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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q/A

AMENDMENT NO. 1

CHECK ONE[X]
        
        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the Quarterly Period Ended: March 31, 2002OR[   ]
        
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ____________   to  ____________


American HomePatient, Inc.

---

(Debtor-in-Possession as of July 31, 2002)


(exact name of registrant as specified in its charter)


Delaware
        
        0-19532
        
        62-1474680(State or other jurisdiction of
        
        (Commission
        
        (IRS Employer Identification No.)incorporation or organization)
        
        File Number)


5200 Maryland Way, Suite 400, Brentwood, Tennessee
        
        37027(Address of principal executive offices)
        
        (Zip Code)


(615) 221-8884

---

(Registrants telephone number, including area code)


None

---

(Former name, former address and former fiscal year, if changes since last report.)


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 [  ]  No [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).

Yes [  ]   No [X]

16,367,389

---

(Outstanding shares of the issuers common stock as of March 24, 2003)


EXPLANATORY NOTE:

THIS FORM 10-Q/A IS BEING FILED FOR THE PURPOSE OF AMENDING AND RESTATING
PART I, ITEMS 1 AND 2, AND PART II, ITEM 6 OF OUR FORM 10-Q, ORIGINALLY
FILED ON MAY 15, 2002, TO REFLECT THE RESTATEMENT OF OUR UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES AS OF AND FOR
THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 AND AS OF DECEMBER 31, 2001.
ALL INFORMATION IN THIS FORM 10-Q/A IS AS OF THE DATE OF THE ORIGINAL FORM
10-Q FILING AND DOES NOT REFLECT ANY SUBSEQUENT EVENTS OTHER THAN THE
EFFECTS OF THE RESTATEMENT INCLUDED IN NOTE 10 RESTATEMENT. IN ADDITION,
SUBSEQUENT TO THE ORIGINAL FILING OF OUR FORM 10-Q, AMERICAN HOMEPATIENT,
INC. AND 24 OF ITS SUBSIDIARIES FILED VOLUNTARY PETITIONS FOR RELIEF TO
REORGANIZE UNDER CHAPTER 11 OF THE U.S. BANKRUPTCY CODE IN THE UNITED
STATES BANKRUPTCY COURT FOR THE MIDDLE DISTRICT OF TENNESSEE. SEE NOTE 11
SUBSEQUENT EVENT  BANKRUPTCY FILING FOR DISCLOSURE OF THE BANKRUPTCY
FILING. THE FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS ENDED
MARCH 31, 2002, AND AS OF DECEMBER 31, 2001, HAVE NOT BEEN ADJUSTED AS A
RESULT OF THE BANKRUPTCY FILING. SEE NOTE 10 TO THE NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR FURTHER DISCUSSION OF THE
RESTATEMENT.

Total number of sequentially pages is 54

1



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TABLE OF CONTENTS



|                                             |  |  |  |  |  |  |  | 
|-------------------------------------------- |  |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION               
|PART II. OTHER INFORMATION                  
|SIGNATURES                                  
|INDEX TO EXHIBITS                           
|Ex-99.1 Section 906 Certification of the CEO
|Ex-99.2 Section 906 Certification of the CFO



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##### Table of Contents






PART I.    FINANCIAL INFORMATION

ITEM 1  FINANCIAL STATEMENTS

AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)

ASSETS

March 31,
        
        December 31,2002
        
        2001(As restated,
        
        (As restated,see Note 10)
        
        see Note 10)CURRENT ASSETS:Cash and cash equivalents
        
        $
        6,277,000
        
        
        $
        9,129,000Restricted cash
        
        
        53,000
        
        
        
        265,000Accounts receivable, less allowance for
doubtful accounts of $31,164,000 and
$32,152,000, respectively
        
        
        60,460,000
        
        
        
        62,154,000Inventories, net of inventory reserves of
$1,020,000 and $1,191,000, respectively
        
        
        13,350,000
        
        
        
        14,001,000Prepaid expenses and other current assets
        
        
        1,667,000
        
        
        
        1,582,000Federal income tax receivable
        
        
        2,112,000
        
        
        
        Total current assets
        
        
        83,919,000
        

        
        
        87,131,000PROPERTY AND EQUIPMENT, at cost:
        
        
        173,846,000
        
        
        
        172,626,000Less accumulated depreciation and amortization
        
        
        (126,757,000
        )
        
        
        (125,538,000
        )Property and equipment, net
        
        
        47,089,000
        
        
        
        47,088,000OTHER ASSETS:Goodwill, net
        
        
        121,214,000
        
        
        
        189,699,000Investment in joint ventures
        
        
        9,077,000
        
        
        
        9,450,000Deferred financing costs, net of accumulated
amortization of $10,337,000 and $9,518,000,
respectively
        
        
        2,567,000
        
        
        
        3,383,000Other assets
        
        
        10,342,000
        
        
        
        10,289,000Total other assets
        
        
        143,200,000
        
        
        
        212,821,000TOTAL ASSETS
        
        $
        274,208,000
        
        
        $
        347,040,000


(Continued)

2



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AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Continued)

LIABILITIES AND SHAREHOLDERS (DEFICIT) EQUITY

March 31,
        
        December 31,2002
        
        2001(As restated,
        
        (As restated,see Note 10)
        
        see Note 10)CURRENT LIABILITIES:Current portion of long-term debt and capital leases
        
        $
        278,859,000
        
        
        $
        282,554,000Accounts payable
        
        
        17,787,000
        
        
        
        19,819,000Other payables
        
        
        2,437,000
        
        
        
        2,600,000Accrued expenses:Payroll and related benefits
        
        
        7,662,000
        
        
        
        8,054,000Interest
        
        
        2,473,000
        
        
        
        2,231,000Insurance, including self-insurance reserves
        
        
        5,764,000
        
        
        
        5,229,000Other
        
        
        7,206,000
        
        
        
