<PAGE>

                    U.S. SECURITIES AND 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 31,1997

[             ] 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, 1997 are
$22,814,000.

         The aggregate market value of the voting and non-voting common stock
held by nonaffiliates of the issuer is $4,440,156 (as of March 30, 1998).

         The number of shares outstanding of the issuer's common stock is
5,993,652 (as of March 30, 1998).

                      DOCUMENTS INCORPORATED BY REFERENCE

         Transitional Small Business Disclosure Format: Yes........   No...X...

<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. 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 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.

Recent Developments

         In May 1997, the Company completed its purchase of the Hudson Valley
companies (the Hudson Valley companies) by acquiring all the shares of an
affiliated company, Richards Decker Operating Company (RDO), and issuing
shares and notes for the balance of the purchase price pursuant to an
amendment dated as of December 31, 1996 ("December Amendment") to a Purchase
Agreement dated February 28, 1996 and amended on August 12, 1996 (the
"Original Agreement"), among the Company, Alan McGeorge, Harvey H. McGeorge
Co., Inc. and Hudvalco, Inc. Pursuant





<PAGE>



to the December Amendment the balance of the purchase price for the Hudson
Valley companies was increased by $125,000 to $1,175,000 leaving a balance of
$1,132,772 after adjustments. The unpaid purchase price was paid by (i)
issuing 153,846 shares of the Company's Common Stock to Alan McGeorge pursuant
to a conversion right of the original note (ii) issuing 7,979 additional
shares of the Company's Common Stock and (iii) issuing a five month note (the
New Note) in the amount of $566,386 payable in five equal installments
convertible into shares of the Company's Common Stock in certain
circumstances. The Company through the issuance of additional shares or cash
payment guaranteed the price of its Common Stock at $3.50 per share.

         In July 1997, the Company renegotiated the amount due on the New Note
and the New Note was repaid in full for the amount of $500,000. In conjunction
with the repayment of the New Note, the Company issued 166,667 shares of its
Common Stock to a third party, Ronald Davis, in consideration for $500,000.

         On July 29, 1997, the Company entered into an Asset Purchase
Agreement with John Gillen, the sole shareholder of Fox Ridge Transportation,
Inc. ("Fox Ridge"), to acquire certain vehicles owned by Fox Ridge. The
consummation of such agreement was subject to the delivery of certain
documents by Fox Ridge and the assumption by the Company of Fox Ridge's
outstanding indebtedness and leasehold obligations relating to the vehicles,
all of which were completed by October 1, 1997. Pending delivery of such
documents, the Company operated the business of Fox Ridge and received the
revenues since July 29, 1997. Pursuant to the terms of the Asset Purchase
Agreement, the Company paid Mr. Gillen upon consummation a purchase price of
$1,140,000, by (i) issuing 130,969 shares of the Company's Common Stock to Mr.
Gillen and (ii) assuming approximately $485,000 of outstanding debt of Fox
Ridge, which debt was refinanced by the Company. The Asset Purchase Agreement
also provides for the issuance of additional shares, up to a maximum of 65,485
shares, to Mr. Gillen if Mr. Gillen is unable to sell the shares received in
this transaction at $5.00 per share. Any additional shortage will be paid in
cash by the Company.

         The Company is currently consolidating its separate operating
entities into one company with separate operating divisions. The Company has
taken a charge to earnings for the fiscal year ended December 31, 1997 in the
amount of $1,371,000, which is primarily the result of a writedown of accounts
receivable of certain of the acquired companies arising subsequent to the
acquisitions, and $1,239,000 for costs relating to this consolidation,
including severance and other costs previously deferred for future
acquisitions, the completion of which, in the opinion of management, is not
likely to occur. The consolidation of the companies was substantially
completed during the first quarter of 1998. The Company expects the remainder
of the consolidation to be completed during the second quarter of 1998.

         The Company has also taken a charge to earnings of $5,400,000 for the
year ended 1997 for the write-down of intangibles, which is the result of
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 revenues, caused by, among other things, 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.

                                      2



<PAGE>



         The intangible writedown referred to above arose out of the acquired
operations of the Hudson Valley companies. This writedown resulted from a
significant reduction in revenues of the Hudson Valley companies, thereby
reducing income derived from and the value of that acquisition as represented
in the Original Agreement. The Company anticipates taking legal action against
the former owners of the Hudson Valley companies for failure to make
appropriate disclosures.

         The Company has determined not to pursue any additional acquisitions
pending consolidation of its separate operating entities into one operation,
which consolidation commenced in the third quarter of 1997 and is expected to
be completed in the second quarter of 1998. If the Company makes any
acquisitions thereafter, the completion of any such acquisitions will increase
the revenues and expenses of the Company. However, there can be no assurance
that future net income will be positively impacted. Additional financing,
however, may be required in the future in connection with any future
acquisitions.

         At December 31, 1997, the Company was not in compliance with several
financial covenants from its lenders. The lenders have provided a waiver in
connection with an amendment to the loan agreement, which was completed on
April 14, 1998.

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, with over 2,000 privately-owned
companies.

         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.

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,

                                      3



<PAGE>



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 believes that the fragmented nature of its industry
combined with increasing performance requirements and cost burdens imposed on
smaller companies creates favorable acquisition and expansion opportunities
for the Company.

         In the New York-New Jersey metropolitan and surrounding area the
Company had intended, through such acquisitions and expansion, to build a
network of and become a significant provider of ambulette and ambulance
services. The Company believes it is now a significant medical transportation
provider in the New York-New Jersey metropolitan area. The Company has
determined not to pursue any additional acquisitions pending consolidation of
its separate operating entities into one operation.

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

     o    Continuing its commitment to high quality, specialized and 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.

     o    Acquiring ambulance and ambulette service providers in the New
          York-New Jersey metropolitan area, and integrating and consolidating
          these companies and their operations with the operations of the
          Company. The Company believes such acquisitions and consolidations
          will improve the efficiency of existing operations;

         The Company may also seek to expand through the acquisition of
ambulance and ambulette providers outside of the New York-New Jersey
metropolitan area with high quality management and strong performance records.
The Company will consider acquisition candidates that it believes offer
attractive opportunities for intrinsic growth and expansion into nearby
service areas and where the Company believes it may become a significant
provider.

         Management believes that such acquisitions would enable it to achieve
economies of scale, improve its gross margins and increase its ability to
compete with other service providers. The

                                      4



<PAGE>



Company may retain senior management of acquired companies outside of the New
York-New Jersey metropolitan area after the acquisition to manage local
operations. The Company will also consider acquiring businesses that provide
related health care services including the distribution of durable medical
equipment and supplies.

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 -- 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 day treatment" and "scheduled daily in advance."

         The "pre-scheduled day treatment" services, which accounted for over
37% of the Company's revenues during 1996 and approximately 29% of the
Company's revenues during 1997, 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 recent acquisitions and marketing efforts.

                                      5




<PAGE>



         Ambulance operations generated approximately 37% and 49% of the
Company's total revenues during the years ended December 31, 1996 and 1997,
respectively. Presently, the Company's ambulance services are provided
primarily 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
intends to expand 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, 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 supervision
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 monitors, defibrillators, oxygen delivery
systems and specialty pharmaceutical and medical supplies.

         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.

         Ambulance units are staffed by two EMTs and 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 it's services on the basis of quality of care,
reliability, reputation and cost. As part of its strategy, the Company
substantially expanded its marketing efforts in 1997. During the year the
Company retained several sales representatives each responsible for a
particular area. The representatives receive a base salary and additional
compensation based upon increased revenues in the territory for which they are
responsible. In addition, the Company retains several customer care
representatives (CCRs) who are based at major hospitals that the Company
services. In addition to serving as liaison between the hospitals staff and
the Companys ambulance dispatch/billing personnel, the CCRs also market the
Companys services to area nursing homes and smaller hospitals.

         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

                                      6



<PAGE>



City, Rockland 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.

