SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 10-Q

    [X] Quarterly  Report  Pursuant  to  Section  13 or 15(d) of the  Securities
        Exchange Act of 1934 For the Period Ended December 31, 1996
                                      or          -----------------  
    [   ] Transition  Report  Pursuant to Section 13 or 15(d) of the  Securities
        Exchange Act of 1934 For the Transition Period from _____ to _____

                         Commission File Number  1-10966
                                                --------- 
                           HEALTH PROFESSIONALS, INC.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


              Delaware                                    11-3076108
              --------                                    ----------
   (State or other jurisdiction of                     (I.R.S. Employer
    incorporation or organization)                     Identification No.)

       515 East Las Olas Boulevard, Suite 1600, Fort Lauderdale, Fl 33301
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

                                  305-766-2552
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.   Yes  X , No    .
                                         ---     ---
Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

          Class                                  Outstanding at January 31, 1997
----------------------------                     -------------------------------
Common Stock, $.02 par value                              4,722,000
 













<PAGE>









                           HEALTH PROFESSIONALS, INC.
                                AND SUBSIDIARIES


                                    I N D E X
                                    ---------

                                                                      Page No.
                                                                      --------
PART I - Financial Information


       Condensed Consolidated Balance Sheets,
       December 31, 1996 and September 30, 1996                         3 - 4

       Condensed Consolidated Statements of Operations,
      Three Months Ended December 31, 1996 and 1995                         5

      Condensed Consolidated Statements of Cash Flows,
      Three Months Ended December 31, 1996 and 1995                         6

       Notes to Condensed Consolidated Financial Statements             7 - 8

      Management's Discussion and Analysis of Financial
       Condition and Results of Operations                             9 - 14

PART II - Other Information                                                15


















                                      2

<PAGE>



                   HEALTH PROFESSIONALS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS




Assets                                          December 31,    September 30,
------                                          ------------    -------------
                                                     1996            1996
                                                     ----            ----


Current assets:
  Cash                                          $   48,000       $    49,000
  Accounts receivable, net                       3,575,000         3,425,000
  Inventory                                        108,000           108,000
  Prepaid consulting fees,
   current portion                                 115,000           115,000
  Prepaid expenses and other                        28,000            46,000
                                                ----------        ----------

      Total current assets                       3,874,000         3,743,000


Equipment, furniture & fixtures
  and leasehold improvements, net                1,257,000          1,338,00
Prepaid consulting fees, less
  current portion                                  117,000           145,000
Covenants not to compete, net                      373,000           419,000
Costs in excess of net assets
   of businesses acquired, net                   6,234,000         6,134,000
Other assets                                       457,000           463,000
                                               -----------       -----------

      Total                                    $12,312,000       $12,242,000
                                               ===========       ===========












            See notes to condensed consolidated financial statements.




                                        3


<PAGE>



                   HEALTH PROFESSIONALS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS



                                               December 31,    September 30,
Liabilities and Stockholders'                        1996             1996
-----------------------------                        ----             ----
Equity
------

Current liabilities:
  Accounts payable and accrued
    expenses                                   $ 3,877,000       $ 3,725,000
  Accrued salaries and payroll taxes               317,000           117,000
  Factoring line of credit                       1,002,000         1,100,000
  Current portion of long term debt                377,000           474,000
                                               -----------       -----------

    Total current liabilities                    5,573,000         5,416,000
                                               -----------       -----------

Long term debt, less current portion             2,109,000         1,519,000
                                               -----------       -----------



Stockholders' equity:
Serial preferred stock, $1 par value;
  Authorized  100,000  shares;  issued - none
Common  Stock - $.02  par  value; authorized
  25,000,000 shares; issued and
  outstanding 4,722,000 and
  4,554,000 respectively                            94,000            91,000
Additional paid-in capital                      43,535,000        43,280,000
  Less:  40,000 shares of
   Treasury Stock at cost                          (42,000)          (42,000)
Deficit                                        (38,957,000)      (38,022,000)
                                               ------------      ------------

Total stockholders' equity                       4,630,000         5,307,000
                                               -----------       -----------

      Total                                    $12,312,000       $12,242,000
                                               ===========       ===========





            See notes to condensed consolidated financial statements.