        7,080,000Total current liabilities
        
        
        322,188,000
        
        
        
        327,567,000NONCURRENT LIABILITIES:Long-term debt and capital leases, less current portion
        
        
        550,000
        
        
        
        1,142,000Other noncurrent liabilities
        
        
        4,787,000
        
        
        
        4,782,000Total noncurrent liabilities
        
        
        5,337,000
        
        
        
        5,924,000COMMITMENTS AND CONTINGENCIESSHAREHOLDERS (DEFICIT) EQUITY:Preferred stock, $.01 par value; authorized 5,000,000
shares; none issued and outstanding
        
        
        
        
        
        
        Common stock, $.01 par value; authorized 35,000,000
shares; issued and outstanding, 16,367,000 and
16,327,000 shares, respectively
        
        
        164,000
        
        
        
        163,000Paid-in capital
        
        
        173,985,000
        
        
        
        173,975,000Accumulated deficit
        
        
        (227,466,000
        )
        
        
        (160,589,000
        )Total shareholders (deficit) equity
        
        
        (53,317,000
        )
        
        
        13,549,000TOTAL LIABILITIES AND SHAREHOLDERS (DEFICIT)
EQUITY
        
        $
        274,208,000
        
        
        $
        347,040,000


(Concluded)

The accompanying notes to interim condensed consolidated financial statements
are an integral part of these consolidated financial statements.

3



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AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

Three Months Ended March 31,2002
        
        2001(As restated,
        
        (As restated,see Note 10)
        
        see Note 10)REVENUES:Sales and related service revenues
        
        $
        34,823,000
        
        
        $
        43,868,000Rentals and other revenues
        
        
        45,181,000
        
        
        
        46,396,000Total revenues
        
        
        80,004,000
        
        
        
        90,264,000EXPENSES:Cost of sales and related services
        
        
        16,504,000
        
        
        
        22,066,000Cost of rentals and other revenues, including rental
equipment depreciation of $4,639,000 and $5,172,000,
respectively
        
        
        8,186,000
        
        
        
        8,518,000Operating, including bad debt expense of $4,170,000 and
$3,961,000, respectively
        
        
        46,336,000
        
        
        
        49,521,000General and administrative
        
        
        4,262,000
        
        
        
        4,109,000Earnings from joint ventures
        
        
        (1,273,000
        )
        
        
        (1,059,000
        )Depreciation, excluding rental equipment, and amortization
        
        
        1,033,000
        
        
        
        2,828,000Amortization of deferred financing costs
        
        
        824,000
        
        
        
        324,000Interest
        
        
        5,203,000
        
        
        
        10,228,000Gain on sale of assets of center
        
        
        (667,000
        )
        
        
        Total expenses
        
        
        80,408,000
        
        
        
        96,535,000LOSS FROM OPERATIONS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
        
        
        (404,000
        )
        
        
        (6,271,000
        )(BENEFIT FROM) PROVISION FOR INCOME TAXES
        
        
        (2,012,000
        )
        
        
        150,000INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE
        
        
        1,608,000
        
        
        
        (6,421,000
        )CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE WITH NO
RELATED TAX EFFECT
        
        
        (68,485,000
        )
        
        
        NET LOSS
        
        $
        (66,877,000
        )
        
        $
        (6,421,000
        )INCOME (LOSS) PER COMMON SHARE BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE:- Basic
        
        $
        0.10
        
        
        $
        (0.40
        )- Diluted
        
        $
        0.09
        
        
        $
        (0.40
        )CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE PER
COMMON SHARE:- Basic
        
        $
        (4.20
        )
        
        $
        - Diluted
        
        $
        (3.66
        )
        
        $
        NET LOSS PER COMMON SHARE:- Basic
        
        $
        (4.10
        )
        
        $
        (0.40
        )- Diluted
        
        $
        (3.57
        )
        
        $
        (0.40
        )WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:- Basic
        
        
        16,331,000
        
        
        
        16,018,000- Diluted
        
        
        18,729,000
        
        
        
        16,018,000


The accompanying notes to interim condensed consolidated financial statements
are an integral part of these consolidated financial statements.

4



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AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Three Months Ended March 31,2002
        
        2001(As restated,
        
        (As restated,see Note 10)
        
        see Note 10)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
        
        $
        (66,877,000
        )
        
        $
        (6,421,000
        )Adjustments to reconcile net loss to net cash provided
by operating activities:Cumulative effect of change in accounting principle
        
        
        68,485,000
        
        
        
        Depreciation and amortization
        
        
        5,672,000
        
        
        
        8,000,000Amortization of deferred financing costs
        
        
        824,000
        
        
        
        324,000Provision for doubtful accounts
        
        
        (988,000
        )
        
        
        (2,138,000
        )Provision for inventory
        
        
        (171,000
        )
        
        
        30,000Equity in earnings of unconsolidated joint ventures
        
        
        (769,000
        )
        
        
        (508,000
        )Minority interest
        
        
        72,000
        
        
        
        71,000Gain on sale of assets of center
        
        
        (667,000
        )
        
        
        Change in assets and liabilities, net of dispositions:Accounts receivable
        
        
        2,179,000
        
        
        
        4,368,000Inventories
        
        
        551,000
        
        
        
        1,389,000Prepaid expenses and other current assets
        
        
        (86,000
        )
        
        
        154,000Federal income tax receivable
        
        
        (2,112,000
        )
        
        
        Accounts payable, other payables and accrued
expenses
        
        
        (1,954,000
        )
        
        
        2,613,000Other noncurrent liabilities
        
        
        (12,000
        )
        
        
        18,000Other assets and liabilities
        
        
        (69,000
        )
        
        
        89,000Net cash provided by operating activities
        
        
        4,078,000
        
        
        
        7,989,000CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sale of assets of center
        
        
        1,805,000
        
        
        
        Additions to property and equipment, net
        
        
        (5,750,000
        )
        