Personnel Training and Quality Assurance

         As of December 31, 1997, the Company employed 141 EMTs and 74
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 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, 1996 and 1997, the Company
derived approximately 60% and 44%, respectively, of its net revenues from
Medicaid and Medicare; 11% and 9%, respectively, of its net revenues pursuant
to contracts with Beth Abraham Hospital (the Company's only fixed-cost
provider); and 29% and 47%, 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. Through this expertise and its consolidation of the
billing and collection departments of its recent acquisitions, the Company has
written down $1,371,000 of its accounts receivables and as a result has taken a
charge to earnings for the year ended December 31, 1997. See Description of
BusinessRecent Developments and Management's Discussion and Analysis of
Financial Condition and Results of Operations for

                                      7



<PAGE>



information with respect to this writedown.

Principal Customers

         During 1997 the majority of the Company's services are provided
pursuant to oral arrangements or short-term, non-exclusive contracts with its
customers. However, 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, 1998. During the years ended December 31,
1996 and 1997, the Company derived approximately 13% and 10%, 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. As the Company's other business expands and
acquired businesses are operational for a full year, it is anticipated that
Beth Abraham will account for an increasingly lower percentage of revenues in
1998 and in the future.

         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, 1998. During the years ended December 31, 1996
and 1997, the Company derived approximately 8% and 6%, respectively, of its
revenues from services provided to the County of Union, New Jersey. The
Company expects that these revenues will increase for the fiscal year ending
1998 since the Company commenced additional services to the County of Union,
New Jersey as of January 1, 1998.

         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.

         As a result of acquisitions and trends in the medical transportation
industry the Company has entered into additional agreements for medical
transportation services. In the New York-New Jersey metropolitan area, large
hospitals and health institutions are seeking to enter into single source
medical transportation contracts and the Company has entered into such
agreements with several hospitals.

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

                                      8



<PAGE>



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.

         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 acquirors 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.

         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

                                      9



<PAGE>



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 is responsible for paying the balance of the bill, 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.

         The Company, like other Medicaid and Medicare providers, is subject
to governmental audits of its Medicaid and Medicare reimbursement claims, but
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. Nevertheless, the State of New York disputed certain claims for
which the Company received reimbursement during a four and one-half year
period. In August 1997, the Company entered into a stipulation pursuant to
which it paid $97,000 for disputed claims and received a release from the
State.

                                      10



<PAGE>


         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
rules 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.

Equipment

         As of December 31, 1997, the Company's fleet included 166 ambulettes
and 66 ambulances. Except for 31 leased vehicles, the Company owns all of its
vehicles.

Employees

         As of December 31, 1997, the Company had a total of 564 employees of
which approximately 431 were full-time and 133 were part-time employees. Of
these, 504 employees were involved in medical transport services and 60
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. The Company is currently negotiating a formal agreement
with the unions. The Company considers its relations with employees to be
good.

                                      11




<PAGE>



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.

         In 1997 the Company leased a small office in Union, New Jersey for
the administration, including dispatch, of its Union County para-transit
contract.

         In conjunction with certain acquisitions, subsidiaries of the Company
entered into leases for garage and operating facilities in Bedford Hills, New
York, Haverstraw, New York and Orange, New Jersey. These facilities typically
consisted of garage, dispatch and office facilities. However, the Company has
been consolidating certain of these facilities. At December 31, 1997, these
facilities consisted of the following: (a) the facility in Bedford Hills is
5,000 square feet for office space at an annual rental of $37,000 pursuant to
a lease that expires in August 1998; (b) the facility in Haverstraw is 13,000
square feet for office space and a garage at an annual rental of $72,000
pursuant to a lease that expires in August 2001; and (c) 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.


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, which commenced on March 25, 1998, will be continuing in May 1998.

         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

                                      12



<PAGE>



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 Companys
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 Companys services and quantum meruit based upon the reasonable value
of those services. On March 16, 1998, PSCH served an answer which contains one
counterclaim for unspecified damages based upon the PSCHs claim that the
Company breached the transportation agreement. The answer which was served was
defective. PSCHs counsel was promptly notified of the deficiency and requested
to serve a properly signed pleading. As of March 31, 1998, such a pleading has
not been received. The Company intends to vigorously prosecute this action and
oppose the counterclaim.

         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 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.

         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


                                      13


<PAGE>



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 Companys time to respond to the complaint has been extended to
April 21, 1998. The Company vigorously disputes the material allegations of
the complaint.

         In March 1998, the landlord for the Companys facilities in
Haverstraw, New York commenced an action against a subsidiary of the Company
in the Justice Court of the Village of Haverstraw, County of Rockland entitled
Tor Avenue Realty, Inc. v. Century Ambulance & Ambulette, Inc. (the Tor
Action). The Tor Action alleges unpaid rent tax and utility payments in the
amount of approximately $57,000. The owner of Tor Avenue Realty, Inc. is one
of the former owners of the Hudson Valley companies. The Company intends to
vigorously oppose this action and is currently considering a counterclaim.

         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

         There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year ended December 31, 1997.



                                      14


<PAGE>



                                    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 SmallCap Market under the symbols "CMTI" and "CMTIW",
respectively.

         Between July 1995 and 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 not related to the financial condition of the Company.

         Set forth below are the high and low bids for the Company's common
stock and redeemable warrants on The Nasdaq SmallCap Market between August 1,
1997 and December 31, 1997. 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, 1996 and July 31, 1997.


<TABLE>
<CAPTION>

                                             Common Stock                             Redeemable Warrants
                                 ------------------------------------         -----------------------------------
                                       High                  Low                       High                  Low
                                 ----------------      ----------------          ----------------      ----------------
<S>                              <C>                   <C>                      <C>                    <C>  

1997
First Quarter                    $4-1/4                $3-3/16                   1-3/8                 -11/16
Second Quarter                   3-5/16                2-3/4                     -13/16                -21/32
Third Quarter                    3                     2                         -21/32                -7/16
Fourth Quarter                   2-1/8                 1-3/32                    -15/32                -1/8

1996
First Quarter                    $8-3/4                $6-7/8                   $3                    $1-5/8
Second Quarter                   8-5/8                  5-1/8                    2-11/16               1
Third Quarter                    7                      4-13/16                  1-13/16               1-1/4
Fourth Quarter                   5                      2-15/16                  1-7/16                -27/32
</TABLE>    

         As of December 31, 1997, 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.

         During the three months ended December 31, 1997, the Company issued
294,320 shares of Common Stock, without registration under the Securities Act
of 1933 (the Securities Act), to two non-affiliate entities upon their
conversion of 1,030.1 shares of the Companys Series BB Convertible Preferred
Stock. The Company claimed Section 3(9) of the Securities Act as the exemption
from registration of such transaction.



                                      15


<PAGE>



         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.


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

Introduction

         For all periods presented, the financial information includes the
accounts of all operating subsidiaries of the Company acquired prior to 1996.
Between May and August 1996, the Company completed five acquisitions (the 1996
Acquisitions) by wholly-owned subsidiaries of the Company. The operations for
the 1996 Acquisitions were accounted for by purchase method accounting and
revenues and expenses from those operations are only included for a portion of
1996 but for all of 1997. The Company did not complete any significant
acquisitions in 1997.

         The Company's total revenue, which is comprised primarily of
ambulette and ambulance service fees charged to Medicare, Medicaid, other
third party payors such as private insurance carriers and health maintenance
organizations, and directly to patients, is presented net of contractual
adjustments.

Forward Looking Statements

The following statements and certain other statements contained 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 costs (v) customer relations and (vi)
increased competition.

Results of Operations

         Year Ended December 31, 1997 as Compared with Year Ended 
December 31, 1996

         Revenues increased by $7,282,000, or 46.9%, to $22,814,000 in 1997
from $15,532,000 in 1996. The increase is due substantially to the additional
revenues resulting from a full year inclusion of the 1996 Acquisitions, and to
a lesser extent, increased volume generated from its customer base prior to
such acquisitions. These acquisitions have resulted in a shift of the Companys
revenues from predominantly an ambulette based Company to virtually an even
mix of ambulette and ambulance revenues. In addition to the revenue mix
change, the payor mix has also changed. The reimbursement from Medicare and
Medicaid has been reduced significantly as a percentage of revenues, from 60%
in 1996 to 44% in 1997 while the reimbursement from private insurers and other
non governmental agencies has increased from 29% in 1996 to 47% in 1997. The
Company during 1997 began to decline certain trips previously performed by
operations of the


                                      16


<PAGE>



businesses acquired, as a result of the Companys stricter interpretations of
the reimbursement regulations. The stricter interpretations caused changes in
relationships with certain customers, thereby reducing revenues and increasing
competition.

