Unexercised          Value of In-the-Money Options at
      Name              Exercise       Realized           Options at 12/31/98                         12/31/98 *
      ----              --------       --------           -------------------                         ----------
                                                         Exercisable         Unexercisable       Exercisable         Unexercisable
                                                         -----------         -------------       -----------         -------------
<S>                        <C>          <C>              <C>                  <C>                <C>                 <C>
 Dean Sloane               0            ---                0                       0                 ---                  ---
 Craig Sloane              0            ---                15,000                834                 ---                  ---
</TABLE>

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

*    Value is based on the excess of the closing bid price of the Company's
Common Stock as of December 31, 1998 ($2.63 per share) over the option price of
the in-the-money options.

Employment Agreements

         In September 1994, the Company entered into an employment agreement
with Dean L. Sloane, President and Chief Executive Officer of the Company. The
agreement has a three-year term which renews for an additional year on each
anniversary of the agreement, and provides for an annual base compensation of
$225,000, with annual increases based on a published cost of living index. In
addition, Mr. Sloane is entitled to such bonuses as may be awarded by the Board
in its discretion. The agreement calls for payment of benefits, including life
insurance and automobile expenses, similar to that received prior to execution
of the agreement. In the event the Company terminates Mr. Sloane's employment
without cause or Mr. Sloane terminates the agreement for "good reason" (as
defined in the agreement), the Company has agreed to pay to Mr. Sloane as
severance, an amount equal to Mr. Sloane's monthly salary multiplied by the
greater of (i) the number of months remaining between the date of termination
and the then expiration date of the agreement, and (ii) twelve. The Company is
the beneficiary of a $1.0 million key man life insurance policy with respect to
Mr. Sloane. The agreement also contains a non-competition provision covering the
term of the agreement plus one year following termination.

         In September 1994, the Company also entered into an employment
agreement with Craig V. Sloane, Vice President-Operations of the Company. The
agreement has a three-year term which renews for an additional year on each
anniversary of the agreement, and provides for an annual base compensation of
$85,000 subject to increase at least 5% per year. The agreement calls for
payment of automobile expenses. The agreement also contains a non-competition
provision covering the term of the agreement plus one year following
termination.

         The Company has entered into an employment agreement as of July 1, 1997
with Joseph A. Connell, Sr., Chief Operating Officer of the Company. The
agreement has a two-year term which renews for an additional year on each
anniversary of the agreement, and provides for an annual base compensation of
$85,000. The agreement calls for payment of automobile expenses. The agreement
also contains a non-competition provision covering the term of the agreement
plus one year following termination.



                                       22
<PAGE>

Employee Stock Option Plan

         The Company has adopted a 1992 Employee Stock Option Plan (the
"Employee Plan") for officers, employees, and consultants of the Company and any
of its subsidiaries. In 1996 the Company's stockholders approved increasing the
number of shares subject to the Employee Plan from 43,917 shares of the
Company's Common Stock to 125,000 shares (shares are restated to reflect the one
for six reverse stock split). As of February 28, 1999, options to purchase
25,250 shares of Common Stock were outstanding and options to purchase 93,083
shares of Common Stock were available for grant.

         The Employee Plan is administered by a Stock Option Committee (the
"Committee"), consisting of two disinterested members of the Board of Directors.
In general, the Committee will select the persons to whom options will be
granted and will determine, subject to the terms of the Employee Plan, the
number, the exercise period and other provisions of such options. The options
granted under the Employee Plan will be exercisable in such installments as may
be provided in the grant.

         Options granted to employees may be either incentive stock options
under the Internal Revenue Code ("ISOs") or non-ISOs. The Committee may
determine the exercise price provided that, in the case of ISOs, such price may
not be less than 100% (110% in the case of ISOs granted to holders of 10% of the
voting power of the Company's stock) of the fair market value (as defined in the
Employee Plan) of the Company's Common Stock at the date of grant. The aggregate
fair market value (determined at time of option grant) of stock with respect to
which ISOs become exercisable for the first time in any year cannot exceed
$100,000.

         The options are evidenced by a written agreement containing the above
terms and such other terms and conditions consistent with the Employee Plan as
the Committee may impose. Each option, unless sooner terminated, shall expire no
later than 10 years (five years in the case of ISOs granted to holders of 10% of
the voting power of the Company's stock) from the date of the grant, as the
Committee may determine. The Committee has the right to amend, suspend or
terminate the Employee Plan at any time, provided, however, that unless ratified
by the Company's stockholders within 12 months thereafter, no amendment or
change in the Employee Plan will be effective: (a) increasing the total number
of shares which may be issued under the Employee Plan; (b) reducing below fair
market value on the date of grant the price per share at which any option which
is an ISO may be granted; (c) extending the term of the Employee Plan or the
period during which any option which is an ISO may be granted or exercised; (d)
altering in any way the class of persons eligible to participate in the Employee
Plan; (e) materially increasing the benefits accruing to participants under the
Employee Plan; or (f) with respect to options which are ISOs, amending the
Employee Plan in any respect which would cause such options to no longer qualify
for incentive stock option treatment pursuant to the Internal Revenue Code of
1986.




                                       23
<PAGE>

Compensation of Directors

         Directors who are not employed by the Company will be paid a fee of
$1,000 for each board of directors meeting attended and $500 for each committee
meeting attended. All directors are reimbursed for expenses incurred on behalf
of the Company.

         The Company has adopted a 1994 Directors' Stock Option Plan (the
"Directors' Plan") for non-employee directors of the Company and any of its
subsidiaries. The Directors' Plan authorizes the granting of stock options to
purchase an aggregate of 8 ,333 shares of the Company's Common Stock. Options
granted under the Directors' Plan do not qualify as incentive stock options
within the meaning of Section 422 of the Internal Revenue Code. The Directors'
Plan, as amended in 1996, provides for the automatic grant to each of the
Company's non-employee directors of options to purchase 833 shares of Common
Stock on the first day of the Company's fiscal year. The options will have an
exercise price of 100% of the fair market value of the Common Stock on the date
of grant, have a ten year term and become exercisable in two equal annual
installments commencing on the date of the grant. The options may be exercised
by payment in cash of the full option exercise price. At the discretion of the
Board, the exercise price may be paid by tendering of shares of Common Stock
having a fair market value equal to the option exercise price or by tendering
cash in an amount equal to the aggregate par value of the shares being
purchased, together with an interest bearing note for the remainder of the
purchase price in form, and having terms satisfactory to the Board, in its sole
discretion.

Item 11. Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of February 28, 1999 by (i) each stockholder
known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, (ii) each director of the Company, and (iii) all
directors and executive officers as a group. Except as otherwise indicated, the
Company believes that the beneficial owners of the Common Stock listed below,
based on information furnished by such owners, have sole investment and voting
power with respect to such shares, subject to community property laws where
applicable.


Name and address of Beneficial           Number of Shares
       Owner                            Beneficially Owned   Percentage of Class
--------------------------------   ------------------------ --------------------
Dean L. Sloane                              240,099 (1)             24.6%
4 Gannett Drive
White Plains, N.Y.  10604

Craig V. Sloane                              15,834 (2)              1.6%
4 Gannett Drive
White Plains, N.Y.  10604

Bernard M. Kruger                            20,816 (3)              2.0%
170 East 78th Street
New York, N.Y. 10021

Lucius J. Riccio                              2,416 (4)               *
315 East 69th Street
New York, N.Y. 10021

Ronald V. Davis                              62,778 (5)              6.4%
c/o Davis Capital LLC                       -------                 ----
2015 West Main Street
Stamford, Connecticut, 06902.              

All directors and executive officers as a   341,943                 34.6%
group (5 persons)                           =======                 ====     


                                       24
<PAGE>

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

(1)  Does not include 16,697 shares owned by Mary K. Sloane, Dean L. Sloane's
     wife. Dean L. Sloane disclaims beneficial ownership of such shares.

(2)  Includes 15,834 shares of the Company's Common Stock subject to options.

(3)  Includes shares of the Company's Common Stock subject to presently
     exercisable options.