                                        4


<PAGE>



                   HEALTH PROFESSIONALS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                       Three Months Ended
                                                       ------------------
                                                          December 31,
                                                       ------------------
                                                     1996             1995
                                                     ----             ----

Operating revenue                               $1,920,000       $   976,000
Operating revenue - related parties                      -           974,000
Interest and other income                            9,000            17,000
                                                 ---------       -----------
                                                 1,929,000         1,967,000
Costs and expenses:
  Direct service expense                         1,019,000           943,000
  Selling, general and
    administrative expense                       1,578,000         1,210,000
  Interest                                          91,000           155,000
  Research and development                         148,000            86,000
  Provision (recovery) for loss
    and other professional
    association revenues                            29,000          (459,000)
                                               -----------       ------------

                                                 2,865,000         1,935,000
  Net Income (Loss)                            $  (936,000)      $    32,000
                                               ============      ===========

Net earnings(loss) per share                   $      (.20)      $      .01
                                               ============      ==========

Weighted average number of
 common and common equivalent
 shares outstanding                              4,666,000         2,189,000
                                               ===========       ===========












            See notes to condensed consolidated financial statements.

                                        5


<PAGE>
                   HEALTH PROFESSIONALS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                                 Three Months Ended December
                                                 ---------------------------
                                                     1996              1995
                                                     ----              ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)                              $(936,000)         $ 32,000
Adjustments to reconcile net earnings
 (loss) to net cash used in operating
 activities:
  Depreciation and amortization                    286,000           144,000
Provision (recovery) for bad debts                (272,000)         (386,000)
  Lease obligations                                (28,000)           12,000

Change in assets and liabilities:
  (Increase) decrease in accounts
    receivable                                     122,000          (156,000)
  (Increase) in inventory                                -                 -
  (Increase) decrease in prepaid expenses
     and other                                      46,000          (108,000)
  (Increase) decrease in other assets                6,000           (47,000)
Increase in accounts payable
  and accrued expenses                             152,000           286,000
Increase (decrease) in accrued salaries
  and payroll taxes                                200,000           (53,000)
                                                 ---------         ----------
NET CASH USED IN OPERATING ACTIVITIES             (424,000)         (276,000)
                                                 ----------        ----------

INVESTING ACTIVITIES:
  Capital expenditures, net                              -           (43,000)
  Collection of Notes Receivable                         -           101,000
                                                 ---------         ---------
NET CASH PROVIDED BY INVESTING
   ACTIVITIES                                            -            58,000
                                                 ---------         ---------
FINANCING ACTIVITIES:
  Repayments of long term debt and
    current maturities, net                        (94,000)          258,000
Proceeds from long-term borrowing                  615,000                 -
Cash Received from (paid to)
       Factor, net                                 (98,000)          106,000
                                                 ----------        ---------
NET CASH PROVIDED BY (USED IN)
 FINANCING ACTIVITIES                              423,000           364,000

NET INCREASE (DECREASE) IN CASH                     (1,000)          146,000

CASH AT BEGINNING OF PERIOD                         49,000            20,000
                                                 ---------         ---------

CASH AT END OF PERIOD                               48,000         $ 166,000
                                                 =========         =========

            See notes to condensed consolidated financial statements

                                        6

<PAGE>



                   HEALTH PROFESSIONALS, INC. AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements

1.  General
    -------
 
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include all
of the  information  and  footnotes  required by generally  accepted  accounting
principles for complete financial statements. In the opinion of management,  all
adjustments  considered  necessary for a fair  presentation  have been included.
Operating  results  for  the  three  months  ended  December  31,  1996  are not
necessarily  indicative  of the results that may be expected for the year ending
September 30, 1997 . These  statements  should be read in  conjunction  with the
financial  statements and notes thereto  included in the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1996.

2.   Litigation and other Contingencies
     ----------------------------------
  
      In 1993,  the SEC  advised  the  Company  that it had  commenced  a formal
investigation of potential  securities law violations in connection with certain
trading  activity  in  the  Company's   securities  and  has  requested  certain
information from the Company and certain of its officers in connection with that
investigation.  The Company and its officers have complied with these  requests.
In September  1996, the SEC settled its  administrative  proceedings  with HPI's
former  Chairman (who left the Company  effective  August,  1992) and others who
were  alleged to have  unlawfully  traded in HPI's  common  stock.  Neither  the
Company itself,  nor any of its current officers or directors were implicated in
the SEC investigation.