         Operating expenses increased by $6,647,000, or 67.7%, to $16,466,000
in 1997 from $9,819,000 in 1996. This percentage increase was greater than the
percentage increase in revenue due to the inherently lower margins of the
acquired companies. As a result of the increase in ambulance services, the
Company's overall costs of providing services also increased during the year
ended December 31, 1997. Ambulances require at least two employees who are
more highly trained, (either EMTs and or Paramedics), for the transport of a
single patient while ambulettes transport multiple patients with less skilled
employees, typically with one driver, and in certain circumstances a matron.
The increase in operating costs has been slightly offset by a reduction in
insurance expenses. The Company significantly reduced its insurance costs
while maintaining the same levels of coverage, as a result of consolidating
certain policies, particularly the automobile, general liability and
professional liability policies. The other operating costs of the Company
(fleet maintenance, rent and depreciation and amortization) have remained
relatively constant as a percentage of revenues. As a result of the foregoing,
gross profit as a percentage of revenues decreased from 36.8% to 27.8%, even
though gross profit increased by $635,000, or 11.1%, to $6,348,000 in 1997
from $5,713,000 in 1996.

         Selling, general and administrative expenses increased by $2,256,000,
or 47.6%, to $6,996,000 in 1997 from $4,740,000 in 1996, primarily as a result
of the increased depreciation, amortization of the intangibles and bad debt
reserves, as well as additional personnel and marketing costs. This increase
in costs was offset by the elimination of certain redundant expenses
associated with the acquisitions. These costs as a percentage of revenues
remained basically constant as revenues increased proportionally.

         The charge to earnings for the intangibles write-down of $5,400,000
for the year ended December 31, 1997 is 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, among other things, 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 expected
future cash flows as required by general accepted accounting principles.

         The Company is currently consolidating its separate operating
entities into one company with separate operating divisions, which includes 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 principally relating to the Hudson Valley companies, for revenues
billed subsequent to its acquisition. The Company also charged operations for
$396,000 primarily relating to severance costs and $843,000 for costs
previously deferred in connection with potential acquisitions which management
believes are unlikely to be completed. This consolidation, which is
substantially complete, is intended, among other items, to obtain better
overall utilization of its operating personnel by increasing efficiency and
reduce costs in future periods.



                                      17


<PAGE>



         Income from operations (exclusive of the intangible and the accounts
receivable write-downs and the additional charge to earnings described above
aggregating $8,010,000) decreased by $1,621,000, or 166.6%, to a loss from
operations of $648,000 in 1997 from income of $973,000 in 1996. This decrease
was a result of the factors described above, primarily the lower margins of
the acquired companies operations and the disproportionate increases in
operating expenses.

         Interest expense increased by $199,000, or 43.0%, to $662,000 in 1997
from $463,000 in 1996. This increase is primarily due to the additional
borrowing and debt incurred in connection with acquisitions completed in 1996.

         Interest income decreased by $65,000, or 46.4%, to $75,000 in 1997
from $140,000 in 1996. The reduction in interest income is primarily due to
significant expenditures in connection with acquisitions which reduced
available cash.

         The Company's income taxes amounted to a benefit of $977,000 for the
year ended December 31, 1997, compared with a tax provision of $298,000 for
the year ended December 31, 1996. The 1997 tax benefit resulted from the
Company incurring a taxable loss for the year ended December 31, 1997.

         The Company's net loss amounted to $8,224,000, or $1.57 per share,
for the year ended December 31, 1997, as compared to net income of $394,000,
or $0.10 per share, for the year ended December 31, 1996. This decrease in net
income and earnings per share is attributable to the factors described above,
primarily the increase in operating expenses, particularly the higher cost of
operating personnel, the intangible write-downs, the accounts receivable
write-down and the restructuring and other costs.

         The Company has determined not to pursue any additional acquisitions
pending consolidation of its separate operating entities into one operation.
If the Company makes any acquisitions thereafter, the completion of any such
acquisitions will increase the revenues and expenses of the Company, however,
there can be no assurance that future net income will be positively impacted.
Additional financing, however, may be required in connection with any future
acquisitions.

         In January 1997, the New York State Medicaid reimbursement rates were
changed. The base rates were reduced, while certain other reimbursement rates
were added or increased. These rate changes principally effected the ambulette
business, and the Company has taken certain courses of action, including the
elimination of certain operations which had become less profitable or
unprofitable particularly where customers refused or were unable to permit the
Company to provide the services efficiently to meet the new regulations.

Liquidity and Capital Resources

         Cash provided by operating activities was $96,000 in 1997 compared
with cash used in operating activities of $1,167,000 in 1996. The increase in
cash provided by operating activities was largely the result of a decrease in
accounts receivable due mainly to increased reserves which is primarily
attributable to the companies acquired in the prior year, as well as a change
in the payment


                                      18


<PAGE>



schedule of governmental agencies, and an increase in depreciation and 
amortization in connection with the acquisitions.

         Cash used in investing activities in 1997 and 1996 was $705,000 and
$5,766,000, respectively. The decrease in cash used in investing activities
was largely the result of cash being utilized in the prior year for
acquisitions. This was offset by capital expenditures associated with the
purchase of vehicles and equipment, and a decrease in short term investments.

         Cash provided by financing activities amounted to $497,000 for the
year ended December 31, 1997 as compared to $7,945,000 for the same period in
1996. The decrease in cash provided by financing activities was the result of
proceeds in the prior period, primarily from the issuance of Common Stock in a
private placement in 1996.

         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, in
the past, and may in the future, be temporarily unable to draw down desired
amounts because of slow payment by reimbursement agencies and as a result of
delays in collection. In addition, the Company may be 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 from its lenders. 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. Further, the lenders have extended the maturity date
of the revolving credit arrangement to January 18, 1999 and in conjunction
which such revisions, reduced the amount under the revolving credit
arrangement from $6,500,000 to $3,500,000. The Company intends to refinance
such credit facility prior to January 1999.

         At December 31, 1997, the Company had working capital of $3,092,000
as compared to working capital of $4,984,000 at December 31, 1996.

         The Company believes that internally generated funds and bank loans
will provide sufficient liquidity and enable it to meet its currently
foreseeable working capital requirements for operations for at least the next
12 months, with the exception of the revolving credit arrangement, which
management intends to refinance as described above.

         The Company intends to consider making additional acquisitions after
the consolidation of the Company's operations. Additional financing, however,
may be required in the future in connection with the Company's acquisition
program.

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.


                                      19


<PAGE>



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 presently 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-24 comprising a portion of
this Annual Report on Form 10-KSB.


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

         There have been no changes in accountants or disagreements on
accounting and financial disclosure during the 24 months prior to December 31,
1997.



                                      20


<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                                 52           President, Chairman of the Board, Chief
                                                            Executive
                                                            Officer and Director

Joseph A. Connell, Sr.                         45           Chief Operating Officer

Donald J. Panos                                37           Vice President of Finance, Chief Financial
                                                            Officer

Craig V. Sloane                                47           Vice President-Operations, Secretary and Director

Steven R. Fittante                             44           Vice President, Corporate Development

Bernard M. Kruger, M.D.                        55           Director

Lucius J. Riccio, Ph.D.                        50           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 AMRs 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.

         Donald J. Panos has been employed by the Company since November 1995
and is Vice President of Finance, and Chief Financial Officer. From August
1994 to November 1995, Mr. Panos was employed as a manager with an accounting
firm, Herman J. Dobkin & Company, L.L.P. From 1989 to 1994, Mr. Panos was
employed by Horsehead Industries, Inc., a $750 million private company with a
public subsidiary and publicly traded debt as Manager of Financial Reporting.
From


                                      21


<PAGE>



1987 to 1989 he was a Senior Accountant with Ernst & Young. Mr. Panos is a CPA.