        
        (4,662,000
        )Distributions and loan payments from (advances to)
unconsolidated joint ventures, net
        
        
        1,142,000
        
        
        
        (272,000
        )Net cash used in investing activities
        
        $
        (2,803,000
        )
        
        $
        (4,934,000
        )


(Continued)

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AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Continued)

Three Months Ended March 31,2002
        
        2001(As restated,
        
        (As restated,see Note 10)
        
        see Note 10)CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments on long-term debt and capital leases
        
        
        (4,287,000
        )
        
        
        (208,000
        )Proceeds from employee stock purchase plan
        
        
        
        
        
        
        202,000Proceeds from exercise of stock options
        
        
        11,000
        
        
        
        Deferred financing costs
        
        
        (8,000
        )
        
        
        (133,000
        )Distributions to minority interest owners
        
        
        (55,000
        )
        
        
        (63,000
        )Restricted cash
        
        
        212,000
        
        
        
        173,000Net cash used in financing activities
        
        
        (4,127,000
        )
        
        
        (29,000
        )(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
        
        
        (2,852,000
        )
        
        
        3,026,000CASH AND CASH EQUIVALENTS, beginning of period
        
        
        9,129,000
        
        
        
        12,081,000CASH AND CASH EQUIVALENTS, end of period
        
        $
        6,277,000
        
        
        $
        15,107,000SUPPLEMENTAL INFORMATION:Cash payments of interest
        
        $
        4,813,000
        
        
        $
        6,606,000Cash payments of income taxes
        
        $
        49,000
        
        
        $
        172,000NON-CASH FINANCING ACTIVITIES:Office equipment capital leases
        
        $
        
        
        
        $
        1,294,000


(Concluded)

The accompanying notes to interim condensed consolidated financial statements
are an integral part of these consolidated financial statements.

6



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AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.      BASIS OF PRESENTATION

American HomePatient, Inc. was incorporated in Delaware in September 1991.
American HomePatient Inc.s principal executive offices are located at 5200
Maryland Way, Suite 400, Brentwood, Tennessee 37027-5018, and its telephone
number at that address is (615) 221-8884. American HomePatient, Inc and
subsidiaries (the Company) provides home health care services and products
consisting primarily of respiratory and infusion therapies and the rental and
sale of home medical equipment and home health care supplies. For the three
months ended March 31, 2002, such services represented 65%, 15% and 20%,
respectively of revenues. These services and products are paid for primarily
by Medicare, Medicaid and other third-party payors. As of March 31, 2002, the
Company provided these services to patients primarily in the home through 287
centers in 35 states: Alabama, Arizona, Arkansas, Colorado, Connecticut,
Delaware, Florida, Georgia, Illinois, Iowa, Kansas, Kentucky, Maine, Maryland,
Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New
Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina,
South Dakota, Tennessee, Texas, Virginia, Washington, West Virginia and
Wisconsin. From its inception through 1997 the Company experienced substantial
growth primarily as a result of its strategy of acquiring and operating home
health care businesses. Beginning in 1998, the Companys strategy shifted from
acquiring new businesses to focusing more on internal growth, integrating its
acquired operations and achieving operating efficiencies.

The interim condensed consolidated financial statements of the Company for the
three months ended March 31, 2002 and 2001 herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management of the Company, the accompanying unaudited interim condensed
consolidated financial statements reflect all adjustments (consisting of only
normally recurring accruals) necessary to present fairly the financial position
at March 31, 2002 and the results of operations and the cash flows for the
three months ended March 31, 2002 and 2001.

The results of operations for the three months ended March 31, 2002 and 2001
are not necessarily indicative of the operating results for the entire
respective years. These unaudited interim condensed consolidated financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Companys Annual Report on Form 10-K.

Certain reclassifications have been made to the 2001 consolidated financial
statements to conform to the 2002 presentation.

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2.      BANK CREDIT FACILITY

At March 31, 2002, the Company had current assets of $83.9 million and current
liabilities of $322.2 million, resulting in a working capital deficit of $238.3
million and current ratio of 0.3x as compared to a working capital deficit of
$240.4 million and a current ratio of 0.3x at December 31, 2001.

The Company is the borrower under the Bank Credit Facility between the Company
and Deutsche Bank Trust Company, successor to Bankers Trust Company, as agent
for the Lenders. The Companys breach of several of the financial covenants in
the Fourth Amended and Restated Credit Agreement and its failure to make a
scheduled principal payment due March 15, 2001 caused the Company to not be in
compliance with certain covenants of the Fourth Amended and Restated Credit
Agreement. On June 8, 2001, the Company entered into the Fifth Amended and
Restated Credit Agreement (the Amended Credit Agreement) that provided a new
loan to the Company from which the proceeds were used to pay off all existing
loans under the Credit Agreement. The Amended Credit Agreement also includes
modified financial covenants and a revised amortization schedule. In addition,
the Amended Credit Agreement no longer contains a revolving loan component; all
existing indebtedness is now in the form of a term loan which matures on
December 31, 2002. The Amended Credit Agreement requires principal payments of
$750,000 on September 30, 2001 and December 31, 2001; a principal payment of
$11.6 million on March 31, 2002; principal payments of $1.0 million on June 30,
2002 and September 30, 2002; and a Balloon Payment of $281.5 million on
December 31, 2002. As of May 9, 2002, the Company has paid the $750,000
principal payment due on September 30, 2001, the $750,000 principal payment due
on December 31, 2001, the $11.6 million principal payment due on March 31, 2002
as well as the $1.0 million principal payment due on June 30, 2002, $0.6
million of the $1.0 million principal payment due on September 30, 2002, and
$5.3 million of the Balloon Payment due on December 31, 2002. These early
payments of 2002 principal were generated from operational cash flows, from the
sales of assets of centers, from the sales of the Companys wholly-owned real
estate and from the collection of patient receivables associated with the asset
sales. The Bank Credit Facility matures on December 31, 2002, and payment of
the entire outstanding balance (the Balloon Payment) is due at that time.
Anticipated future cash flow from operations will not be sufficient to pay the
Balloon Payment. There can be no assurance that the Bank Credit Facility will
be renewed, and if there is no renewal, then the Companys ability to make the
Balloon Payment is contingent upon obtaining replacement financing. There can
be no assurance that the Company can obtain such financing on terms acceptable
to the Company or at all. Additional sources of funds may be required and there
can be no assurance that the Company will be able to obtain additional funds on
terms acceptable to the Company or at all. The Amended Credit Agreement
further provides for mandatory prepayments of principal from the Companys
excess cash flow and from the proceeds of the Companys sales of securities,
sales of assets, tax refunds or excess casualty loss payments. Substantially
all of the Companys assets have been pledged as security for borrowings under
the Bank Credit Facility. Indebtedness under the Bank Credit Facility, as of
May 9, 2002, totals $276.6 million (which excludes letters of credit totaling
$3.4 million).