(4)  As reported in a Schedule 13D, dated July 3, 1997.

(5)  Includes 25,667 shares subject to presently exercisable options.


Item 12. Certain Relationships and Related Transactions

         In connection with the Company's loan from Finova Capital Mr. Sloane
has executed a limited guaranty. The Company has agreed to reimburse Mr. Sloane
for any amounts paid under the guarantee and to collateralize the obligation to
Mr. Sloane by granting him a security interest in the same assets that Finova
has a security interest.


Item 13. Exhibits and Reports on Form 8-K





                                       25
<PAGE>



(a)      Exhibits


<TABLE>
<S>                <C>                                              
     3.01          Restated Certificate of Incorporation of the Company (1)
                   (a) Amendment of Certificate of Incorporation of the Company
                   (b) Amendment of Certificate of Incorporation of the Company

     3.02          Certificate of Amendment to the Company's certificate of incorporation
                   Amended and Restated By-Laws of the Company (1)

     4.01          Specimen Certificate representing the Common Stock, par value $.001 per share (1)

    10.01*         1992 Employee Stock Option Plan (1)

    10.02*         1994 Directors' Stock Option Plan (1)

    10.03*         Employment Agreement entered into between the Company and Dean L. Sloane (1)

    10.04*         Employment Agreement entered into between the Registrant and Craig V. Sloane (1)

    10.05*         Employment Agreement entered into between the Company and Joseph A. Connell, Sr. (5)

    10.06          Lease dated January 1, 1997 by and between the Company and 2301 Jerome Avenue Realty Corp. and the Addendum
                   thereto. (5)

    10.07          Lease dated September 1997 by and between the Company and Principal Mutual Life Insurance Company. (5)

    10.08          Indemnification Agreement entered into between the Company and each of its directors (1)

    10.09+         Agreement dated as of January 1994 between the Company and Beth Abraham Hospital (1)

    10.10+         Agreement dated as of January 1, 1994 between the Company and Beth Abraham Hospital (1)

    10.11          Amendment to the Agreements between the Company and Beth Abraham Hospital (5)
              
    10.12          Warrant, issued to the Equity Group, to purchase 30,000 shares of Common Stock commencing November 1, 1994 (2)
              
    10.13          Warrant, issued to the Equity Group, to purchase 30,000 shares of Common Stock commencing November 1, 1995 (2)
              
    10.14          Asset Purchase Agreement dated September 25,1995 between the Company and Medical Transportation Corporation (3)
              
    10.16          A loan and security agreement between Finova Capital Corporation and registrant and its subsidiaries dated
                   February 2, 1999

    21.01          Subsidiaries of the Company
               
    23.01          Consent of Edward Isaac & Company, Inc.
               
    27.01          Financial Data Schedule
</TABLE>


                                       26
<PAGE>

------------  
+   Confidential treatment was granted for the deleted portion of this document.

*   Management contract or compensatory plan or arrangement.

(1) Such Exhibits were filed with the Company's Registration Statement (File No.
    33-80338) declared effective September 30, 1994 and are incorporated herein
    by reference.

(2) Such Exhibits were filed with the Company's Annual Report on Form 10-KSB for
    the fiscal year ended December 31, 1994 and are incorporated herein by
    reference.

(3) Such Exhibit was filed with the Company's Current Report on Form 8-K, dated
    November 1, 1995, and is incorporated herein by reference.

(4) Such Exhibit was filed with the Company's Annual Report on Form 10-KSB for
    the fiscal year ended December 31, 1996 and is incorporated herein by
    reference.

(5) Such Exhibit was filed with the Company's Annual Report on Form 10-KSB for
    the fiscal year ended December 31, 1997 and is incorporated herein by
    reference.

(b) Reports on Form 8-K

         None


<PAGE>

COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Contents
<TABLE>
<CAPTION>

                                                                                                  Page
                                                                                                  ----
<S>                                                                                               <C>
Consolidated Financial Statements

   Independent auditors' report                                                                    F-2

   Balance sheet as of December 31, 1998                                                           F-3

   Statements of operations for the years ended December 31, 1998 and 1997                         F-4

   Statements of changes in stockholders' equity for the years ended
      December 31, 1998 and 1997                                                                   F-5

   Statements of cash flows for the years ended December 31, 1998 and 1997                         F-6

   Notes to financial statements                                                               F-7 to F-21

</TABLE>
                                                                             F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Community Medical Transport, Inc.


We have audited the accompanying consolidated balance sheet of Community Medical
Transport, Inc. and subsidiaries (the "Company") as of December 31, 1998 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the years in the two-year period ended December 31,
1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Community Medical
Transport, Inc. and subsidiaries at December 31, 1998, and the consolidated
results of their operations, and their consolidated cash flows for each of the
years in the two-year period ended December 31, 1998, in conformity with
generally accepted accounting principles.



March 25, 1999
New York, New York

                                                                             F-2

<PAGE>

COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Consolidated Balance Sheet
December 31, 1998
<TABLE>
<CAPTION>
ASSETS
<S>                                                                                                    <C>        
Current assets:
      Cash and cash equivalents                                                                     $    92,000
      Short-term investments                                                                            824,000
      Accounts receivable - trade, less allowance for doubtful accounts of $1,950,000                 3,587,000
      Prepaid insurance                                                                                 513,000
      Prepaid and refundable income taxes                                                               199,000
      Other current assets                                                                              418,000
      Deferred tax assets                                                                               474,000
                                                                                                    -----------

         Total current assets                                                                         6,107,000

Property, equipment and leasehold improvements - net                                                  3,535,000
License - net                                                                                           677,000
Customer lists - net                                                                                  1,249,000
Other asset                                                                                             247,000
Goodwill - net                                                                                        2,549,000
Covenant not to compete, net                                                                             33,000
Deferred tax assets                                                                                      42,000
                                                                                                    -----------

                                                                                                    $14,439,000
                                                                                                    ===========

LIABILITIES
Current liabilities:
      Current portion of long-term debt                                                             $ 1,701,000
      Accounts payable                                                                                1,619,000
      Accrued expenses                                                                                  910,000
                                                                                                    -----------

         Total current liabilities                                                                    4,230,000

Long-term debt - net of current portion                                                               4,540,000
                                                                                                    -----------

                                                                                                      8,770,000
                                                                                                    ===========

Commitments and contingencies

STOCKHOLDERS' EQUITY
Preferred stock, 4% cumulative, $.001 par value, 1,000,000 shares authorized
Common stock, $.001 par value, 5,000,000 shares authorized, 998,942 shares
  issued and outstanding                                                                                  1,000
Capital in excess of par value                                                                       14,054,000
Accumulated deficit                                                                                  (8,386,000)
                                                                                                    -----------

         Total stockholders' equity                                                                   5,669,000
                                                                                                    -----------

                                                                                                    $14,439,000
                                                                                                    ===========
</TABLE>

See notes to consolidated financial statements                               F-3
<PAGE>
COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Consolidated  Statements of Operations
<TABLE>
<CAPTION>
                                                                                                  Year Ended
                                                                                                  December 31,
                                                                                        ----------------------------
                                                                                           1998              1997
                                                                                        -----------      -----------
<S>                                                                                        <C>              <C>        
Net revenue                                                                             $18,245,000      $22,814,000
                                                                                        -----------      -----------

Expenses:
      Salaries and benefits                                                              10,030,000       12,593,000
      Fleet maintenance                                                                   1,193,000        1,766,000
      Insurance                                                                             638,000          773,000
      Rent                                                                                  483,000          484,000
      Depreciation and amortization                                                       1,094,000          850,000
                                                                                        -----------      -----------

         Total operating expenses                                                        13,438,000       16,466,000
                                                                                        -----------      -----------

Gross profit                                                                              4,807,000        6,348,000

Selling, general and administrative expenses                                              5,757,000        6,996,000
Intangible write-down                                                                                      5,400,000
Receivable write-down                                                                                      1,371,000
Restructuring and other costs                                                                     -        1,239,000
                                                                                        ------------     -----------