3.    Subsequent Events
      -----------------

      The  Company  has  undertaken  a  major  restructuring  of  its  executive
personnel  responsibilities  and a consolidation of certain of its executive and
other  personnel  functions  as certain of its  development  projects  have been
completed and the timing of other projects has been delayed.  The Company's Vice
President for Business  Development  has resigned from that  position,  but will
remain a  consultant  to the  Company for  physician  network  development.  The
Company's  interim  Chief  Financial  Officer has  resigned  and has  accepted a
position with a  not-for-profit  organization.  The Company's Deputy Director of
Research has  relinquished  that position,  but will remain  affiliated with the
Company as Chairman of the Scientific  Advisory Board for the CSI Foundation for
Research and is currently  being fully funded by a grant from the  Department of
the Navy.  These  management  and  operational  functions  will be  fulfilled by
personnel  currently  employed  by the  Company.  Certain  non-management  staff
functions  have also been  consolidated.  Salary and benefit  savings from these


                                        7


<PAGE>


changes will commence in the second quarter and be fully recognized in the third
quarter of fiscal  1997.  For the fiscal year ending  September  30,  1997,  the
Company expects a net reduction of salaries and related expenses,  after certain
salary  increases,   of  approximately   $383,000  with  annualized  savings  of
approximately $532,000.

      CSI has signed research agreements with two major pharmaceutical companies
to participate in four multi-site  clinical trials.  CSI Clinical  Trials,  Inc.
will be the  operating  unit  responsible  for  conducting  this  pharmaceutical
research  within  the CSI  network.  These  trials  mark the first  time that in
addition  to its core  Company-owned  sites,  CSI will be  including  affiliated
physician sites in a major research effort.

      Two Phase II  multi-site  trials  will seek to  evaluate  the  safety  and
effectiveness  of a new anti-viral drug in reducing the severity and duration of
herpes genitalis and herpes labialis in a non-HIV infected  population.  Ten CSI
sites  will  participate  in these  trials and will seek to enroll at least 3000
individuals.  With full  enrollment,  these  studies will  generate in excess of
$6,570,000 in research revenue.

      Two Phase II multi-site HIV drug trials will  investigate  the safety of a
new  anti-retroviral  drug in combination  with AZT, 3TC and Indinavir.  Six CSI
sites will  participate in these trials and may enroll at least 40  participants
in each study.  With full  accrual,  these  studies are  expected to generate in
excess of $1,990,000 in research revenue.

      Although  historically  the Company has usually  achieved full  enrollment
into its clinical  trials,  it can give no assurances  that full enrollment into
these trials will be achieved.

      All four trials will be initiated  during the Company's  current  quarter,
with a 9-12 month expected trial duration.  The Company anticipates that most of
the  resulting  revenue will be earned  during the third and fourth  quarters of
fiscal 1997 and that  incremental  expenses  associated  with these  trials will
range between 30%-40% of revenue.

      In addition to the major new  trials,  in the current  quarter the Company
has  achieved  certain  milestones  in its ongoing  trials  that have  triggered
research  income  of  approximately   $95,000.  The  Company  expects  to  reach
additional  milestones in its ongoing  trials in the current  quarter which will
trigger  additional  reserach income of approximately  $80,000.  The Company can
give no assurances that these additional  milestones will be achieved within the
second quarter.











                                      8


<PAGE>



                   HEALTH PROFESSIONALS, INC. AND SUBSIDIARIES
         Management's Discussion and Analysis of Financial Condition and
                              Results of Operations

BACKGROUND AND BUSINESS PLAN DEVELOPMENT

      CSI  currently  owns and  operates six medical  clinic and research  sites
located in Florida (Fort  Lauderdale,  Miami  Beach),  California  (Irvine,  Los
Angeles, San Diego) and Illinois (Chicago). The Company had Independent Practice
Affiliation  (IPA)  agreements  with  physician's  professional  corporations to
utilize  these  facilities  prior to January 1,  1996.  On January 1, 1996,  the
Company  purchased the medical  practices in Fort Lauderdale and Miami. On April
1, 1996, the Company purchased the medical practice in Chicago. On September 30,
1996, the Company created a Management Service Organization in California, which
purchased the medical practice  operations in Irvine and on October 28, 1996 the
Company  purcahsed  medical  practice  operations in Los Angeles,  which had not
previously  been  affiliated  with the Company.  The San Diego medical  practice
continues to utilize the Company's San Diego facility under an IPA agreement.

      Management believes that owning the Company's affiliated medical practices
or medical  practice  operations,  where  permitted  by law,  will  increase its
ability  to  deliver  comprehensive   integrated  medical  and  clinical  trials
services,  will result in more  cost-efficient  management  of the practices and
will allow better  utilization of its  standards-of  care  algorithms to improve
health care outcomes.