         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.

         Steven R. Fittante has been employed by the Company since July 1995
and is Vice President of Corporate Development. From June 1993 until June 1995
he was employed by Mayflower Laidlaw Transit, Inc., serving most recently as
North East Regional Manager. From 1985 to 1993 he was director of Monmouth
County Department of Transportation.

         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.

         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 other than Joseph A. Connell, Sr.


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, 1995, 1996 and 1997 to the
Company's Chief Executive Officer and to each executive officer whose
compensation exceeded $100,000 during its fiscal year ended December 31, 1997:


                                      22


<PAGE>



                          Summary Compensation Table
<TABLE>
<CAPTION>

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

<S>                               <C>           <C>                    <C>           <C>                           <C>
Dean Sloane                       1997          $225,000               0             $34,000                       0
   President and Chief            1996          $225,000               0             $37,000                       0
   Executive Officer              1995          $225,000               0             $46,000                       0

Craig Sloane                      1997          $ 94,000               0             $12,000                       0
   Vice- President-               1996          $ 90,000         $15,000             $12,000                  10,000
   Operations                     1995          $ 85,000         $15,000             $12,000                       0
------------
</TABLE>

(1) Consists primarily of automobile lease payments.


         The following table sets forth information as to options exercised by
each of the named executives during the fiscal year ended December 31, 1997
and the value of in-the-money options held by such executives at December 31,
1997.

<TABLE>
<CAPTION>

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


                        Number of
                        Shares of
                       Common Stock         Value           Number of Shares of Common Stock 
                       Acquired on        Realized         Underlying Unexercised Options at       Value of In-the-Money Options at
      Name               Exercise           Value                       12/31/97                                12/31/97 *
 ----------------     ----------------   --------------   -------------------------------------   ---------------------------------
                                                           Exercisable           Unexercisable      Exercisable      Unexercisable
                                                         ----------------     -----------------   ----------------  ---------------
<S>                  <C>              <C>                <C>                <C>                   <C>               <C>   
Dean Sloane          0                      ---                   0                   0                    ---           ---
                                                                                       
Craig Sloane         0                      ---              95,000                   0                $29,700           ---
------------   
</TABLE>
                                                                      
*     Value is based on the excess of the closing bid price of the Company's
      Common Stock as of December 31, 1997 ($1.22 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.


                                      23


<PAGE>



         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.

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 February 1996 the Board of Directors authorized
the amendment of the Employee Plan subject to stockholder approval, increasing
the number of shares subject to the Employee Plan from 263,500 shares of the
Company's Common Stock to 750,000 shares. As of February 28, 1998, options to
purchase 203,000 shares of Common Stock were outstanding and options to
purchase 507,000 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)


                                      24


<PAGE>



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.

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 50,000 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 5,000 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. Each director received 5,000 options in lieu of 1997 options
on November 11, 1996.

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, 1998 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.


                                      25


<PAGE>

<TABLE>
<CAPTION>

       Name and address of Beneficial               Number of Shares
                   Owner                           Beneficially Owned                      Percentage of Class
--------------------------------------------  --------------------------------     ------------------------------------

<S>                                             <C>                                 <C>  
Dean L. Sloane                                         1,440,596 (1)                             24.6%
         45 Morris Street                                                                  
         Yonkers, N.Y. 10705                                                               
                                                                                           
Craig V. Sloane                                           95,000 (2)                             1.6%
         45 Morris Street                                                                  
         Yonkers, N.Y. 10705                                                               
                                                                                           
Bernard M. Kruger                                        119,900 (3)                             2.0%
         170 East 78th Street                                                              
         New York, N.Y. 10021                                                              
                                                                                           
Lucius J. Riccio                                           9,500 (3)                             *
         315 East 69th Street                                                              
         New York, N.Y. 10021                                                              
                                                                                           
Ronald V. Davis                                          376,667 (4)                             6.4%
         c/o Davis Capital LLC                                                             
         2015 West Main Street                                                             
         Stamford, Connecticut,                                                            
           06902.                                                                                     
                                                                                           
All directors and executive                            1,707,496 (5)                             28.4%
         officers as a group (7                                                            
           persons)                                                                     
------------                                     
* Less than 1%                              
</TABLE>

(1)   Does not include 100,000 shares owned by Mary K. Sloane, Dean L.
      Sloane's wife. Dean L. Sloane disclaims beneficial ownership of such
      shares.

(2)   Includes 95,000 shares of the Company's Common Stock subject to
      presently exercisable options.

(3)   Includes 9,500 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 154,000 shares subject to presently exercisable options.


Item 12.     Certain Relationships and Related Transactions

         Not Applicable




                                      26


<PAGE>



Item 13.     Exhibits and Reports on Form 8-K

(a)    Exhibits


     3.01     Restated Certificate of Incorporation of the Company (1)

     3.02     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.

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

     10.07    Lease dated September 1997 by and between the Company and
              Principal Mutual Life Insurance Company

     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

     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)

     10.15    Credit Agreement, dated as of December 18, 1996, among the
              Company, Atlantic Bank of New York, Fleet Bank, N.A. and Israel
              Discount Bank of New York, including collateral documents (4)

     21.01    Subsidiaries of the Company

     23.01    Consent of Richard A. Eisner & Company, LLP

     27.01    Financial Data Schedule

                                      27


<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.

(b)     Reports on Form 8-K

         None




                                      28


<PAGE>

COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

                                                                          
Contents

                                                                           Page

Consolidated Financial Statements

   Independent auditors' report                                             F-2

   Balance sheet as of December 31, 1997                                    F-3

   Statements of operations for the years ended December 31, 1997
      and 1996                                                              F-4

   Statements of changes in stockholders' equity for the years ended
      December 31, 1997 and 1996                                            F-5

   Statements of cash flows for the years ended December 31, 1997 and
      1996                                                                  F-6

   Notes to financial statements                                            F-7

                                     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,
1997 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, 1997. 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 enumerated above present fairly, in
all material respects, the consolidated financial position of Community
Medical Transport, Inc. and subsidiaries at December 31, 1997, 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, 1997, in
conformity with generally accepted accounting principles.

/s/ Richard A. Eisner & Company, LLP




New York, New York
March 6, 1998

With respect to Note E,
April 14, 1998

                                     F-2
<PAGE>


COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

                 
Consolidated Balance Sheet
December 31, 1997
<TABLE>
<CAPTION>
<S>                                                                                           <C>         
ASSETS
Current assets:
   Cash                                                                                       $       925,000
   Short-term investments                                                                           1,136,000
   Accounts receivable - trade, less allowance for doubtful accounts of $1,434,000                  4,828,000
   Prepaid insurance                                                                                  706,000
   Prepaid and refundable income taxes                                                                592,000
   Other current assets                                                                               276,000
   Deferred tax assets                                                                                524,000
                                                                                              ---------------

      Total current assets                                                                          8,987,000

Property, equipment and leasehold improvements - net                                                4,385,000
License - net                                                                                         703,000
Customer lists - net                                                                                1,459,000
Other assets                                                                                          398,000
Goodwill - net                                                                                      2,661,000
Covenants not to compete, net                                                                         100,000
                                                                                              ---------------

                                                                                              $    18,693,000
                                                                                              =============== 
LIABILITIES
Current liabilities:
   Current portion of long-term debt (including $408,000 past due)                            $     2,388,000
   Accounts payable                                                                                 2,091,000
   Accrued expenses                                                                                 1,416,000
                                                                                              ---------------

      Total current liabilities                                                                     5,895,000

Long-term debt - net of current portion                                                             5,566,000
Deferred tax liabilities                                                                              524,000
                                                                                              ---------------
                                                                                                   11,985,000
                                                                                              ---------------
Commitments and contingencies