Loss from operations                                                                       (950,000)      (8,658,000)
Other income                                                                                                  44,000
Interest income                                                                              52,000           75,000
Interest expense                                                                           (663,000)        (662,000)
                                                                                        ------------     -----------

Loss before income tax benefit                                                           (1,561,000)      (9,201,000)
                                                                                        ------------     -----------

Income tax benefit:
      Current                                                                                               (120,000)
      Deferred                                                                             (516,000)        (857,000)
                                                                                        ------------     -----------

                                                                                           (516,000)        (977,000)
                                                                                        ------------     -----------

Net loss                                                                                $(1,045,000)     $(8,224,000)
                                                                                        ===========      ===========

Net loss available to common shareholders - basic                                       $(1,045,000)     $(8,262,000)
                                                                                        ===========      ===========

Preferred stock dividends - assumed conversion                                                    -           38,000
                                                                                        ------------     -----------
Net loss available to common shareholders including assumed
      conversion - diluted                                                              $ (1,045,000)    $(8,224,000)
                                                                                        ============     ===========

Net loss per share - basic                                                              $     (1.05)    $     (9.42)
                                                                                        ============    ============
                   - diluted                                                            $     (1.05)    $     (9.37)
                                                                                        ============     ===========

Weighted average number of common  shares outstanding - basic                                998,199         877,483
                                                                                        -------------    -----------
Weighted average number of common shares outstanding -diluted                                998,199         877,483
                                                                                        ============     ===========
</TABLE>

See notes to consolidated financial statements                               F-4
<PAGE>
COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
                                                                  4% Cumulative                                                     
                                                                    Dividend      
                                                                   Convertible    
                                                                 Preferred Stock                                                    
                                                  -----------------------------------------------              Common Stock         
                                                     Series A         Series B         Series BB         -------------------------- 
                                                      Shares           Shares            Shares           Shares            Amount  
                                                     --------         ---------        ---------         ---------      ------------
<S>                                                        <C>            <C>                <C>            <C>              <C> 
Balance - December 31, 1996                               0.0           2,423.0              0.0         4,770,940        $  5,000  
Net loss                                                                                                                            
Exercise of common stock options                                                                            40,000                  
Exchange of Series B preferred stock
 for Series BB preferred stock                                         (1,955.5)         1,955.5
Conversion of preferred stock into common                                (467.5)        (1,177.1)          490,606           1,000 
Additional costs in connection with stock
 Issuance                                                                                                                           
Shares issued in acquisition of Fox Ridge                                                                  130,969                  
Shares issued in acquisition of RDO                                                                        328,492                  
                                                     --------         ---------          -------        ----------        --------  
                                         
                                                    
Balance - December 31, 1997                               0.0               0.0            778.4         5,761,007        $  6,000  
Net loss                                                                                                                            
Conversion of series BB preferred stock                                                   (778.4)          222,392
Other changes                                                                                               10,253                  
Adjustment of  shares due to
Due to 1 for 6 reverse stock split                                                                      (4,994,710)         (5,000) 
Additional costs in connection with stock
 Issuance
                                                     --------         ---------          -------        ----------        --------  
Balance - December 31, 1998                               0.0               0.0              0.0           998,942        $  1,000  
                                                     ========         =========          =======        ==========        ========  

</TABLE>
<PAGE>
                               [RESTUBBED TABLE]
<TABLE>
<CAPTION>
                                                                     Retained                       
                                                    Capital in       Earnings                       
                                                     Excess of     (Accumulated                     
                                                     Par Value        Deficit)             Total    
                                                  -------------   ----------------    ------------- 
<S>                                                    <C>                <C>              <C>  
Balance - December 31, 1996                        $12,322,000       $   883,000      $ 13,210,000  
Net loss                                                              (8,224,000)       (8,224,000)
Exercise of common stock options                        36,000                              36,000  
Exchange of Series B preferred stock                                                                
 for Series BB preferred stock                                                                      
Conversion of preferred stock into comm                 (1,000)                                  0 
Additional costs in connection with stock                                                           
 Issuance                                              (35,000)                            (35,000)  
Shares issued in acquisition of Fox Ridge              655,000                             655,000  
Shares issued in acquisition of RDO                  1,066,000                           1,066,000                    
                                                   -----------       -----------        ----------  
                                                                                                    
                                                                                                    
Balance - December 31, 1997                        $14,043,000        (7,341,000)        6,708,000  
Net loss                                                              (1,045,000)       (1,045,000)
Conversion of series BB preferred stock                                                             
Other changes                                            6,000                               6,000   
Adjustment of  shares due to                                                                        
Due to 1 for 6 reverse stock split                       5,000                                      
                                                   -----------       -----------        ----------  
Balance - December 31, 1998                        $14,054,000       $(8,386,000)       $5,669,000 
                                                   ===========       ===========        ==========  
</TABLE>

See notes to consolidated financial statements                               F-5

<PAGE>

COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                                       Year Ended
                                                                                      December 31,
                                                                                --------------------------
                                                                                   1998            1997
                                                                                -----------    -----------
<S>                                                                                 <C>            <C>         
Cash flows from operating activities:
      Net loss                                                                  $(1,045,000)   $(8,224,000)
      Adjustments to reconcile net loss to cash provided by (used in)
         operating activities:
             Depreciation and amortization expense                                1,623,000      1,640,000
             Common shares issued for employee benefit obligation                     6,000
             Imputed interest on note payable                                                        5,000
             Intangible write-down                                                               5,400,000
             Receivable write-down                                                               1,371,000
             Restructuring and other costs                                                       1,239,000
             Provision for uncollectible accounts receivable                        516,000
             Changes in deferred taxes assets and liabilities                      (516,000)      (971,000)
             Changes in:
                Accounts receivable                                                 725,000     (1,129,000)
                Prepaid insurance and other current assets                           51,000        403,000
                Other assets                                                        151,000       (162,000)
                Accounts payable and accrued expenses                              (978,000)       903,000
                Prepaid income taxes                                                393,000       (379,000)
                                                                                -----------    -----------
                  Net cash provided by operating activities                         926,000         96,000
                                                                                -----------    -----------

Cash flows from investing activities:
      Acquisition of equipment - net of disposals                                  (358,000)    (1,256,000)
      Acquisition of businesses                                                                    (46,000)
      Decrease in short-term investments                                            312,000        597,000
                                                                                -----------    -----------
               Net cash used in investing activities                                (46,000)      (705,000)
                                                                                -----------    -----------

Cash flows from financing activities:
      Proceeds of bank borrowings                                                    55,000      1,246,000
      Principal repayments on debt                                               (1,517,000)      (635,000)
      Principal payments on capital lease obligations                              (251,000)      (115,000)
      Additional costs in connection with common stock issuance                                    (35,000)
      Net proceeds from exercise of common stock warrants                                           36,000
                                                                                -----------    -----------
               Net cash (used in ) provided by financing activities              (1,713,000)       497,000
                                                                                -----------    -----------

Net decrease in cash                                                               (833,000)      (112,000)
      Cash - beginning of year                                                      925,000      1,037,000
                                                                                -----------    -----------

      Cash - end of year                                                        $    92,000    $   925,000
                                                                                ===========    ===========

Supplementary disclosures of cash flow information: 
      Cash paid during the year for:
         Interest                                                               $   637,000    $   577,000
                                                                                ===========    ===========
         Taxes                                                                  $   149,000    $   253,000
                                                                                ===========    ===========
Supplementary disclosures of noncash investing and financing activities:
Acquisition of property and equipment                                                          $   739,000
Acquisition of intangibles and licenses                                                        $ 1,513,000
Common stock issued in connection with acquisition of business                                 $(1,721,000)
Debt assumed in connection with acquisition of business                                        $  (485,000)
                                                                                               -----------

Cash paid to acquire assets                                                                    $    46,000
                                                                                               -----------

Equipment acquired under capital leases                                         $    55,000    $   342,000
                                                                                ===========    ===========
</TABLE>
See notes to consolidated financial statements                               F-6

<PAGE>


COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998 and 1997


NOTE A - ORGANIZATION AND BASIS OF PRESENTATION

The accompanying financial statements include the accounts of Community Medical
Transport, Inc. (the "Company") and its five wholly owned subsidiaries,
Community Ambulette Service, Inc. ("Ambulette"), First Help Ambulance and
Ambulette Inc. ("First Help"), Empire Ambulance and Ambulette Inc. ("Empire"),
Century Ambulance and Ambulette, Inc. ("Century") and Elite Ambulance and
Medical Coach, Inc. ("Elite") (collectively the "Companies"). All intercompany
balances and transactions have been eliminated in consolidation.