      The  transition  to  ownership  of  the  practices  has  unexpectedly  but
temporarily  impaired  practice  operations in Ft.  Lauderdale and Miami, with a
materially significant negative impact on revenues derived from those facilities
during  the later  half of fiscal  1996 and the first  quarter  of fiscal  1997.
Management  has been  working to restore  these  revenues  and expects  that its
marketing  efforts  will result in an  improvement  of the  practice  operations
during the second and third quarters of fiscal 1997.

  In  addition,  the Fort  Lauderdale  and Miami sites will  benefit  from their
selection to  participate  in five large clinical  trials,  the Immune  Response
Corporation's  HIV-1  Immunogen  trial,  Bristol-  Myers Squibb's two lobucovair
trials and Dupont Merck's two DMP-266 trial. Patient recruitment to these trials
is  expected  to occur  during the second and third  quarters of fiscal 1997 and
full  enrollment  will have a material  effect on revenues  for those  quarters.
Although the Company has historically achieved full enrollment into its clinical
trials, it can give no assurances full enrollment will be achieved.

      On October 28, 1996, the Company  purchased  medical  practice  operations
located in Los Angeles, California. The acquisition price for the  practice  was








                                      9


<PAGE>



paid  with  168,000  shares  of the  Company's  HPI  common  stock  and  will be
supplemented  by an earn-out.  The earn-out will also be paid in Company  shares
and will be  calculated  at 75% of collected  revenues  derived  from  specified
services  provided to new patients during the one year period  commencing  after
the effective date of the practice operations transfer.  The earn-out stock will
be valued at 70% of the average  market closing price  calculated  during the 20
trading days preceding the close of the earn-out period.

      In addition, physician practices located in Florida,  California,  Kansas,
Virginia, Texas, Pennsylvania, Maine, Washington, DC and New York are affiliated
with the CSI network and utilize CSI services to varying degrees.

      The  Company's   principal  business  objective  is  to  extend  the  full
capabilities of its Information  Technologies  system (ITS) to all its currently
affiliated  sites  and to expand  the  number  of owned  and  affiliated  sites.
Management believes that this will increase its revenue base to meet its central
operating and development expenses and will then generate substantial  operating
profits. The extension of the ITS to all affiliated sites will allow the Company
to provide more  comprehensive  services to these sites,  thereby increasing the
revenue  earned from each.  The  expansion  of owned and  affiliated  sites will
create  further  market  outlets for the  Company's  services and allow  greater
market capture of the  underlying  populations  requiring  those  services.  The
expanded  network will be positioned to capture health  services  contracts as a
national managed care disease-specific  provider,  will provide larger economies
of scale, will provide more clinical data for medical and financial analysis and
will allow CSI to conduct larger clinical  trials.  The new Los Angeles site and
the new  clinical  trials  scheduled  to commence  during the second  quarter of
fiscal 1997 represent the accomplishment in part of this objective.

RESULTS OF OPERATIONS
---------------------

      The  Company's  total  facilities  revenues are derived from  provision of
physician medical services (where allowed by law) practice management  services,
diagnostic  laboratory  services  and other  ancillary  medical  services to the
patients  of  medical  practices  owned  by CSI  and to  the  medical  practices
affiliated with CSI.
                                                       Three Months Ended
                                                       ------------------
                                                          December 31,
                                                          ------------
                                                    1996              1995
                                                    ----              ----
Total Facilities revenues                       $1,740,000        $1,419,000
Home health                                        101,000           321,000
Clinical trials and other                           79,000           210,000


                                                $1,920,000        $1,950,000
                                                ==========        ==========

                                       10


<PAGE>



      Total facilities revenues increased by $321,000 for the three months ended
December  31,  1996,  as compared to the same period in 1995.  The  increase was
primarily due to an increase in lab and infusion  revenue,  offset by a decrease
in revenues  from the Company's  impaired Ft.  Lauderdale  and Miami sites.  The
decrease in Home Health  revenue of $220,000 for the three months ended December
31, 1996,  is primarily due to the cyclical  nature of the services  required to
care for these  patients in an integrated  health care setting and a shifting of
service locations to the physician's office. The decrease in clinical trials and
other revenue of $131,000 for the three months ended December 31, 1996 is due to
the  conclusion of certain  contracts  prior to the  initiation of new contracts
subsequently put into place.