STOCKHOLDERS' EQUITY
Preferred stock, 4% cumulative, $.001 par value, 5,000,000 shares authorized,
   Series BB, 7,500 shares designated, 778.4 shares issued and outstanding
   (liquidation value of $778,400, excluding cumulative dividends)
Class A nonvoting common stock, $.001 par value, 10,000,000 shares authorized,
   none issued
Common stock, $.001 par value, 20,000,000 shares authorized, 5,761,007 shares issued
   and outstanding                                                                                      6,000
Capital in excess of par value                                                                     14,043,000
Accumulated deficit                                                                                (7,341,000)
                                                                                              --------------- 

      Total stockholders' equity                                                                    6,708,000
                                                                                              ---------------

                                                                                              $    18,693,000
                                                                                              =============== 

</TABLE>
                See notes to consolidated financial statements

                                     F-3
<PAGE>


Consolidated Statements of Operations
<TABLE>
<CAPTION>

                                                                                                         Year Ended
                                                                                                        December 31,
                                                                                                   1997              1996


Net revenue                                                                                   $    22,814,000  $    15,532,000
                                                                                              ---------------  ---------------
<S>                                                                                          <C>                 <C>
Expenses:
   Salaries and benefits                                                                           12,593,000        6,779,000
   Fleet maintenance                                                                                1,766,000        1,207,000
   Insurance                                                                                          773,000        1,059,000
   Rent                                                                                               484,000          257,000
   Depreciation and amortization                                                                      850,000          517,000
                                                                                              ---------------  ---------------
      Total operating expenses                                                                     16,466,000        9,819,000
                                                                                              ---------------  ---------------
Gross profit                                                                                        6,348,000        5,713,000

Selling, general and administrative expenses                                                        6,996,000        4,740,000
Intangible write-down                                                                               5,400,000
Receivable write-down                                                                               1,371,000
Restructuring and other costs                                                                       1,239,000
                                                                                              ---------------  ---------------

Income (loss) from operations                                                                      (8,658,000)         973,000
Other income                                                                                           44,000           42,000
Interest income                                                                                        75,000          140,000
Interest expense                                                                                     (662,000)        (463,000)
                                                                                              ---------------  ---------------
Income (loss) before provision (benefit) for income taxes                                          (9,201,000)         692,000
                                                                                              ---------------  ---------------
Provision (benefit) for income taxes:
   Current                                                                                           (120,000)          91,000
   Deferred                                                                                          (857,000)         207,000
                                                                                              ---------------  ---------------
                                                                                                     (977,000)         298,000
                                                                                              ---------------  ---------------

Net income (loss)                                                                             $    (8,224,000) $       394,000
                                                                                              ===============  ===============
Net income (loss) available to common shareholders - basic                                    $    (8,262,000) $       357,000
Preferred stock dividends - assumed conversion                                                         38,000           37,000
                                                                                              ---------------  ---------------
Net income (loss) available to common shareholders including assumed
   conversion - diluted                                                                       $    (8,224,000) $       394,000
                                                                                              ================ ===============

Net income (loss) per share - basic and diluted                                                   $(1.57)            $.10
                                                                                                  ======             ====

Weighted average number of common shares outstanding - basic                                        5,264,900        3,419,200
Effect of potential common shares related to stock options and assumed
   preferred stock conversion                                                                                          408,000
                                                                                              ---------------  ---------------
Weighted average number of common shares outstanding - diluted                                      5,264,900        3,827,200
                                                                                              ===============  ===============
</TABLE>
                See notes to consolidated financial statements

                                     F-4


<PAGE>


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, 1995                                                                          3,033,671   $ 3,000   

Net income                                                                                                                 
Exercise of common stock warrants                                                                       79,280             
Offering of common stock                                                                               277,348             
Offering of convertible preferred stock                   3,437.5        5,000.0                                           
Conversion of preferred stock into common
   stock                                                 (3,437.5)      (2,577.0)                    1,380,641     2,000   
                                                      -----------    -----------    -----------   ------------  --------   

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




                                                      
                                                      
                                                       
                                                                                 Retained                   
                                                            Capital in           Earnings                   
                                                             Excess of        (Accumulated                  
                                                             Par Value           Deficit)            Total  
                                                             ---------          ---------            -----  
<S>                                                       <C>              <C>                 <C>          
Balance - December 31, 1995                                $ 4,593,000        $ 489,000        $ 5,085,000  
                                                                                                            
Net income                                                                      394,000            394,000  
Exercise of common stock warrants                              476,000                             476,000  
Offering of common stock                                     1,337,000                           1,337,000  
Offering of convertible preferred stock                      5,918,000                           5,918,000  
Conversion of preferred stock into common                                                                   
   stock                                                        (2,000)                                  0  
                                                          ---------------   -------------       ----------  
                                                                                                            
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 common                       (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  
                                                          ============    =============        ===========  
</TABLE>
                 See notes to consolidated financial statements

                                     F-5
                                                       
<PAGE>

Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                                                        Year Ended
                                                                                                       December 31,
                                                                                            --------------------------------
                                                                                                  1997              1996
                                                                                            -------------      -------------
Cash flows from operating activities:
<S>                                                                                         <C>                <C>          
   Net income (loss)                                                                        $  (8,224,000)     $     394,000
   Adjustments to reconcile net income (loss) to cash provided by (used in) operating
      activities:
        Depreciation and amortization expense                                                   1,640,000            759,000
        Imputed interest on note payable                                                            5,000             44,000
        Intangible write-down                                                                   5,400,000
        Receivables write-down                                                                  1,371,000
        Restructuring and other costs                                                           1,239,000
        (Decrease) increase in deferred taxes payable                                            (971,000)           207,000
        Changes in:
           Accounts receivable                                                                 (1,129,000)        (2,205,000)
           Prepaid insurance and other current assets                                             403,000         (1,055,000)
           Other assets                                                                          (162,000)          (881,000)
           Accounts payable and accrued expenses                                                  903,000          1,643,000
           Prepaid income taxes                                                                  (379,000)           (73,000)
                                                                                            -------------      -------------
              Net cash provided by (used in) operating activities                                  96,000         (1,167,000)
                                                                                            -------------      -------------

Cash flows from investing activities:
   Acquisition of equipment - net of disposals                                                 (1,256,000)        (1,111,000)
   Acquisition of businesses                                                                      (46,000)        (4,978,000)
   Decrease in short-term investments                                                             597,000            323,000
                                                                                            -------------      -------------
              Net cash used in investing activities                                              (705,000)        (5,766,000)
                                                                                            -------------      -------------

Cash flows from financing activities:
   Proceeds from bank borrowings                                                                1,246,000          7,122,000
   Principal repayments on debt                                                                  (635,000)        (6,878,000)
   Principal payments on capital lease obligations                                               (115,000)           (30,000)
   Net proceeds from issuance of common stock                                                                      1,337,000
   Net proceeds from issuance of preferred stock                                                                   5,918,000
   Additional costs in connection with common stock issuance                                      (35,000)
   Net proceeds from exercise of common stock options and warrants                                 36,000            476,000
                                                                                            -------------      -------------
              Net cash provided by financing activities                                           497,000          7,945,000
                                                                                            -------------      -------------

Net increase (decrease) in cash                                                                  (112,000)         1,012,000
Cash - beginning of year                                                                        1,037,000             25,000
                                                                                            -------------      -------------
Cash - end of year                                                                          $     925,000      $   1,037,000
                                                                                            =============      =============

Supplementary disclosures of cash flow information:
   Cash paid during the year for:
      Interest                                                                              $     577,000      $     386,000
                                                                                            =============      =============
      Taxes                                                                                 $     253,000      $     309,000
                                                                                            =============      =============
Supplementary disclosures of noncash investing and financing activities:
Acquisition of property and equipment                                                       $     739,000      $     818,000
Acquisition of intangibles and licenses                                                     $   1,513,000      $   8,015,000
Common stock issued in connection with acquisition of businesses                            $  (1,721,000)
Debt assumed in connection with acquisition of business                                     $    (485,000)
Notes payable in connection with acquisition of businesses                                                     $  (3,855,000)
                                                                                            -------------      -------------
Cash paid to acquire assets                                                                 $      46,000      $   4,978,000
                                                                                            =============      =============

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

                                     F-6
<PAGE>


COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1997 and 1996


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 Company 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 Company 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.