The Companies operated in one business segment. It provides specialized
transportation for the handicapped and disabled, mentally retarded, elderly and
chronically ill to and from day treatment centers, day care programs, hospitals,
nursing homes and other health care facilities in the New York metropolitan
area. This service is provided in ambulettes, which are specialized vans that
contain wheelchair lifts or ramps. The Companies also provides emergency and
nonemergency ambulance transportation of patients who require basic medical care
or supervision during transport to and from hospitals, nursing homes and other
health care facilities.


NOTE B - SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies in the preparation of the financial statements
are as follows:

[1] Revenue recognition:

    Revenue is recognized on the date of transportation. Revenue is reported at
    the realizable amount from patients, third-party payors and others under
    contractual arrangements.

[2] Property, equipment and leasehold improvements:

    Property, equipment and leasehold improvements are stated at cost less
    accumulated depreciation and amortization. The Company computed depreciation
    and amortization using the straight-line method over the estimated useful
    lives of the assets as follows:

         Ambulette and ambulance fleet                  5 -  7 years
         Machinery, equipment and office furniture      3 - 10 years
         Leasehold improvements                         Shorter of lease term or
                                                        estimated life of asset

[3] Intangible assets:

    Intangible assets consist of goodwill, licenses, customer lists and
    covenants not to compete. The goodwill is being amortized on a straight-line
    basis over twenty five years. The licenses are being amortized on a
    straight-line basis over forty years. The customer lists are being amortized
    using the straight-line method over the period of expected benefit, which is
    from five to ten years. The covenants not to compete are being amortized
    using the straight-line method over the period of the covenants which is
    three years. Intangible assets are evaluated periodically, and adjusted if
    necessary, if events and circumstances indicate that the carrying amount is
    impaired. (Note K)


                                                                             F-7
<PAGE>
COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998 and 1997

NOTE B - SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED)


[4] Income taxes:

    The Company's income tax accounting method has automatically changed from
    the cash method of accounting to the accrual method in compliance with
    Internal Revenue Code ("IRC") Section 448. In accordance with IRC Section
    448, the Company has elected to recognize the impact of such change over a
    four-year period commencing January 1, 1996.

    The Company accounts for income taxes utilizing the asset and liability
    approach requiring the recognition of deferred tax assets and liabilities
    for the expected future tax consequences of temporary differences between
    the basis of assets and liabilities for financial reporting purposes and tax
    purposes.


[5] Short-term investments:

    Short-term investments consist primarily of money market funds investing in
    United States government obligations with original maturities less than one
    year when purchased. These investments are readily convertible to cash and
    are accounted for as available for sale securities. Such investments are
    stated at fair value, which approximates cost.


[6] Net loss per share:

    In 1997, the Company adopted Statement of Financial Accounting Standards No.
    128 ("SFAS #128"), "Earnings Per Share", SFAS #128 which requires the
    reporting of earnings (loss) per basic share and earnings (loss) per diluted
    share. Earnings (loss) per basic share is calculated by dividing net income
    (loss) available to common shareholders by the weighted average outstanding
    shares during the period. Earnings per diluted share is calculated by
    dividing net income available to common shareholders with preferred
    dividends added back (if converted method) by the basic shares and all
    dilutive potential common shares, including options and convertible
    preferred stock. Net income per share has been retroactively adjusted for
    the 1 for 6 reverse stock split in 1998. The authorized number of common
    shares was reduced from 20 million to 5 million.

    Net loss available to common shareholders was computed by deducting
    cumulative preferred stock dividends of $38,000 in 1997 from net loss. In
    1998, net loss available to common shareholders was equal to the net loss,
    as there were no cumulative preferred stock dividends.


[7] Estimates:

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

                                                                             F-8

<PAGE>
COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998 and 1997


NOTE B - SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED)



[8] Fair value of financial instruments:

    The carrying value of the Company's cash, short-term investments and
    accounts payable approximate fair value due to their short-term nature. The
    fair value of long-term debt approximates the carrying amount as the current
    rates on similar instruments are similar to the effective rates.



[9] Stock-based compensation:

    The Company has adopted Statement of Financial Accounting Standards No. 123,
    "Accounting for Stock-Based Compensation" ("SFAS No. 123"). The provisions
    of SFAS No. 123 allow companies to either expense the estimated fair value
    of employee stock options or to continue to follow the intrinsic value
    method set forth in Accounting Principles Board Opinion 25, "Accounting for
    Stock Issued to Employees" ("APB 25") but disclose the pro forma effects on
    net income (loss) had the fair value of the opinions been expensed. The
    Company has elected to continue to apply APB 25 in accounting for its
    employee stock option incentive plans.

NOTE C - PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements consist of the following:

          Ambulette and ambulance fleet                            $5,205,000
          Machinery, equipment and office furniture                 1,633,000
          Leasehold improvements                                      264,000
                                                                   ----------


                                                                    7,102,000
          Less accumulated depreciation and amortization           (3,567,000)
                                                                   ----------
                                                                   $3,535,000
                                                                   ==========

The net book value of property and equipment under capital lease amounted to
approximately $570,000 at December 31, 1998. Depreciation expense includes
depreciation on property and equipment held under capital leases.

                                                                             F-9
<PAGE>

COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998 and 1997

NOTE D - LEASES


The Company is obligated under long-term noncancelable operating and capital
leases (reflecting the refinancing discussed in Note E) for premises and
equipment expiring in various years through the year 2005.


Future minimum lease payments are as follows:
<TABLE>
<CAPTION>
                                                            Operating                   Capital
                                                             Leases                     Leases
                                                             ------                     ------
<S>                                                            <C>                        <C> 
           1999                                            $  720,000                   $110,000
           2000                                               387,000                     67,000
           2001                                               352,000                     29,000
           2002                                               224,000                     18,000
           2003                                               185,000                      3,000
           Thereafter                                         206,000                          0
                                                           ----------                   --------

           Total minimum lease payments                    $2,074,000                    227,000
                                                           ==========
           Amount representing interest                                                  (32,000)
                                                                                        --------

           Present value of minimum lease payments                                      $195,000
                                                                                        ========
</TABLE>

Rent expense for the years ended December 31, 1998 and December 31, 1997 was
approximately $ 593,000 and $ 502,000, respectively.