The Amended Credit Agreement further provides for the payment to the Lenders of
certain fees. These fees include a restructuring fee of $1.2 million (paid on
the effective date of the Amended Credit Agreement), $200,000 payable on each
of December 31, 2001, March 31, 2002 and June 30, 2002, as well as $459,000
payable on September 30, 2002. In addition, the Company has an obligation to
pay the agent an annual administrative fee of $75,000 and an annual fee of .50%
of the average monthly outstanding indebtedness on each anniversary of the
Amended Credit Agreement.

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The Amended Credit Agreement contains various financial covenants, the most
restrictive of which relate to measurements of EBITDA (as defined in the
Amended Credit Agreement), leverage, interest coverage ratios, and collections
of accounts receivable. The Amended Credit Agreement also contains provisions
for periodic reporting.

The Amended Credit Agreement also contains restrictions which, among other
things, impose certain limitations or prohibitions on the Company with respect
to the incurrence of indebtedness, the creation of liens, the payment of
dividends, the redemption or repurchase of securities, investments,
acquisitions, capital expenditures, sales of assets and transactions with
affiliates. The Company is not permitted to make acquisitions or investments
in joint ventures without the consent of Lenders holding a majority of the
lending commitments under the Bank Credit Facility. In addition, proceeds of
all of the Companys accounts receivable are transferred daily into a bank
account at PNC Bank, N.A. which, under the terms of a Concentration Bank
Agreement, requires that all amounts in excess of $3.0 million be transferred
to an account at Deutsche Bank Trust Company in the Companys name. Upon
occurrence of an event of default under the Amended Credit Agreement, the
Lenders have the right to instruct PNC Bank, N.A. and Deutsche Bank Trust
Company to cease honoring any drafts under the accounts and apply all amounts
in the bank accounts against the indebtedness owed to the Lenders.

Interest is payable on the unpaid principal amount under the Amended Credit
Agreement, at the election of the Company, at either a Base Lending Rate or an
Adjusted Eurodollar Rate (each as defined in the Amended Credit Agreement),
plus an applicable margin of 2.75% and 3.50%, respectively. The Company is
also required to pay additional interest in the amount of 4.50% per annum on
that principal portion outstanding of the Amended Credit Agreement that is in
excess of four times adjusted EBITDA, as defined by the Amended Credit
Agreement. As of March 31, 2002, the weighted average borrowing rate was 7.3%.
Upon the occurrence and continuation of an event of default under the Amended
Credit Agreement, interest would be payable upon demand at a rate that is 2.00%
per annum in excess of the interest rate otherwise payable under the Amended
Credit Agreement and the Company no longer would have the right to designate
the Adjusted Eurodollar Rate plus the applicable margin as the applicable
interest rate.

The Company was required to issue, effective on March 31, 2001, warrants to the
Lenders representing 19.999% of the common stock of the Company issued and
outstanding as of March 31, 2001, pursuant to the terms of the Second Amendment
to the Fourth Amended and Restated Credit Agreement (which amendment was
entered into on April 14, 1999). To fulfill these obligations, warrants to
purchase 3,265,315 shares of common stock were issued to the Lenders on June 8,
2001. Fifty percent of these warrants are exercisable during the period
commencing June 1, 2001 and ending May 31, 2011, and the remaining fifty
percent are exercisable during the period commencing September 30, 2001 and
ending September 29, 2011. The exercise price of the warrants is $0.01 per
share. The Company accounted for the fair value of these warrants during the
fourth quarter of 2000 as the issuance of these warrants was determined to be
probable. As such, the Company increased deferred financing costs by $686,000
to recognize the
estimated fair value of the warrants as of December 31, 2000. As of May 9,
2002 these warrants have not been exercised.

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3.      GOING CONCERN

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred net losses
of $66,877,000 and $12,892,000 for the three months ended March 31, 2002 and
the year ended December 31, 2001, respectively, and has a shareholders deficit
of $53,317,000 at March 31, 2002. The Company has substantial debt balances
related to the Amended Credit Agreement, of which $276.9 million is due on or
before December 31, 2002. There is currently no commitment as to how any such
payment would be satisfied by the Company. These factors among others raise
substantial doubt about the Companys ability to continue as a going concern.
The accompanying financial statements do not include any adjustments of
recorded asset carrying amounts or the amounts and classification of
liabilities that might result should the Company be unable to continue as a
going concern.

The Company plans to extend the maturity on the Bank Credit Facility, reduce
the related interest cost on such debt, and to pay all of its reported
liabilities. In addition, the Company has plans to improve financial
performance through consolidating operations, stabilizing and increasing
profitable revenues, decreasing and controlling operating expenses and
improving accounts receivable performance.