      Interest  and  other  income  decreased  by $8,000  for the  three  months
December 31, 1996 as compared to the three months ended  December 31, 1995.  The
decrease  is due to a  decrease  in the  note  receivable  from  the sale of the
discontinued operations.

      Direct service expense as a percentage of operating  revenues was 53 % for
the three  months  ended  December  31,  1996,  as compared to 48% for the three
months  ended  December  31, 1995.  This  increase  for the three months  ending
December 31, 1996 is primarily due to the purchase of physician  practices which
increased the Company's salary cost.

      Selling,  general and administrative expenses increased by $368,000(30.4%)
to  $1,578,000  for the three months ended  December 31, 1996 as compared to the
three months  ended  December 31,  1995.  The increase  relates  primarily to an
increase in  depreciation  and  amortization  and other expenses  related to the
purchases of the various clinics in fiscal year 1996 and the purchase of the Los
Angeles clinic in November of 1996.

       For the three months ending  December 31, 1995, the Company  decreased PA
Physician   Association   reserves   by   $459,000   due  to  an   increase   in
collateralization of the receivables provided by the Chairman of the Company and
by one of the former CSI  shareholders  who is now a director of the Company for
advances  and  other  professional  association  reserves  owed  by  them to the
Company.  The  reserve  balance  had been  established  in part for  advances of
start-up expenses to develop four of the Company's  affiliated medical practices
and for other  receivables  due to the Company.  This compares to an increase in
the  reserve   balance  at   December   31,  1996  of  $29,000  to  reflect  the
uncollaterized portion of receivables due from the professional  corporations in
California. The reserve balance is reviewed by the Company on a quarterly basis.
Any  increases  or decreases to such  balances by the Company  could  materially
impact reporting results.

      Interest  and  factoring  fees  decreased  by $64,000 for the three months
ended  December  31, 1996,  as compared to the three  months ended  December 31,







                                      11


<PAGE>


1995. The decrease was primarily  related to the to the  termination on February
21,  1996  of  the  obligation  due  the  former  CSI  shareholders,  due to the
conversion of the obligation due the former CSI  shareholders  to stock and to a
decrease in factoring expenses, as a result of amending the factoring agreement,
reducing the factoring fees. This decrease was partially  offset by the increase
in interest  expenses related to the receipt in October and November of $750,000
in convertible loans.

      The Company incurred research and development  expenses of 148,000 for the
three months ended  December 31, 1996,  compared to $86,000 for the three months
ending December 31, 1995.

      The Company  sustained a loss from  continuing  operations of $936,000 for
the three months ended  December 31, 1996,  as compared to a gain of $32,000 for
the three months  ended  December 31,  1995,  despite  similar  revenues for the
period.  The difference in results  between the periods was primarily due to the
increase in  depreciation  and  amortization  expenses  resulting  from  network
expansion through medical practice and operations purchases which have occurred,
prior to developing increased revenues from the expansion, and from the one time
decrease in reserves during the first quarter of fiscal 1995.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

      As  of  December  31,  1996,  the  Company  had  stockholders'  equity  of
$4,630,000  and  a  working   capital  deficit  of  $1,699,000  as  compared  to
stockholders'  equity of $1,062,000 and working  capital of $777,000 at December
31, 1995.

      The  Company  used  cash  in its  operating  activities  of  approximately
$424,000 and $276,000 for the three months ended  December 31, 1996 and December
31, 1995. In fiscal year 1996, the cash use was primarily as a result of the net
loss.  This was offset by a decrease in accounts  receivable,  due to  increased
collections,  an  increase  in accounts  payable  and  accrued  expenses  and an
increase  in  accrued  salaries  and  payroll  taxes due to the timing of normal
biweekly payroll cycle.  Financing activities provided cash from the proceeds of
convertible  loans in a series of convertible  debentures  discussed below. This
was offset by the repayment of debt and the repayment to the factor. The Company
anticipates  that  cash will  continue  to be used in its  operating  activities
during the remainder of fiscal 1997.