NOTE E - LONG-TERM DEBT

Long-term debt at December 31, 1998 consists of the following:

Bank debt - As discussed in (1) below the following indebtedness has been
refinanced.
<TABLE>
<CAPTION>
<S>                                                                               <C>               <C> 
$ 6,500,000 Revolving Credit Note to bank, collateralized
  principally by all accounts receivable, inventory and equipment,
  bearing interest at prime plus 1/2% (8.25% at December  31, 1998)         $3,500,000(1)(2)
Note payable to bank, collateralized principally by all accounts
  Receivable, inventory and equipment, bearing interest at
  prime plus 1/2%  (8.25 % at December 31, 1998)                               833,000(1)(2)
Note payable to bank, collateralized principally by all accounts
  receivable, inventory and equipment, bearing interest at
  prime plus 1/2% (8.25% at December 31, 1998)                                 570,000(1)(2)   $ 4,903,000(2)
                                                                            ----------

</TABLE>

                                                                            F-10

<PAGE>
COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998 and 1997

NOTE E - LONG-TERM DEBT  (CONTINUED)

Notes payable
<TABLE>
<CAPTION>
<S>                                                                                       <C>              <C>
Note payable to Jenco Ambulette Service Inc., (net of imputed interest at 9%)
  payable in quarterly principal payments of $16,667
  due June 15, 1999                                                                     $121,000(3)
Note payable to A-1 Ambulance Service Inc., bearing interest at
  8.25%, payable in quarterly principal payments of $18,125
  due June 12, 1998                                                                      109,000(3)
Note payable for acquired businesses with an effective interest
  rate of 8.25% payable in quarterly principal payments of $22,500
  due June 12, 1998                                                                      135,000(3)
Note payable to Elite Ambulance and Medical Coach Inc., bearing
  interest at 7%, due on December 15, 2001                                               204,000
Note payable to Medical Transportation Corporation, (net of imputed
  interest at 9%) due October 31, 1998                                                   212,000(3)
Notes payable for vehicles collateralized by the underlying vehicles,
  bearing interest at 9.9% - 12.8%, payable in monthly payments of $1,097
  due October 20, 2001                                                                    31,000          $ 812,000
                                                                                        ---------
</TABLE>

Capital lease obligations
<TABLE>
<CAPTION>
<S>                                                                                 <C>                       <C> 
For vehicles in connection with the acquisition of Fox Ridge, bearing interest
  at 10.9% payable in monthly installments of $15,324
  due August 1, 2000                                                                     266,000(1)
For various equipment, collateralized by the underlying
  equipment, bearing interest at 10.8% - 17.4% payable in monthly
  installments of $6,836 due at various times through November 16, 2002                  164,000
For vehicles, collateralized by the underlying vehicles, bearing interest at
  13.4% payable in monthly installments of $3,397 due October 1, 2001                     96,000(1)         526,000
                                                                                    ------------         ----------

                                                                                                           6,241,000
Less current maturities                                                                                   (1,701,000)
                                                                                                          ----------
                                                                                                          $4,540,000
                                                                                                          ==========
</TABLE>
Future principal payments of long-term debt are as follows:

         1999                                        $1,701,000
         2000                                           903,000
         2001                                           869,000
         2002                                           826,000
         2003 and thereafter                          1,942,000
                                                     ----------
                                                     $6,241,000
                                                     ==========
                                                                            F-11
<PAGE>
COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998 and 1997


NOTE E - LONG-TERM DEBT  (CONTINUED)

(1) On February 2, 1999 the Company entered into a $8,950,000 credit facility to
    replace the previously existing credit facility. The new credit facility
    consists of a $4,000,000 revolving credit line, which may only be drawn if
    the Company has sufficient qualified accounts receivable, a term note of
    $3,950,000 and an equipment acquisition line of $1,000,000. Debt and capital
    lease obligations aggregating $5,265,000, as of December 31, 1998, were
    repaid with the credit facility.

    The term debt bears interest at prime plus 1 1/4% and is amortized in
    monthly installments of $65,800 plus interest through February 2004. The
    debt under the revolving credit line is due February 2004 and bears 
    interest at prime plus 1%. In accordance with SFAS #6 the debt outstanding
    at December 31, 1998 has been classified in accordance with the terms of the
    new credit facility.

    The new credit facility agreement imposes certain restrictions on
    borrowings, capital expenditures and the payment of dividends and requires
    the Company to meet certain net worth and other financial ratios. The
    obligations are secured by substantially all of the Company's assets. One of
    the major shareholders has provided a limited guarantee of the obligations.

(2) The Company's revolving credit agreement (the "Facility") dated December 18,
    1996 permitted borrowings by the Company of up to $6,500,000 through
    December 18, 1998 for general working capital purposes. In addition, the
    agreement permitted borrowings under separate facilities of a $1,500,000
    line of credit for fixed asset acquisitions, and a $2,000,000 term note
    financing existing equipment and refinancing of existing bank debt.
    Borrowings under these agreements were collateralized by substantially all
    property, plant and equipment, inventory and accounts receivable, as well as
    a $1,000,000 personal guarantee of the president of the Company. The
    agreement imposed certain restrictions on borrowings, prohibited the payment
    of dividends and required the Company to meet certain net worth and working
    capital requirements and other financial ratios. At December 31, 1997 the
    Company was not in compliance with certain covenants. On April 14,1998, the
    bank agreed to waive the covenants which the Company was not in compliance
    with at December 31,1997. Additionally, the bank amended certain covenants
    at future measurement dates to accommodate the Company's current financial
    status. Further, the bank has extended the facility date to January 18, 1999
    and in conjunction with their revisions reduced the amount available under
    the revolving credit agreement from $6,500,000 to $3,500,000

(3) Payments of approximately $408,000 under these notes are in arrears because
    of certain disputes with the noteholders. Management believes that
    resolution of such disputes will not result in any material obligation in
    excess of the amounts recorded in the Company's balance sheet.


NOTE F - INCOME TAXES

The differences between the tax benefit and the amount that would be computed by
applying the statutory federal income tax rate to income (loss) before taxes is
attributable to the following:
<TABLE>
<CAPTION>
                                                                 Year Ended
                                                                 December31,
                                                          -------------------------
                                                             1998           1997
                                                          ---------    ------------
<S>                                                           <C>          <C> 
           Income tax benefit at 34%                      $(531,000)   $(3,128,000)
           Nondeductible items                               77,000      1,923,000
           State and local taxes, net of federal effect    (144,000)      (257,000)
           Increase in valuation reserve                     70,000        480,000
           Other                                             12,000          5,000
                                                          ---------    -----------

                                                          $(516,000)   $  (977,000)
                                                          =========    ===========
</TABLE>
                                                                            F-12
<PAGE>


COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998 and 1997


NOTE  F - INCOME TAXES (continued)

The tax effect of temporary differences which give rise to the net deferred tax
assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
                                                                            Total       Current    Long-term
                                                                         ----------   ----------   ---------
<S>                                                                      <C>          <C>           <C>
Deferred tax liabilities:
  Unrecognized prior year differences between the accrual
    basis of accounting and the cash basis of accounting                 $  338,000   $  338,000    $
  Depreciation on property, equipment and leasehold
    improvements                                                            181,000                  181,000
                                                                         ----------   ----------    --------

                                                                            519,000      338,000     181,000
                                                                         ----------   ----------    --------

Deferred tax assets:
  Allowance for doubtful accounts                                           858,000      858,000
  Accrued expenses                                                           48,000       48,000
  Net operating loss carry forwards                                         679,000      338,000     341,000
                                                                         ----------   ----------    --------

                                                                          1,585,000    1,244,000     341,000
Valuation allowance                                                         550,000      432,000     118,000
                                                                         ----------   ----------    --------

                                                                          1,035,000      812,000     223,000
                                                                         ----------   ----------    --------

Net deferred tax asset                                                   $  516,000   $  474,000    $ 42,000
                                                                         ==========   ==========    ========
</TABLE>

As of December 31, 1998, the Company has approximately $1,540,000 of net
operating loss carryforwards available expiring in 2017.

The Company has established a valuation allowance of $550,000 to reduce the
deferred tax asset to the amount management believes is realizable.

The companies 1996 corporate income taxes are currently under audit by the
Internal Revenue Service. The Company believes that there will be no material
variance revealed during this audit examination.


NOTE G - STOCKHOLDERS' EQUITY

[1] Public offering:

    In October 1994, the Company completed a public offering of 1,136,200 units
    at $4 per unit, each unit consisting of one share of common stock and one
    redeemable ("Warrant") pursuant to a registration statement which was
    declared effective by the Securities and Exchange Commission on October 1,
    1994, resulting in net proceeds of $3,343,000.

    In connection therewith, the Company issued to the underwriters a warrant
    ("Underwriters Warrant") to purchase 100,000 units at $5.80 per unit through
    September 30, 1999. Such units are identical to those sold in the public
    offering.