4.      GOVERNMENT INVESTIGATION AND LITIGATION

On June 11, 2001, a settlement agreement (the Government Settlement) was
entered among the Company, the United States of America, acting through the
United States Department of Justice (DOJ) and on behalf of the Office of
Inspector General of the Department of Health and Human Services (OIG) and
the TRICARE Management Activity, and a former Company employee, as relator.
The Government Settlement was approved by the United States District Court for
the Western District of Kentucky, the court in which the relators false claim
action was filed. The Government Settlement covers alleged improprieties by
the Company during the period from January 1, 1995 through December 31, 1998,
including allegedly improper billing activities and allegedly improper
remuneration to and contracts with physicians, hospitals and other healthcare
providers. Pursuant to the Government Settlement, the Company made an initial
payment of $3,000,000 in the second quarter of 2001 and agreed to make
additional payments in the principal amount of $4,000,000, together with
interest on this amount, in installments due at various times until March 2006.
The Company also agreed to pay the relators attorneys fees and expenses. The
Companys Plan of Reorganization proposes that the Company will timely pay all
amounts owed in accordance with the Government Settlement. The Company has
reserved $4,186,000 for its future obligations pursuant to the Government
Settlement. The Government Settlement does not resolve the relators claims
that the Company discriminated against him as a result of his reporting alleged
violations of the law to the government. The Company denies and intends to
vigorously defend these claims.

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The Company also was named as a defendant in two other False Claims Act cases.
In each of those cases, the DOJ declined to intervene and both cases were
subsequently dismissed in March 2001. The first of these cases, United States
ex rel. Kirk S. Corsello v. Lincare, et al. (N.D. Ga.), was dismissed with
prejudice on motion of the Company on March 9, 2001. The appeal of that
dismissal was argued in November 2001; however, in December 2001 the Court of
Appeals for the Eleventh Circuit dismissed the appeal on jurisdictional grounds
and returned the case to the trial court. In January 2002, one of the other
defendants filed a Motion for Reconsideration with the Court of Appeals. Mr.
Corsellos qui tam complaint alleged that the Company and numerous other
unrelated defendants, including other large DME suppliers, engaged in a
kickback scheme to provide free or below market value equipment and medicine to
physicians who would in turn refer patients to the defendants in violation of
the False Claims Act. The other case, United States ex rel. Alan D. Hutchison
v. Respironics, et al. (S.D. NY and N.D. Ga.), was dismissed without prejudice
on Mr. Hutchisons own motion on March 22, 2001. Since that date, the Company
has not been served with any additional papers in this case. Mr. Hutchisons
qui tam complaint alleged that the Company and numerous other unrelated
defendants filed false claims with Medicare for ventilators that the defendants
allegedly knew were not medically necessary.

The Company was informed in May 2001 that the United States is investigating
its conduct during periods after December 31, 1998, and the Company believes
that this investigation was prompted by another qui tam complaint against the
Company under the False Claims Act. The Company has not seen a complaint in
this action, but believes that it contains allegations similar to the ones
investigated by the government in connection with the False Claims Act case
covered by the Government Settlement discussed above. The Company believes
that this second case will be limited to allegedly improper activities
occurring after December 31, 1998.

There can be no assurances as to the final outcome of any pending False Claims
Act lawsuits. Possible outcomes include, among other things, the repayment of
reimbursements previously received by the Company related to improperly billed
claims, the imposition of fines or penalties, and the suspension or exclusion
of the Company from participation in the Medicare, Medicaid and other
government reimbursement programs. Other than the $4,186,000 reserve discussed
above which relates to the Government Settlement, the Company has not recorded
any reserves related to the unsettled government investigations. The outcome
of any pending lawsuits or future settlements could have a material adverse
effect on the Company.

The Company is a party to other legal proceedings incidental to its business.
In the opinion of management, any ultimate liability with respect to these
other actions will not have a material adverse effect on its financial position
or results of operations.

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5.      RELATED PARTY TRANSACTIONS

A partner in the law firm of Harwell Howard Hyne Gabbert & Manner, P.C.
(H3GM), which the Company engaged during 2002 and 2001 to render legal advice
in a variety of activities, is a director of the Company. The Company paid
H3GM $196,000 and $117,000 during the three months ended March 31, 2002 and
2001, respectively.

6.     SALE OF ASSETS OF CENTER

In the quarter ended March 31, 2002, the Company recorded a pre-tax gain of
approximately $0.7 million related to the sale of the assets of an infusion
business and nursing agency (collectively, the Center). Effective March 19,
2002, substantially all of the assets of the Center were sold for approximately
$1.3 million in cash. Funds representing the value of the remaining assets of
the Center have been escrowed pending regulatory approvals and will be released
once these are obtained. During the three months ended March 31, 2002 and
2001, the Center generated approximately $1.9 million and $2.5 million,
respectively, in total revenues. The proceeds of this sale were used to pay
down debt under the Companys Bank Credit Facility.

7.      EARNINGS PER SHARE

Under the standards established by Statement of Financial Accounting Standards
No. 128, Earnings Per Share, earnings per share is measured at two levels:
basic earnings per share and diluted earnings per share. Basic earnings per
share is computed by dividing net income (loss) by the weighted average number
of common shares outstanding during the year. Diluted earnings per share is
computed by dividing net income (loss) by the weighted average number of common
shares after considering the additional dilution related to convertible
preferred stock, convertible debt, options and warrants. In computing diluted
earnings per share, the outstanding stock warrants and stock options are
considered dilutive using the treasury stock method. For the three months
ended March 31, 2002 and 2001, approximately 3,789,000 and 2,380,000 shares,
respectively, attributable to the exercise of outstanding options were excluded
from the calculation of diluted earnings per share because the effect was
antidilutive.