As presented in the consolidated financial statements, the Company has
experienced a net loss, was in Default of certain loan covenants and has
approximately $7.9 million of debt substantially consisting of bank loans, a
major portion of which is due in January 1999. The Company has negotiated a
retructuring of its bank debt as more fully described Note E.

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:
<TABLE>
<CAPTION>

<S>                                                                     <C>   <C>    
               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
</TABLE>
                                     F-7

<PAGE>


NOTE B - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[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 L).

[4]   Income taxes:

      In 1996, the Company's income tax accounting method 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 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 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 income (loss) per share:

      In 1997, the Company adopted Statement of Financial Accounting Standards
      No. 128 ("SFAS #128"), "Earnings Per Share", SFAS #128 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.
      Adoption of SFAS #128 had no effect on 1996.

      Net income (loss) available to common shareholders was computed by
      deducting cumulative preferred stock dividends of $38,000 and $37,000 in
      1997 and 1996, respectively from net income (loss).

[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>


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 is 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                         $   5,056,000
           Machinery, equipment and office furniture                 1,521,000
           Leasehold improvements                                      251,000
                                                                 -------------

                                                                     6,828,000
           Less accumulated depreciation and amortization            2,443,000
                                                                 -------------
                                                                 $   4,385,000
                                                                 =============

The net book value of property and equipment under capital lease amounted to
approximately $767,000 at December 31, 1997. Depreciation expense includes
depreciation on property and equipment held under capital leases.

                                     F-9

<PAGE>


NOTE D - LEASES

The Company is obligated under long-term noncancelable operating and capital
leases for premises and equipment expiring in various years through the year
2005.

Future minimum lease payments are as follows:

                                                       Operating      Capital
                                                         Leases       Leases
                                                         ------       ------

            1998                                     $    575,000   $    307,000
            1999                                          510,000        307,000
            2000                                          459,000        188,000
            2001                                          440,000         38,000
            2002                                          293,000          4,000
            Thereafter                                    505,000              0
                                                     ------------   ------------

            Total minimum lease payments             $  2,782,000        844,000
                                                     ============
            Amount representing interest                                 131,000
                                                                    ------------

            Present value of minimum lease payments                 $    713,000
                                                                    ============


Rent expense for the years ended December 31, 1997 and 1996 was approximately
$502,000 and $282,000, respectively.


NOTE E - LONG-TERM DEBT

Long-term debt consists of the following:
<TABLE>
<CAPTION>

Bank debt

<S>                                                                              <C>                          <C> 
$6,500,000 Revolving Credit Note to bank, collateralized
   principally by all accounts receivable, inventory and equipment, bearing
   interest at prime rate plus 1/2% (9% at December 31, 1997), $500,000 is
   due December 18, 1998 and $3,500,000 is due January 18, 1999                   $   4,000,000
Note payable to bank, collateralized principally by all accounts receivable,
   inventory and equipment, bearing interest at the prime rate plus 1/2%,
   (9% at December 31, 1997), payable in quarterly principal payments
   of $166,666 due December 18, 1999                                                  1,500,000
Note payable to bank, collateralized principally by all accounts receivable,
   inventory, and equipment, bearing interest at the prime rate plus
   1/2% (9% at December 31, 1997) due December 18, 2000                                 760,000            6,260,000  (1)
                                                                                    -------------


</TABLE>

                                     F-10


<PAGE>


NOTE E - LONG-TERM DEBT  (CONTINUED)

Long-term debt consists of the following:
<TABLE>
<CAPTION>

<S>                                                                              <C>                          <C> 

Notes payable

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   (2)
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   (2)
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                                                                        134,000   (2)
Note payable to Elite Ambulance and Medical Coach Inc., bearing interest
   at 7%,due on December 15, 2001                                                       365,000
Note payable to Medical Transportation Corporation, (net of imputed interest
   at 9%) due October 31, 1997                                                          212,000   (2)
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                                                                      40,000              981,000
                                                                                  -------------

Capital lease obligations

Forvehicles in connection with the acquisition of Fox Ridge, bearing interest
   at 10.9% payable in monthly installments of $15,324
   due August 1, 2000                                                                   412,000
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                181,000
For vehicles, collateralized by the underlying vehicles, bearing interest at
   13.4% payable in monthly installments at $3,397 due October 1, 2001                  120,000              713,000
                                                                                  -------------        -------------
                                                                                                           7,954,000
Less current maturities                                                                                    2,388,000
                                                                                                       -------------

                                                                                                       $   5,566,000
                                                                                                       =============
</TABLE>

Future principal payments of long-term debt are as follows:

          1998                                 $  2,388,000
          1999                                    4,806,000
          2000                                      659,000
          2001                                       97,000
          2002                                        4,000
                                               ------------

                                               $  7,954,000
                                               ============

                                     F-11

<PAGE>


NOTE E - LONG-TERM DEBT  (CONTINUED)

(1)    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 permits 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 are
       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 imposes
       certain restrictions on borrowings, prohibits the payment of dividends
       and requires 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 has agreed to waive the
       covenants which the Company was not in compliance with at December 31,
       1997. Additionally, the bank has 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.

(2)    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 provision (benefit) and the amount that would
be computed by applying the statutory federal income tax rate to income before
taxes is attributable to the following:
<TABLE>
<CAPTION>

                                                                       Year Ended
                                                                      December 31,
                                                             -----------------------------
                                                                   1997            1996
                                                             ---------------   ------------

<S>                                                          <C>               <C>         
          Income tax (benefit) provision at 34%              $    (3,128,000)  $    235,000
          Nondeductible items                                      1,923,000         51,000
          State and local taxes, net of federal effect              (257,000)        49,000
          Increase in valuation reserve                              480,000
          Other                                                        5,000        (37,000)
                                                             ---------------   ------------
                                                             $      (977,000)  $    298,000
                                                             ===============   ============
</TABLE>
                                     F-12

<PAGE>


NOTE F - INCOME TAXES  (CONTINUED)

The tax effects of temporary differences which give rise to 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           $    676,000   $    338,000     $    338,000
        Depreciation on property, equipment and leasehold
           improvements                                                        186,000                         186,000
                                                                          ------------   ------------    -------------
                                                                               862,000        338,000          524,000
                                                                          ------------   ------------    -------------
     Deferred tax assets:
        Allowance for doubtful accounts                                        631,000        631,000
        Accrued expenses                                                       509,000        509,000
        Net operating loss carryforwards                                       202,000                         202,000
                                                                          ------------   ------------    -------------
                                                                             1,342,000      1,140,000          202,000
     Valuation allowance                                                       480,000        278,000          202,000
                                                                          ------------   ------------    -------------
                                                                               862,000        862,000                0
                                                                          ------------   ------------    -------------
     Net deferred tax asset (liability)                                   $          0   $    524,000        $(524,000)
                                                                          ============   ============    =============
</TABLE>

As of December 31, 1997, the Company has approximately $459,000 of net
operating loss carryforwards available expiring in 2012.

The Company has established a valuation allowance of $480,000 as the
realization of the deferred tax asset is not certain.


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.

                                     F-13

<PAGE>


NOTE G - STOCKHOLDERS' EQUITY  (CONTINUED)

[1]    Public offering:  (continued)

      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.

[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 had 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 31,
      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's
      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 is based upon the liquidation value of the preferred stock
      and is 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 have been converted into common stock.
      The liquidation value of the remaining 778.4 Series BB is 778,400,
      excluding $75,000 of cumulative dividends. Subsequent to the balance
      sheet date all of the remaining Series BB were converted into 222,394
      common shares.