    The Warrants are exercisable into one share of common stock, at a price of
    $6.00 per share, for a period of five years commencing with the effective
    date of the public offering. The Warrants are redeemable at a price of $.10
    per Warrant, if the closing bid quotation of the Company's common stock is
    in excess of $8.00 per share for twenty consecutive trading days. The common
    stock shares discussed above have not been adjusted for the one for six
    reverse stock split in 1998.

                                                                            F-13
<PAGE>

COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998 and 1997

NOTE G - STOCKHOLDERS' EQUITY (CONTINUED)

[1]  Public offering:

      In November 1994, the Company issued warrants to purchase 60,000 shares of
      common stock at $5.00 per share to its public relations firm, which expire
      on October 31, 1999.

    The common stock and warrants discussed above do not reflect the six to one
    reverse stock split.

[2] Security offerings:

    On May 31, 1996, the Company completed a private placement of 277,348 shares
    of common stock at a price of $6.40 per share, for net proceeds of
    approximately $1,337,000. The placement agent of such offering received a
    commission, a nonaccountable expense allowance, warrants to purchase up to
    138,674 shares of common stock at $10.00 per share and unit purchase options
    to purchase up to 27,734 units at $7.68 per unit. Each unit consists of one
    share of common stock and one-half of a warrant, each full warrant entitling
    the holder to purchase one share of common stock at $10.00 per share.

    On July 31, 1996 and August 7, 1996, the Company completed an equity
    financing from foreign investors, for 3,437.5 shares of Series A convertible
    preferred stock (the "Series A") with a liquidation value of $3,437,000 and
    5,000 shares of Series B convertible preferred stock (the "Series B") with a
    liquidation value of $5,000,000, respectively, for net proceeds of
    approximately $5,918,000. The preferred stockholders of each series are
    entitled to a 4% cumulative dividend on the stated liquidation value, and
    each share is convertible based on their liquidation by value into shares of
    common stock at the lower of the market value for the five trading days
    prior to conversion or $7.00 per share, and will automatically convert on
    July 31, 1998. All fees and commissions associated with such offerings are
    recorded against paid in capital. As of December 31, 1996 all of the Series
    A have been converted into common stock and 2,577 shares of Series B were
    converted into common stock. The liquidation value of the remaining Series B
    was $2,423,000. In connection with such foreign financing, warrants to
    purchase up to 135,000 shares of common stock at $5.00 per share have been
    issued to a designee of a consultant which expire on September 30, 2001.

    During the first quarter of 1997, 467.5 shares of preferred stock were
    converted into 145,286 common shares with 1955.5 Series B shares remaining
    to be converted. Subsequent to this conversion, the Board of Directors
    authorized the adoption of 7,500 shares of the Company authorized preferred
    stock to be designated as series BB preferred stock (Series BB). Series BB
    has the same rights and preferences as Series B except as follows: eleven
    percent of each outstanding share shall be convertible into common stock at
    any time after April 1, 1997 with an additional eleven percent of each
    outstanding share to be convertible on the first day of each of the next
    seven months, and the final twelve percent to be convertible at any time
    after December 1, 1997. All outstanding shares will automatically convert on
    July 31, 1998. The conversion was based upon the liquidation value of the
    preferred stock and was exchangeable at $3.50 per share.

    The remaining 1955.5 shares of Series B preferred stock were exchanged for
    1955.5 shares of Series BB preferred stock and 150,000 common stock purchase
    warrants. These warrants are exercisable at an initial exercise price of
    $4.00 per share, provided, however, that the purchase price may be adjusted
    under certain circumstances. The expiration date of the common stock
    purchase warrant is November 18, 2000. As of December 31,1997, 1177.1 shares
    of Series BB had been converted into common stock. The liquidation value of
    the remaining 778.4 Series BB was 778,400, excluding $75,000 of cumulative
    dividends. In 1998 all of the remaining Series BB were converted into
    222,392 common shares. The common stock shares discussed above have not been
    adjusted for the 1 for 6 reverse stock split.

                                                                            F-14
<PAGE>
COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998 and 1997

NOTE G - STOCKHOLDERS' EQUITY  (CONTINUED)

[3] Stock option plans:

    The Company applies Accounting Principles Board Opinion No. 25 in accounting
    for its employee stock option and accordingly, recognizes compensation
    expense for the difference between the fair value of the underlying common
    stock and the exercise price of the option at the date of the grant. The
    effect of applying Statement of Financial Accounting Standards No. 123
    ("SFAS # 123") on 1998 and 1997 pro forma net income (loss) as stated below
    is not necessarily representative of the effects on reported net income for
    future years due to, among other things: (1) the vesting period of the stock
    options and the (2) fair value of additional stock options in future years.
    Had compensation cost for the Company's stock option plans been determined
    based upon the fair value at the grant date for awards under the plans
    consistent with the methodology prescribed under SFAS No. 123, the Company's
    net loss in 1998 and 1997 would have been approximately $(1,057,000) and
    $(8,274,000) or $(1.06) per share and $(9.51) per share, respectively. The
    weighed average fair value of the options granted during 1998 and 1997 are
    estimated as $2.43 and $ 10.48 per share, respectively, on the date of grant
    using the Black Scholes option pricing model with the following assumptions:
    dividend yield 0%, volatility of 45%, risk free interest rate of 5.5% for
    1998 and 6.2% for 1997 and expected life of 10 years.

    The 1992 Employees Stock Option Plan, as amended (the "Plan") provides for
    the granting of options to purchase up to 750,000 shares (125,000 shares
    adjusted for the one for six reverse stock split in 1998) of the Company's
    common stock. The Plan is administered by a Stock Option Committee (the
    "Committee"), consisting of two members of the Board of Directors, which has
    the authority to determine when options are granted, the term, the exercise
    price and the exercise period.

    Options granted to employees may be either incentive stock options ("ISOs")
    under the Internal Revenue Code or non-ISOs. The Committee may determine the
    exercise price provided that in the case of ISOs, such price may not be less
    than 100% (110% in the case of ISOs granted to holders of 10% of the voting
    power of the Company's stock) of the fair market value of the Company's
    common stock at the date of grant. The aggregate fair market value
    (determined at time of option grant) of stock with respect to which ISOs
    become exercisable for the first time in any year cannot exceed $100,000.
    Each option, unless sooner terminated, shall expire no later than 10 years
    (five years in the case of ISOs granted to holders of 10% of the voting
    power of the Company's stock) from the date of the grant.

    Additional information with respect to options issued to employees under the
    Plan is summarized below: The information set forth below has been
    retroactively adjusted for the one for six reverse stock split in 1998.
<TABLE>
<CAPTION>

                                                                       Year Ended December 31,
                                                      --------------------------------------------------------
                                                               1998                              1997 
                                                      ----------------------            ----------------------

                                                                   Weighted                           Weighted
                                                                    Average                            Average
                                                      Shares         Prices              Shares          Price
                                                      ------         ------              ------          -----
<S>                                                   <C>            <C>                 <C>            <C>   
    Outstanding at beginning of year                  38,000         $14.98              39,000         $13.14
    Options granted                                    4,416           3.75               6,667          17.91
    Options exercised                                      0              0              (6,667)          5.34
    Options canceled                                 (17,166)          3.52              (1,000)         25.88
                                                     -------         ------              ------         ------
    Outstanding at end of year                        25,250         $ 7.21              38,000         $14.98
                                                     =======         ======              ======         ======

    Options exercisable at year-end                   23,042         $ 7.54              34,667         $14.70
                                                     =======         ======              ======         ======
</TABLE>

                                                                            F-15
<PAGE>

COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998 and 1997

NOTE G - STOCKHOLDERS' EQUITY  (CONTINUED)

[3] Stock option plans: (continued)

     The following table summarizes information about stock options to employees
at December 31, 1998:
<TABLE>
<CAPTION>
                      Options Outstanding                                               Options Exercisable
     --------------------------------------------------------          -------------------------------------------------
                                                   Weighted
                                                    Average
                                                   Remaining           Weighted-                                 Weight
                                                  Contractual           Average                                  Average
        Range of                 Number              Life               Exercise              Number            Exercise
     Exercise Price           Outstanding         (in Years)             Price              Exercisable           Price
     --------------           -----------         ----------             -----                -----------         -----
<S>                                 <C>                <C>               <C>                     <C>             <C>    
         $ 3.75                    4,416              9.6               $ 3.75                  2,208           $  3.75
           5.34                   16,667              5.7                 5.34                 16,667              5.34
          18.50                    4,167              8.5                18.38                  4,167             18.38
                                  ------                                ------                 ------            ------