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The following information is necessary to calculate earnings per share for the
periods presented:

Three Months Ended March 31,2002
        
        2001Income (loss) before cumulative effect of change in
accounting principle
        
        $
        1,608,000
        
        
        $
        (6,421,000
        )Cumulative effect of change in accounting
principle
        
        
        (68,485,000
        )
        
        
        Net loss
        
        $
        (66,877,000
        )
        
        $
        (6,421,000
        )Weighted average common shares outstanding
        
        
        16,331,000
        
        
        
        16,018,000Effect of dilutive options and warrants
        
        
        2,398,000
        
        
        
        Adjusted diluted common shares outstanding
        
        
        18,729,000
        
        
        
        16,018,000Income (loss) per common share before
cumulative effect of change in accounting
principle- Basic
        
        $
        0.10
        
        
        $
        (0.40
        )- Diluted
        
        $
        0.09
        
        
        $
        (0.40
        )Cumulative effect of change in accounting principle per
common share- Basic
        
        $
        (4.20
        )
        
        $
        - Diluted
        
        $
        (3.66
        )
        
        $
        Net loss per common share- Basic
        
        $
        (4.10
        )
        
        $
        (0.40
        )- Diluted
        
        $
        (3.57
        )
        
        $
        (0.40
        )


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8.      RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 141, Business Combinations
(SFAS No. 141) and Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets (SFAS No. 142). SFAS No. 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. SFAS No. 141 also specifies criteria which
intangible assets acquired in a purchase method business combination must meet
to be recognized and reported apart from goodwill. The Company adopted SFAS
No. 141 effective July 1, 2001. See Note 9 Adoption of SFAS No. 142 for
disclosure of the impact of SFAS No. 142. The Company adopted SFAS No. 142 on
January 1, 2002.

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
143, Accounting for Asset Retirement Obligations (SFAS No. 143) effective
for fiscal years beginning after June 15, 2002. SFAS No. 143 requires that a
liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
Company does not expect the future adoption of SFAS No. 143 to have a material
effect on its financial position or results of operations.

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS
No. 144) effective for fiscal years beginning after December 15, 2001. SFAS
No. 144 establishes a single accounting model for long-lived assets to be
disposed of by sale, whether previously held and used or newly acquired, and
broadens the presentation of discontinued operations to include more disposal
transactions. The Companys January 1, 2002 adoption of SFAS No. 144 did not
have a material impact on its financial position or results of operations.

In April 2002, the FASB issued Statement of Financial Accounting Standards No.
145, Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections (SFAS No. 145). SFAS No. 145
rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt,
and an amendment of that Statement, SFAS No. 64, Extinguishment of Debt Made
to Satisfy Sinking-Fund Requirements. SFAS No. 145 also rescinds SFAS No. 44,
Accounting for Intangible Assets of Motor Carriers. SFAS No. 145 amends SFAS
No. 13, Accounting for Leases, to eliminate an inconsistency between the
required accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. This Statement also makes several technical
corrections and clarifications to other existing authoritative pronouncements.
The provisions of this Statement related to the rescission of SFAS No. 4 are
effective for fiscal years beginning after May 15, 2002. The provisions of
this Statement related to SFAS No. 13 are effective for transactions occurring
after May 15, 2002. All other provisions of this Statement are effective for
financial statements issued on or after May 15, 2002. The Company does not
anticipate that the future adoption of the provisions of SFAS No. 145 which
will be effective for transactions after May 15, 2002 will have a material
effect on its financial statements. The Company is evaluating the remaining
provisions of SFAS No. 145 and will adopt the remaining provisions
prospectively on January 1, 2003.

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9.     ADOPTION OF SFAS NO. 142

The Company adopted the provisions of SFAS No. 142 effective January 1, 2002.
As of the adoption date, the Company had unamortized goodwill in the amount of
$189.7 million. In accordance with SFAS No. 142, effective January 1, 2002 the
Company discontinued amortization of goodwill. Goodwill was tested for
impairment by comparing the fair value of goodwill to the carrying value of
goodwill. Fair value was determined using projected operating results and a
combination of analyses which included discounted cash flow calculations,
market multiples and other market information. Key assumptions used in these
estimates include projected operating results, discount rates, and peer market
multiples. The implied fair value of goodwill did not support the carrying
value of goodwill primarily due to the Companys highly leveraged capital
structure.

Based upon the results of the Companys initial impairment tests, the Company
has recorded an impairment loss of $68.5 million in the quarter ended March 31,
2002, recognized as a cumulative effect of change in accounting principle.
There was no tax effect on the impairment loss due to the fact that the
majority of the related goodwill was non-tax deductible and because of the
Companys federal net operating loss position. The Company will conduct annual
impairment tests hereafter, unless specific events arise which warrant more
immediate testing. Any subsequent impairment losses will be recognized as an
operating expense in the Companys consolidated statements of operations. The
Company recorded goodwill amortization expense of $1.4 million in the three
months ended March 31, 2001.

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##### Table of Contents



The change in the carrying amount of goodwill for the quarter ended March 31,
2002 is as follows:

2002Goodwill, net of accumulated amortization, beginning of
period
        
        $
        189,699,000Transitional impairment loss
        
        
        (68,485,000
        )Goodwill, net of accumulated amortization, end of period
        
        $
        121,214,000


Actual results of operations for the three months ended March 31, 2002 and pro
forma results of operations for the three months ended March 31, 2001 had the
Company applied the non-amortization provisions of SFAS No. 142 in that period
are as follows:

Three Months Ended March 31,2002
        
        2001Reported net loss
        
        $
        (66,877,000
        )
        
        $
        (6,421,000
        )Add: Goodwill amortization
        
        
        
        
        
        
        1,419,000Adjusted net loss
        
        $
        (66,877,000
        )
        
        $
        (5,002,000
        )Basic loss per shareReported net loss
        
        $
        (4.10
        )
        
        $
        (0.40
        )Goodwill amortization
        
        
        
        
        
        
        0.09Adjusted net loss
        
        $
        (4.10
        )
        
        $
        (0.31
        )Diluted loss per shareReported net loss
        
        $
        (3.57
        )
        
        $
        (0.40
        )Goodwill amortization
        
        
        
        
        
        
        0.09Adjusted net loss
        
        $
        (3.57
        )
        
        $
        (0.31
        )


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##### Table of Contents



10.      RESTATEMENT

Subsequent to the issuance of the Companys March 31, 2002 consolidated
financial statements, the Companys management determined that the accounting
treatment initially afforded to certain transactions was not correct. A
summary of these items is provided below.