                                     F-14

<PAGE>


NOTE G - STOCKHOLDERS' EQUITY  (CONTINUED)

[3]    Stock option plans:

      The Company applies Accounting Principles Board Opinion No. 25 in
      accounting for its employee stock options 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 1997 and 1996 pro forma net income
      (loss) as stated below is not necessarily representative of the effects
      on reported net income (loss) 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 #123, the Company's net loss in 1997
      would have been approximately $(8,298,000) or $(1.58) per basic and
      diluted share and net income in 1996 would have been approximately
      $204,000 or $.05 per basic and diluted share, respectively. The weighted
      average fair value of the options granted during 1997 and 1996 are
      estimated as $1.46 and $2.95 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 6.2% 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 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:
<TABLE>
<CAPTION>

                                                                                  Year Ended December 31,
                                                                  -----------------------------------------------------
                                                                             1997                         1996
                                                                  -----------------------      ----------------------
                                                                                 Weighted-                    Weighted-
                                                                                  Average                      Average
                                                                                  Exercise                     Exercise
                                                                    Shares         Price         Shares         Price
                                                                  ----------   ----------      ---------    ---------
<S>                                                                  <C>          <C>            <C>           <C>  
      Outstanding at beginning of year                               234,000      $  2.19        165,000       $1.40
      Options granted                                                 15,000         2.85        113,000        5.30
      Options exercised                                              (40,000)         .89
      Options canceled                                                (6,000)        4.31        (44,000)       7.25
                                                                  ----------   ----------      ---------    ---------
      Outstanding at end of year                                     203,000      $  2.43        234,000       $2.19
                                                                  ==========      =======      =========       =====
      Options exercisable at year-end                                195,500      $  2.41        192,000       $1.68
                                                                  ==========      =======      =========       =====
</TABLE>
                                     F-15
<PAGE>


NOTE G - STOCKHOLDERS' EQUITY  (CONTINUED)

[3]    Stock option plans:  (continued)

      The following table summarizes information about stock options to
employees at December 31, 1997:

<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>    
               $.89               110,000               6.7           $   .89             110,000        $   .89
          $2.82 to $2.88           15,000               9.5              2.85               7,500           2.85
          $3.19 to $4.75           68,000               8.5              4.22              68,000           4.22
              $6.50                10,000               8.6              6.50              10,000           6.50
                            -------------                           ---------       -------------     ----------
                                  203,000                             $  2.43             195,500        $  2.41
                            =============                             ======        =============        =======
</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 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.

                                     F-16
<PAGE>


NOTE G - STOCKHOLDERS' EQUITY  (CONTINUED)

[3]    Stock option plans:  (continued)

      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,
                                                               -----------------------------------------------------
                                                                         1997                          1996
                                                               -----------------------      ------------------------
                                                                              Weighted-                    Weighted-
                                                                               Average                      Average
                                                                               Exercise                     Exercise
                                                                 Shares         Price         Shares         Price
                                                                 ------         -----         ------         -----

<S>                                                                <C>         <C>              <C>          <C>  
        Outstanding at beginning of year                           14,000      $ 4.32           2,000        $4.38
        Options granted                                            10,000        1.22          14,000         4.72
        Options canceled                                                0                      (2,000)        7.44
                                                               ----------   ----------      ---------    -----------
 
         Options at end of year                                    24,000      $ 3.03          14,000        $4.32
                                                               ==========      ======       =========        =====

        Options exercisable at year-end                            19,000      $ 3.50           8,000        $4.33
                                                               ==========      ======       =========        =====
</TABLE>

      The following table summarizes information about stock options to
directors outstanding at December 31, 1997:
<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>  
               $ 4.38              2,000                7          $4.38                2,000        $4.38
               $ 4.31             12,000                8          $4.31               12,000        $4.31
               $ 1.22             10,000               10          $1.22                5,000        $1.22
                            ------------                                        -------------
                                  24,000                                               19,000
                            ============                                        =============

</TABLE>
                                     F-17

<PAGE>


NOTE G - STOCKHOLDERS' EQUITY  (CONTINUED)

[4]    Warrants:

      The Company has issued warrants to purchase its common stock principally
      in connection with equity financings. Additional information with
      respect to warrants is summarized below:
<TABLE>
<CAPTION>

                                                                                  Year Ended December 31,
                                                              ------------------------------------------------------------
                                                                         1997                            1996
                                                              ---------------------------    -----------------------------
                                                                                Weighted-                       Weighted-
                                                                                  Average                         Average
                                                                                 Exercise                        Exercise
                                                                   Shares          Price           Shares          Price
                                                              -------------   ------------    -------------     ----------
<S>                                                               <C>            <C>            <C>               <C>  
        Outstanding at beginning of year                          1,601,000         $6.31         1,365,000       $5.99
        Warrants granted                                            150,000          4.00           315,000        7.65
        Warrants exercisable                                                                        (79,000)       6.00
                                                               ------------   -----------     -------------       -----
        Warrants at end of year                                   1,751,000          6.12         1,601,000        6.31
                                                               ============   ===========     =============       =====
        Warrants exercisable at year-end                          1,751,000         $6.12         1,601,000        6.31
                                                               ============        ======     =============       =====
</TABLE>

      The following table summarizes information relating to warrants
outstanding at December 31, 1997:
<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>  
        $ 4.00               150,000             3          $4.00               150,000       $4.00
        $ 5.00               135,000             3          $5.00               135,000       $5.00
    $ 5.80 - $6.00         1,286,000             1          $5.98             1,286,000       $5.98
    $ 7.68 - 10.00           180,000             2          $9.64               180,000       $9.64
                     ---------------                                     --------------
                           1,751,000                                          1,751,000
                     ===============                                     ==============
</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                                           203,000
             Options available for grant under the Plan                               507,000
             Options granted under the Directors Plan                                  24,000
             Options available for grant under the Directors Plan                      26,000
             Shares underlying the Warrants and Underwriters Warrant                1,226,000
             Warrants issued to a consultant                                           60,000
             Warrants issued in connection with private equity financings             465,000
             Issuable in connection with Fox Ridge acquisition                         65,000
                                                                                 ------------
                                                                                    2,576,000
                                                                                 ============        
</TABLE>

                                     F-18
<PAGE>


NOTE H - CONCENTRATION OF RISK

Revenues from principal sources are as follows:

                                                               Year Ended
                                                              December 31,
                                                          -----------------
                                                          1997         1996
                                                          ----         ----
          Principal customer                                 9%          11%
          Medicaid and Medicare                             44           60
          Private insurance and other 
               nongovernment agencies                       47           29
                                                        -------      ------
                                                           100%         100%
                                                        ======       ======

[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, 1998. 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.

      The Company was subject to an audit of its medicaid claims for which the
      Company received reimbursement over a four and one-half year period
      through June 30, 1994. The audit was settled in 1997 for $97,000.

      At December 31, 1997, 31% of accounts receivable was due from Medicaid
      and Medicare, 37% from the hospital facilities which includes its
      principal customer and its affiliates and 32% from private insurers and
      other nongovernmental sources.

                                     F-19

<PAGE>


NOTE I - ACQUISITIONS

[1]     1996 Acquisitions:

       (a)  On May 21, 1996, the Company purchased from an ambulette provider
            in Brooklyn, New York, (Jenco) equipment and ambulettes for a cash
            payment of $30,000 and a balance of $200,000 to be paid in twelve
            equal quarterly installments commencing September 1996. The note
            is subject to reduction depending upon certain factors, including
            revenues derived from former customers of the provider.

       (b)   On June 12, 1996, the Company completed the acquisition of
             certain assets from A-1 Ambulance Service Inc. ("A-1") through
             it's wholly owned subsidiary, Empire. The Company acquired
             equipment, ambulances, customer lists, a covenant not to compete
             and goodwill for a cash payment of $425,000 and a balance of
             $325,000 to be paid in eight quarterly installments commencing
             September 1996.

       (c)   On August 15, 1996, the Company acquired certain assets from
             Hudvalco, Inc. and Harvey H. McGeorge, Inc. (collectively
             "Hudvalco") and all the outstanding common stock of four entities
             related to Hudvalco through common ownership (collectively, the
             "Hudson Valley Companies"), through its wholly owned subsidiary,
             Century. The Company acquired ambulance equipment, licenses to
             operate an ambulance business previously conducted by Hudvalco,
             customer lists and goodwill. The total consideration for the
             acquisition was $5,950,000, subject to certain adjustments, of
             which $3,000,000 was paid in cash, approximately $940,000
             consisted of the assumption of debt and $2,010,000 consisted of a
             ninety-day (90) promissory note.