      CSI and certain  medical  professional  associations  under  contract with
subsidiaries  of CSI  are a  party  to a  $2,500,000  factoring  agreement.  The
agreement provides for factoring of eligible  receivables of which approximately
$23,000 was  available  for borrowing at December 31, 1996 and $983,000 had been
drawn at December 31, 1996. Fees charged by the factor for factoring was amended
in June, 1996 from an initial 1% of all eligible receivables to an initial 1% of







                                      12


<PAGE>


eligible  receivables  up to  $5,000,000  a  year.  The fee  then  progressively
decreases  to .75% for eligible  receivables  in excess of  $10,000,000  a year.
Funds are  advances by the factor at 2% over  prime.  Management  believes  that
available cash, including available borrowings from the factoring agreement will
be sufficient to satisfy the Company's  working capital  requirements for fiscal
1997.

      The  Company  is   continuing   its  efforts  to  expand  its  network  of
company-owned  facilities  and  is  acquiring  established  physician  practices
despite its deficit in working capital.  Certain start-up and acquisition  costs
increase  the  Company  deficit  in  working  capital,   which  deficits  should
ultimately be offset by increased  clinical  services revenues and revenues from
clinical  research trial contracts that the Company has recently  received.  The
research  studies  include the Immune  Response  Corporation's  HIV-1  Immunogen
trial,  Bristol-Myers  Squibb's  two  Lobucovair  trials and Dupont  Merck's two
DMP-266.

      The   Company   has    restructured   and   consolidated   its   personnel
responsibilities  over the last  several  months to  reduce to salary  and other
related expenses and to improve the efficiency of its operations. At the present
rate for the year ending  September 30, 1997, the Company would experience a net
reduction in salaries and other related expenses of approximately  $383,000 with
an  annualized  savings of  approximately  $532,000.  In  addition,  some of the
officers and other key personnel had agreed to defer a portion of their salaries
prior to December 31, 1996.  These accrued  deferrals  amounted to approximately
$80,000.

      During October and November,  the Company received proceeds of $750,000 in
convertible loans in a series of convertible  debentures issued under Regulation
S. The  unconverted  balance of the loans bear interest at 5% per annum and will
become due in October  and  November  of 2001.  The loans are  convertible  into
common stock at a 30% discount  from the lower of the closing  trading  price on
the  American  Stock  Exchange at the time the loans were made or at the time of
conversion.  Proceeds  of the  loans  have  been  used in  connection  with  the
Company's new Los Angeles operations and for general working capital.

      Despite  the  Company's  cost  cutting  programs  and its  efforts to seek
additional  sources of available capital in the financial market,  through joint
ventures and from clinical research activities,  the Company continues to suffer
a severe financial  crisis. In order to continue as a going concern in 1997, the
Company must generate cash flow from  operations,  continue its arrangement with
the  Company's  factor (in  connection  therewith  the  Company's  Chairman  has
provided the Factor with his personal  guarantee),  produce additional  revenues
from its previously  established  and new medical  facilities,  its new clinical
trials or raise  additional  cash from the sale of stock or debt.  No assurances
can be made that the  Company can obtain  additional  sources of capital or that








                                      13


<PAGE>


operations can produce  positive cash flow in the immediate term. The Company is
continually evaluating all options available to it, including but not limited to
continued  staff  reductions,  working  with vendors to obtain  extended  credit
terms,  curtailment  of certain  operations,  increasing  revenues  at  existing
facilities and protection under creditor's rights laws.

      Impact of Inflation
      -------------------

      The cost of the Company's  operations  are not  significantly  affected by
inflation.  The Company  believes  that the shift from  commercial  insurance to
managed  care  contracts  will have the  impact of  increasing  direct  costs in
relation to revenues as certain of the rates charged for the Company's  services
are expected to decline.

      Other
      -----

      The  Company  does not  anticipate  making any  material  expenditures  in
connection with  environmental  or occupational  safety  regulation  compliance.
Although the Company anticipates opening additional facilities in the future, it
has not made any material  capital  expenditure  commitments  as of this date in
connection with those potential facilities.





























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<PAGE>


                   HEALTH PROFESSIONALS, INC. AND SUBSIDIARIES


                           PART II - OTHER INFORMATION


Item 4.

Item 6.           Exhibits and Reports on Form 8-K
                  --------------------------------


                                  SIGNATURES

Pursuant  to the  requirements  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.





                                   HEALTH PROFESSIONALS, INC.
                                   ---------------------------
                                           Registrant




February 19, 1997                   /s/ William M. Reiter
                                   ---------------------------
                                   William M. Reiter, M.D.
                                   President and Chief
                                   Executive officer




February 19, 1997                   /s/ W. Douglas Kahn
                                   ---------------------------
                                   W. Douglas Kahn
                                   Chief Financial Officer










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