In June 2001, the Company executed the Amended Credit Agreement (see Note 2)
incurring restructuring fees of approximately $2,259,000. These fees were
initially expensed as paid but should have been accrued and recorded as
deferred financing costs and amortized over the appropriate term. In addition,
in connection with the Amended Credit Agreement, the Company issued warrants to
its Lenders. The Company initially amortized these warrants incorrectly. The
Amended Credit Agreement also stipulated that the Company pay an administrative
fee of $75,000 and an annual fee of 0.50% of the average monthly outstanding
indebtedness. These fees were capitalized as deferred financing costs when
paid, which were subsequently amortized instead of accruing the costs as
interest expense as incurred. Finally, the Amended Credit Agreement and its
predecessor agreement (the Agreements), called for the payment of additional
interest in the amount of 4.5% per annum on that principal portion outstanding
in excess of four times Adjusted EBITDA, as defined by the Agreements. The
initial accounting for this interest was not appropriate. As a result of the
above, accrued interest was understated by approximately $225,000 as of March
31, 2001, and interest expense should have been approximately $225,000 higher
for the three months ended March 31, 2001. Deferred financing costs, net were
understated by approximately $309,000, accrued interest and accrued financing
costs were understated by approximately $1,188,000 and $859,000, respectively,
as of December 31, 2001. Deferred financing costs, net were overstated by
approximately $277,000, accrued interest was understated by approximately
$355,000 and accrued financing costs were overstated by approximately $200,000,
as of March 31, 2002. Interest expense and amortization of deferred
financing costs should have been approximately $355,000 and $77,000 higher,
respectively, for the three months ended March 31, 2002.

During the three months ended March 31, 2002 and 2001 and for the year ended
December 31, 2001, the Company accounted for certain leases as operating
leases, which should have been recorded as capital leases. As a result,

property and equipment, net and capital lease obligations were understated by
approximately $1,169,000 at March 31, 2001, interest expense and depreciation
expense should have been approximately $24,000 and $125,000 higher,
respectively, and rent expense was overstated by approximately $149,000 for the
three months ended March 31, 2001. Property and equipment, net and capital
lease obligations were understated by approximately $883,000 and $885,000,
respectively, at December 31, 2001. Property and equipment, net and capital
lease obligations were both overstated by approximately $119,000. Interest
expense and depreciation expense should have been approximately $17,000 and
$119,000 higher, respectively, and rent expense was overstated by approximately
$136,000 for the three months ended March 31, 2002.

In addition, the Company determined the following related to its March 31, 2001
consolidated financial statements:

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| |  |  | Certain reserves and accruals related to inventory required
adjustment resulting in an increase in inventory and a decrease in cost
of sales and related services of approximately $104,000;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Certain reserves and accruals related to insurance required
adjustment resulting in a decrease in accrued insurance and operating
expenses of approximately $150,000;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Certain costs totaling $240,000 that were capitalized should have
been expensed; and
| | - |  | ------------------------------------------------------------------------------------



| |  |  | Amortization expense related to the warrants was improperly
recorded resulting in an understatement of expense of approximately
$76,000.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------

In addition, the Company determined the following related to its December 31,
2001 consolidated financial statements:



| |  |  | Certain of its investments in bonds were not appropriately
accounted for resulting in an understatement of assets of approximately
$88,000;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interest expense related to the Government Settlement was not
recorded resulting in an understatement of accrued interest of
approximately $137,000;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Certain reserves and accruals related to inventory and property and
equipment required adjustment resulting in an increase in inventory of
approximately $392,000, an increase in property and equipment of
approximately $126,000, and an increase in accounts payable of
approximately $338,000; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Certain costs totaling $150,000 that were capitalized should have
been expensed.
| | - |  | --------------------------------------------------------------------------------

In addition, the Company determined the following related to its March 31, 2002
consolidated financial statements:



| |  |  | Certain of its investments in bonds were not appropriately
accounted for resulting in an understatement of other assets, net of
approximately $28,000, an overstatement of interest receivable of
approximately $47,000 and an overstatement of interest income of
approximately $19,000;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interest expense related to the Government Settlement was not
recorded resulting in an understatement of accrued interest and
interest expense of approximately $49,000;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Certain reserves and accruals related to inventory, net and
property and equipment, net required adjustment resulting in a decrease
in inventory, net of approximately $416,000, a decrease in property and
equipment, net of approximately $131,000, a decrease in accounts
payable of approximately $332,000, an increase in cost of sales and
related services of approximately $217,000, and a decrease in operating
expenses of approximately $2,000; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | Certain costs totaling $540,000 that were capitalized should have
been expensed.
| | - |  | --------------------------------------------------------------------------------



| |  |  | Amortization expense related to the warrants was improperly
recorded resulting in an understatement of expense of approximately
$34,000.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------

During the three months ended March 31, 2002, the Company did not account for a
federal income tax receivable related to the enactment of the Job Creation and
Workers Assistance Act of 2002. As a result, federal income tax receivable and
the benefit from income taxes were understated by approximately $2,112,000 as
of and for the three months ended March 31, 2002.

The Company also made adjustments pertaining to other miscellaneous adjustments
to its previously issued March 31, 2001 and 2002 financial statements that had
the effect of increasing previously reported net loss by approximately $14,000
and $142,000 for the three months ended March 31, 2001 and 2002, respectively.

In addition to the aforementioned restatement items, adjustments pertaining to
the amortization of warrants, certain of the Companys investments and general
and administrative expenses related to the year ended December 31, 2000 were
also identified. The Company recorded the effects of these adjustments, which
would have decreased previously reported 2000 net loss by approximately
$477,000, during the three months ended March 31, 2001.