             The Company also agreed to acquire all the common stock of
             Richard Decker Operating Corp. ("RDO"), an entity also related to
             Hudvalco through common ownership, for $1,066,000, after certain
             adjustments, which closed in May 1997. Consideration for the
             acquired stock was an aggregate of 328,492 shares of the
             Company's common stock issued to the sole stockholder of Hudvalco
             and his designee. The purchase price was allocated as follows:
             $141,000 to vehicles, $257,000 to customer list, $131,000 to
             licenses, $22,000 to noncompete agreements and $515,000 to
             goodwill.

       (d)   On August 22, 1996, a wholly owned subsidiary of the Company
             completed the purchase from Elite Ambulance & Medical Coach, Inc.
             ("Elite") of ambulettes and certain other assets, including
             accounts receivable and a license to operate an ambulette service
             by the state of New Jersey. The assets were acquired pursuant to
             an asset purchase agreement among the Company, Elite and its
             shareholders. Elite operated an ambulette service from Orange,
             New Jersey servicing Essex County, New Jersey and other nearby
             counties under the name Elite. After the acquisition, the
             subsidiary changed its name to Elite Ambulance & Medical Coach,
             Inc. and is operating the acquired ambulette service under the
             name Elite. The consideration for the acquisition was $760,000 of
             which half was paid in cash at the closing and the balance
             pursuant to a one year note. In connection with the acquisition,
             the Company (i) assumed certain debts related to the assets,
             including bank indebtedness of approximately $19,500, (ii)
             entered into a contract with affiliates of Elite to acquire the
             real estate facility containing Elite's operating facility for
             approximately $1,200,000 in cash and short term mortgage notes,
             and (iii) assumed a lease for such facility until the closing of
             the real estate contracts of sale. The Company terminated the
             agreement for the purchase of the property and has entered into a
             long term lease for the facility. The parties are currently
             negotiating an adjustment to the asset purchase price and the
             payment terms on the balance of the purchase price.

       (e)   In August 1996, a wholly owned subsidiary of the Company
             purchased from an ambulette provider in New Jersey (First Invalid
             Coach Services, Inc.) ambulettes, its customer list and goodwill
             for approximately $109,000. $59,000 was paid at the closing with
             an estimated amount of $50,000 to be paid in twelve monthly
             payments based on a percentage of cash receipts generated from
             the client base.
    
                                 F-20

<PAGE>


NOTE I - ACQUISITIONS  (CONTINUED)

[1]     1996 Acquisitions:  (continued)

       (f) A summary of net assets acquired and consideration is as follows:
<TABLE>
<CAPTION>

                                                                                      First Invalid
            Acquisitions                    A-1          Century          Elite           Coach         Jenco         Total
            ------------                    ---          -------          -----           -----         -----         -----

<S>                                    <C>            <C>             <C>             <C>            <C>          <C>         
Vehicles and equipment                 $    104,000   $    537,000    $    143,000    $   34,000     $   30,000   $    848,000
Other current assets                                                       187,000                                     187,000
Customer list                               153,000      1,991,000         277,000        50,000        212,000      2,683,000
Goodwill                                    321,000      3,979,000         597,000        25,000                     4,922,000
Noncompete covenants                        200,000                                                                    200,000
Licenses                                    225,000        100,000                                                     325,000
                                       ------------   ------------    ------------    ----------     ----------   ------------
      Total assets                        1,003,000      6,607,000       1,204,000       109,000        242,000      9,165,000
Assumption of liabilities                                                  166,000                                     166,000
                                       ------------   ------------    ------------    ----------     ----------   ------------
Net assets acquired                    $  1,003,000   $  6,607,000    $  1,038,000    $  109,000     $  242,000   $  8,999,000
                                       ============   ============    ============    ==========     ==========   ============
Notes due former owners                $    325,000   $  2,010,000    $    380,000    $   50,000     $  200,000   $  2,965,000
Payments                                    425,000      3,000,000         400,000        59,000         30,000      3,914,000
Bank note                                                  940,000                                                     940,000
Liabilities assumed which are
recorded
   as additions to the purchase price       106,000        419,000          95,000                                     620,000
Acquisition costs                           147,000        238,000         163,000                       12,000        560,000
                                       ------------   ------------    ------------    ----------     ----------   ------------
                                       $  1,003,000   $  6,607,000    $  1,038,000    $  109,000     $  242,000   $  8,999,000
                                       ============   ============    ============    ==========     ==========   ============
</TABLE>

[2]     1997 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 which was
subsequently refinanced.

                                     F-21
<PAGE>


NOTE I - ACQUISITIONS  (CONTINUED)

[3]     Unaudited pro forma information:

       Unaudited pro forma summary of consolidated operations for 1996
assuming the acquisitions had taken place on January 1, 1996 is as follows:

               Revenue                                    $     24,948,000
                                                          ================

               Net income                                 $        678,000
                                                          ================

               Net income per common share                      $.14
                                                              ========
   
       Had the Company acquired Fox Ridge on January 1, 1996, the effect on
the results of operations for 1997 would not be material.


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 "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 - MANAGEMENT AGREEMENT

One of the Company's subsidiaries had entered into a management agreement with
an ambulance company to conduct, supervise and manage their daily operations
including personnel, finance and accounting, quality control and other day to
day functions. The subsidiary was paid on a "cost-plus" basis. The management
fee included in other income represents 10% of the subsidiary's direct and
allocated indirect costs in performing services under the agreement. The
direct and allocated indirect costs are reimbursable and have been excluded
from the results of operations. The Company terminated such agreement
effective December 31, 1997.

                                     F-22


<PAGE>


NOTE L - INTANGIBLES WRITE-DOWN

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.


NOTE M - RECEIVABLES WRITE-DOWN, RESTRUCTURING AND OTHER COSTS

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 will include moving the Company's headquarters and locating its
billing and dispatching into one facility in White Plains, NY. This move is
expected to take place in March 1998. In connection with this consolidation, a
partial consolidation of the billing process has already begun. In connection
with this process, a re-evaluation of outstanding accounts receivable resulted
in a write-down of $1,371,000, principally relating to the Hudson Valley
Companies, for revenues billed subsequent to its acquisition. The Company also
charged operations 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 is also taking a
charge to earnings for other costs. 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.


NOTE N - 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's time to respond to the Complaint has been extended to April 21,
1998. The Company vigorously disputes the material allegations of the
Complaint.

In an action filed by Medical Transportation Corp. ("Med-Trans"), Med-Trans
alleges 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.

                                     F-23




<PAGE>


NOTE N - CONTINGENCIES  (CONTINUED)

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 $650,000, 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 O - 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 will not cause its financial position or results of
operations disclosures to change.

                                     F-24


<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 14th day of April, 1998.

                                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 14, 1998
    Dean L. Sloane                  Officer (Principal Executive Officer, Principal
                                      Financial and Accounting Officer)

/s/ Donald J. Panos  
------------------------------      Chief Financial Officer, Principal Financial                   April 14, 1998
    Donald J. Panos                 Officer and Principal Accounting Officer


/s/ Craig V. Sloane                 Director                                                       April 14, 1998
------------------------------
    Craig V. Sloane

/s/ Bernard M. Kruger               Director                                                       April 14, 1998
------------------------------
    Bernard M. Kruger

/s/ Lucius J. Riccio
------------------------------      Director                                                       April 14, 1998
    Lucius J. Riccio


</TABLE>





<PAGE>
                                Exhibits Index


     3.01     Restated Certificate of Incorporation of the Company (1)
     3.02     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.
     10.06    Lease dated January 1, 1997 by and between the Company and 2301
              Jerome Avenue Realty Corp. and the Addendum thereto
     10.07    Lease dated September 1997 by and between the Company and
              Principal Mutual Life Insurance Company
     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
     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)
     10.15    Credit Agreement, dated as of December 18, 1996, among the
              Company, Atlantic Bank of New York, Fleet Bank, N.A. and Israel
              Discount Bank of New York, including collateral documents (4)
     21.01    Subsidiaries of the Company
     23.01    Consent of Richard A. Eisner & Company, LLP
     27.01    Financial Data Schedule
------------
+       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.