                                  25,250                                $ 7.21                 23,042            $ 7.54
                                  ======                                ======                 ======            ======
</TABLE>

The directors' stock option plan (the "Directors' Plan"), as amended, authorizes
the granting of stock options to purchase an aggregate of not more than 50,000
shares (8,333 shares adjusted for the one for six reverse tock split in 1998) of
the Company's common stock. Each director of the Company who is not an employee
of the Company shall be eligible for options under this plan. Options to
purchase 5,000 shares of stock shall automatically be granted under the
Directors' Plan each year. Each option granted is exercisable as to 50% of the
number of shares of stock covered thereby on the date of grant and as to the
balance on the first anniversary of the grant. The exercise price of each option
granted shall be the fair market value of the stock on the date the option is
granted. Options granted prior to November 11, 1996 were exercisable as to 50%
of the number of shares covered thereby on the first anniversary of such grant
and as to the balance on the second anniversary.

      Additional information with respect to options issued to outside directors
      under the Directors' Plan activity is summarized as follows:
<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                                               -----------------------------------------------------------
                                                                        1998                               1997     
                                                               ------------------------         --------------------------
                                                                               Weighted                           Weighted
                                                                               Average                             Average
                                                                               Exercise                           Exercise
                                                                Shares          Price            Shares             Price
                                                                ------         --------          ------           --------
<S>                                                               <C>           <C>                <C>             <C>   
Outstanding at beginning of year                                  4,000         $18.18             2,334           $25.92
Options granted                                                   4,000           3.75             1,666             7.31
Options canceled                                                 (4,000)         18.18                 0                0
                                                                 -------        ------             -----           ------

Options at end of year                                            4,000         $ 3.75             4,000           $18.18
                                                                 ======         ======             =====           ======

Options exercisable at year-end                                   2,000         $ 3.75             3,167           $21.03
                                                                 ======         ======             =====           ======
</TABLE>

                                                                            F-16
<PAGE>
COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998 and 1997

NOTE G - STOCKHOLDERS' EQUITY  (CONTINUED)


[3]      Stock option plans:  (continued)

      The following table summarizes information about stock options to
      directors outstanding at December 31, 1998:
<TABLE>
<CAPTION>
                                                      Options Outstanding                        Options Exercisable
                                                 ------------------------------           --------------------------------
                                                 Weighted
                                                  Average
                                                 Remaining             Weighted                                   Weighted
                                                Contractual             Average                                    Average
         Range of              Number              Life                Exercise              Number               Exercise
      Exercise Price         Outstanding         In Years                Price             Exercisable              Price
      --------------         -----------         --------                -----             -----------              -----
<S>                               <C>             <C>                    <C>                   <C>                  <C> 
          $3.75                 4,000              9.6                   $3.75                2,000                 $3.75
                                -----                                                         -----

                                4,000                                                         2,000
                                =====                                                         =====

</TABLE>


[4] Warrants:

    The Company has issued warrants to purchase its common stock principally in
    connection with equity financing. Additional information with respect to
    warrants is summarized below.
<TABLE>
<CAPTION>
                                                                         Year Ended December 31, 
                                                      --------------------------------------------------------------
                                                               1998                                 1997 
                                                      ------------------------           ---------------------------
                                                                      Weighted                             Weighted-
                                                                       Average                              Average
                                                                      Exercise                             Exercise
                                                       Shares          Price             Shares             Price
                                                       ------          -----             ------             -----
<S>                                                      <C>             <C>               <C>               <C>   
      Outstanding at the beginning of year             291,899         $36.49            266,899           $37.68
      Warrants granted                                       0              0             25,000            24.00
                                                       -------         ------            -------           ------

      Warrants outstanding at end of year              291,899         $36.49            291,899           $36.49
                                                       =======         ======            =======           ======

      Warrants exercisable at year-end                 291,899         $36.49            291,889           $36.49
                                                       =======         ======            =======           ======
</TABLE>

                                                                            F-17
<PAGE>

COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998 and 1997

NOTE G - STOCKHOLDERS' EQUITY  (CONTINUED)

[4] Warrants:

      The following table summarizes information related to warrants outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
                                                             Warrants Outstanding                    Warrants Exercisable
                                                         ------------------------------         ------------------------------

                                                          Weighted
                                                           Average
                                                          Remaining            Weighted                               Weighted
                                                         Contractual            Average                                Average
                   Range of              Number             Life               Exercise            Number             Exercise
                Exercise Price         Outstanding        In Years               Price           Exercisable            Price
                --------------         -----------        --------               -----           -----------            -----

<S>                                            <C>          <C>                  <C>                <C>                 <C> 
                    $24.00                  25,000           3                  $24.00              25,000             $24.00
                    $30.00                  32,500           3                  $30.00              32,500             $30.00
                 $34.80-$36.00             204,354           1                  $35.88             204,354             $35.88
                 $46.08-$60.00              30,045           2                  $57.84              30,045             $57.84
                                           -------                                                 -------

                                           291,899                                                 291,899
                                           =======                                                 =======
</TABLE>

[5] Shares reserved or available for future issuance:
<TABLE>
<CAPTION>
<S>                                                                                        <C>   
      Shares of common stock reserved for future issuance are:
         Options granted under the plan                                                    25,250
         Options available for grant under the Plan                                        93,083
         Options granted under the Director Plan                                            4,000
         Options available for grant under the Director's Plan                              4,333
         Shares underlying the Warrants and Underwriters Warrant                          204,354
         Warrants issued to a consultant                                                   10,000
         Warrants issued in connection with private equity financing                       77,545
         Issuable in connection with Fox Ridge acquisition                                 10,833
                                                                                          -------

                                                                                          429,398
                                                                                          =======
</TABLE>

NOTE H - CONCENTRATION OF RISK

Revenues from principal sources are as follows:

                                                    Year Ended
                                                    December 31,
                                         --------------------------------
                                         1998                        1997
                                         ----                        ----

     Principal Customer                    11%                          9%
     Medicaid and Medicare                 39                          44
     Private insurance and other           50                          47
                                          100%                        100%
                                                               

                                                                            F-18
<PAGE>

COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998 and 1997



NOTE H - CONCENTRATION OF RISK  (CONTINUED)


[1] Reliance on principal customers:

    The Company provides services to a principal customer, a hospital and its
    affiliates, pursuant to two written contracts which expire on December 31,
    1999. These contracts give the Company the exclusive right to provide
    medical transportation services for the patients of this customer. The
    contracts may be terminated by the hospital if the Company fails to perform
    its obligations thereunder. These contracts can also be renegotiated by the
    hospital if there is a decrease in services.

[2] Dependence on governmental reimbursement:

    The Company derives the majority of its revenue from reimbursement by third
    party payers, particularly Medicaid and Medicare, typically invoicing and
    collecting payments directly from the third party payer.

    Reimbursement can be influenced by the financial instability of private
    third party payers and the budget pressures and cost shifting by
    governmental payers. A reduction in coverage or reimbursement rates by third
    party payers could have a material adverse effect on the Company's results
    of operations.

    The Company is subject to audits of its Medicaid and Medicare reimbursement
    claims by third-party fiscal intermediaries and governmental agencies. In
    the opinion of management adjustments would not be material to the financial
    position or results of operations of the Company. As a provider of services
    under the Medicaid and Medicare programs, the Company is also subject to the
    Medicaid and Medicare fraud and abuse laws.

    At December 31, 1998, 34% of accounts receivable was due from Medicaid and
    Medicare, 30% from the hospital facilities which includes its principal
    customer and its affiliates and 36% from private insurers and other
    nongovernmental sources.


NOTE I - ACQUISITION:

    In July 1997, the Company completed the acquisition of certain assets of Fox
    Ridge Transportation, Inc.("Fox Ridge"). The purchase price plus related
    acquisition transaction costs of $46,000 totaled $1,186,000 and is being
    allocated as follows: $598,000 to vehicles, $196,000 to customer list and
    $392,000 to goodwill.

    The purchase price of $1,140,000 is comprised of: assumption of debt of
    approximately $485,000 and the issuance of 130,969 shares of its common
    stock guaranteed at a value of $5.00 per share ($655,000) (the "Guaranteed
    Value") for a period of one year following the effective date of a
    registration statement covering the registration of such shares.

    The market value of the shares issued at the closing amounted to $377,000
    ($2.88 per share). The Company agreed to a Guaranteed Value of approximately
    $655,000. Accordingly, the Company may be required to issue additional
    shares (limited to 65,485 shares) and/or transfer cash for any deficiency
    which might result.

    The Company also agreed to place 97,031 shares of its common stock in escrow
    to collateralize the assumed obligation of $485,000. The common shares
    discussed above have not been adjusted for the 1 for 6 reverse stock split.

                                                                            F-19
<PAGE>

COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998 and 1997

NOTE J - EMPLOYEE BENEFITS

[1] 401(k) Retirement Savings Plan:

    In November 1996, the Board of Directors authorized the adoption of a 401(k)
    Retirement Savings Plan (the "401(k) Plan") with an effective date of
    adoption of January 1, 1997. The 401(k) Plan covers all employees who meet
    the 401(k) Plan's eligibility requirements. Eligible employees may elect to
    defer up to 15% of their yearly compensation, as defined. Employer
    contributions are discretionary. A favorable determination letter has been
    received from the Internal Revenue Service, and participation in the Plan
    began April 1, 1997. The Company elected to make a contribution to the Plan
    of 10,253 shares of the Company's common stock. Such shares were funded in
    March 1998.

[2] Collective bargaining agreement:

    Prior to the acquisition of "A-1" the Company was not a party to any
    collective bargaining agreements. The drivers, emergency medical technicians
    and paramedics of A-1 were subject to a collective bargaining agreement
    until 1997 when they voted to decertify the union as their representative.
    During 1997, ambulance drivers in Yonkers, New York and ambulette drivers
    located in Yonkers, New York and Union, New Jersey voted to be unionized.
    The company is currently negotiating a formal agreement with the unions.


NOTE K - INTANGIBLES AND RECEIVABLES WRITE-DOWN, RESTRUCTURING AND OTHER COSTS

Intangible assets are shown net of accumulated amortization, which includes a
material write-down in 1997. The decline in the financial results of the
operations of the Hudson Valley Companies acquired in 1996, has led the Company
to re-evaluate the carrying value of certain assets acquired. The underlying
factors contributing to the decline in financial results include reductions in
service revenue, changes in relations with certain customers and increased
competition. Based on a plan designed to improve operating margins, the Company
determined that a write-down of approximately $5,400,000 for impairment of
goodwill and customer lists should be charged to operations. The Company
determined the fair value of the assets based on discounted expected future cash
flows.

During 1997, the Company began implementing a restructuring program designed to
enhance overall competitiveness and increase productivity and efficiency through
the effective centralization of the Company's previously separate operating
entities. This consolidation is intended to reduce certain redundancies and
complexities in the operations, billing and dispatching, as well as, obtaining a
better overall utilization of its operating personnel. This process included
moving the Company's headquarters and locating its billing and dispatching into
one facility in White Plains, New York. This move took place in March 1998. In
connection with this process, in 1997 a re-evaluation of outstanding accounts
receivable resulted in a write-down of $1,371,000, principally relating to the
Hudson Valley Companies, for revenue billed subsequent to its acquisition. The
Company also charged operations in 1997 for $396,000 principally relating to
severance costs.

In addition to the costs associated with the consolidation of the Company's
separate operating Companies identified above, the Company also took a charge to
earnings for other costs in 1997. The Company defers certain costs incurred in
connection with pending acquisitions. In conjunction with the Company's
restructuring program, management believes that the likelihood of the completion
of these potential acquisitions has been reduced. Accordingly, costs
approximating $843,000 have been charged to operations in 1997.

                                                                            F-20
<PAGE>

COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998 and 1997

NOTE L - CONTINGENCIES

On February 12,1998, the Chapter 7 Trustee of BR Ambulance Service, Inc. ("BR")
filed a complaint ("Complaint") against the Company alleging that the Company
was the recipient of fraudulent conveyances from BR arising out of an asset
purchase agreement between the Company and BR dated March 12, 1995 wherein the
Company allegedly agreed to purchase the assets of BR for a base price of $2.0
million plus additional consideration to be calculated pursuant to a formula.
The Complaint further alleges that BR subsequently transferred various assets to
the Company but the Company did not pay the specified consideration and
accordingly, owes BR not less than $2.0 million. The Company vigorously disputes
the material allegations of the Complaint.

An action was filed by Medical Transportation Corp. ("Med-Trans") alleging that
during the twelve-month period commencing December 1, 1996 and ending November
30, 1997, the Company deliberately terminated relationships with numerous
customers and unilaterally ceased to provide services to such customers.
Med-Trans is the holder of a promissory note (Note E) which is subject to
adjustment based on total annual revenues from an ambulette business acquired
from Med-Trans. Med-Trans is seeking payment in the amount of $228,000. The
Company filed an answer to the complaint on March 30, 1998, together with
affirmative defenses, stating, among other things, that at no time did the
Company voluntarily decide not to service a customer. The Company intends to
vigorously oppose this action.

Various other actions have been filed against the Company principally relating
to alleged breach of employment agreements in connection with certain
acquisitions. The claimants in the actions seek an aggregate of $716,000, plus
punitive damages. The actions are at various stages and the Company believes it
has valid and meritorious defenses.

The ultimate outcome of the above-mentioned Complaint and actions cannot
presently be determined. Accordingly, no provision for any liability that may
result, if any, has been made in the financial statements.

NOTE M - RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statements of
Accounting Standards, No.130, "Reporting Comprehensive Income" and No.131,
"Disclosure About Segments of an Enterprise and Related Information" effective
for fiscal years beginning after December 15, 1997. The Company believes that
these pronouncements did not have an impact on the consolidated financial
statements.

NOTE N - YEAR 2000 COMPLIANCE

The Company recognizes the need to ensure its operations will not be adversely
impacted by year 2000 software failures. The Company is in the process of
evaluating the potential effects of the year 2000 issue and formulating and
implementing a plan to address the potential effects on its business and it
operations. The Company expects to implement successfully the changes necessary
to address its internal readiness and material third-party relationship issues.
There can be no assurance, however, that all the third parties the Company deals
with will achieve year 2000 readiness which could have an adverse effect on the
Company's operations. The Company does not believe that the cost at complying
with year 2000 issues will have a material effect on the Company's operations or
financial condition.

                                                                            F-21
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of White
Plains, State of New York, on the 15th day of April, 1999.

                                    COMMUNITY MEDICAL TRANSPORT, INC.


                                      By:  /s/ Dean L. Sloane
                                           -------------------------------------
                                           Dean L. Sloane,
                                           President and Chief Executive Officer

         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
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
             Signatures                                  Capacity                                     Date
--------------------------          ---------------------------------------------------         ------------------
<S>                                     <C>                                                           <C> 
/s/ Dean L. Sloane                     Director, President and Chief Executive                    April 15,  1999
------------------                     Officer (Principal Executive Officer, Principal
    Dean L. Sloane                     Financial and Accounting Officer)              
                                       

/s/ Craig V. Sloane                    Director                                                   April 15, 1999
-------------------
    Craig V. Sloane

/s/ Bernard M. Kruger                  Director                                                   April 15, 1999
---------------------
    Bernard M. Kruger

/s/ Lucius J. Riccio                   Director                                                   April 15, 1999
--------------------
    Lucius J. Riccio
</TABLE>