The consolidated financial statements as of March 31, 2002 and December 31,
2001 and for the three months ended March 31, 2002 and 2001, contained herein
have been restated to reflect the above discussed adjustments. The following
are reconciliations of the Companys financial statements previously filed to
the restated financial statements:

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March 31, 2002As PreviouslyReported
        
        As RestatedASSETSCURRENT ASSETS:Cash and cash equivalents
        
        $
        6,307,000
        
        
        $
        6,277,000Restricted cash
        
        
        53,000
        
        
        
        53,000Accounts receivable, less allowance for doubtful accounts
        
        
        60,290,000
        
        
        
        60,460,000Inventories, net of inventory reserves of $984,000 and $1,020,000, respectively
        
        
        13,385,000
        
        
        
        13,350,000Prepaid expenses and other current assets
        
        
        2,208,000
        
        
        
        1,667,000Federal income tax receivable
        
        
        
        
        
        
        2,112,000Total current assets
        
        
        82,243,000
        
        
        
        83,919,000PROPERTY AND EQUIPMENT, at cost:
        
        
        172,618,000
        
        
        
        173,846,000Less accumulated depreciation and amortization
        
        
        (126,143,000
        )
        
        
        (126,757,000
        )Property and equipment, net
        
        
        46,475,000
        
        
        
        47,089,000OTHER ASSETS:Goodwill, net
        
        
        121,214,000
        
        
        
        121,214,000Investment in joint ventures
        
        
        9,067,000
        
        
        
        9,077,000Deferred financing costs, net of accumulated amortization of $10,226,000 and
$10,337,000, respectively
        
        
        2,434,000
        
        
        
        2,567,000Other assets
        
        
        10,076,000
        
        
        
        10,342,000Total other assets
        
        
        142,791,000
        
        
        
        143,200,000TOTAL ASSETS
        
        $
        271,509,000
        
        
        $
        274,208,000LIABILITIES AND SHAREHOLDERS DEFICITCURRENT LIABILITIES:Current portion of long-term debt and capital leases
        
        $
        277,958,000
        
        
        $
        278,859,000Accounts payable
        
        
        17,625,000
        
        
        
        17,787,000Other payables
        
        
        2,437,000
        
        
        
        2,437,000Accrued expenses:Payroll and related benefits
        
        
        7,662,000
        
        
        
        7,662,000Interest
        
        
        745,000
        
        
        
        2,473,000Insurance, including self-insurance reserves
        
        
        5,764,000
        
        
        
        5,764,000Other
        
        
        6,496,000
        
        
        
        7,206,000Total current liabilities
        
        
        318,687,000
        
        
        
        322,188,000NONCURRENT LIABILITIES:Long-term debt and capital leases, less current portion
        
        
        684,000
        
        
        
        550,000Other noncurrent liabilities
        
        
        4,788,000
        
        
        
        4,787,000Total noncurrent liabilities
        
        
        5,472,000
        
        
        
        5,337,000SHAREHOLDERS DEFICIT:Preferred stock, $.01 par value; authorized 5,000,000 shares; none issued and
outstanding
        
        
        
        
        
        
        Common stock; $.01 par value; authorized 35,000,000 shares; 16,367,000 issued
and outstanding
        
        
        164,000
        
        
        
        164,000Paid-in capital
        
        
        173,985,000
        
        
        
        173,985,000Accumulated deficit
        
        
        (226,799,000
        )
        
        
        (227,466,000
        )Total shareholders deficit
        
        
        (52,650,000
        )
        
        
        (53,317,000
        )TOTAL LIABILITIES AND SHAREHOLDERS DEFICIT
        
        $
        271,509,000
        
        
        $
        274,208,000


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December 31, 2001As PreviouslyReported
        
        As RestatedASSETSCURRENT ASSETS:Cash and cash equivalents
        
        $
        9,159,000
        
        
        $
        9,129,000Restricted cash
        
        
        265,000
        
        
        
        265,000Accounts receivable, less allowance for doubtful accounts
        
        
        61,661,000
        
        
        
        62,154,000Inventories, net of inventory reserves of $1,384,000 and $1,191,000,
respectively
        
        
        13,257,000
        
        
        
        14,001,000Prepaid expenses and other current assets
        
        
        1,583,000
        
        
        
        1,582,000Total current assets
        
        
        85,925,000
        
        
        
        87,131,000PROPERTY AND EQUIPMENT, at cost:
        
        
        171,266,000
        
        
        
        172,626,000Less accumulated depreciation and amortization
        
        
        (125,043,000
        )
        
        
        (125,538,000
        )Property and equipment, net
        
        
        46,223,000
        
        
        
        47,088,000OTHER ASSETS:Goodwill, net
        
        
        189,699,000
        
        
        
        189,699,000Investment in joint ventures
        
        
        9,492,000
        
        
        
        9,450,000Deferred financing costs, net of accumulated amortization of $9,352,000 and
$9,518,000, respectively
        
        
        2,939,000
        
        
        
        3,383,000Other assets
        
        
        10,386,000
        
        
        
        10,289,000Total other assets
        
        
        212,516,000
        
        
        
        212,821,000TOTAL ASSETS
        
        $
        344,664,000
        
        
        $
        347,040,000LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Current portion of long-term debt and capital leases
        
        $
        282,087,000
        
        
        $
        282,554,000Accounts payable
        
        
        19,360,000
        
        
        
        19,819,000Other payables
        
        
        2,600,000
        
        
        
        2,600,000Accrued expenses:Payroll and related benefits
        
        
        8,054,000
        
        
        
        8,054,000Interest
        
        
        907,000
        
        
        
        2,231,000Insurance, including self-insurance reserves
        
        
        5,229,000
        
        
        
        5,229,000Other
        
        
        6,024,000
        
        
        
        7,080,000Total current liabilities
        
        
        324,261,000
        
        
        
        327,567,000NONCURRENT LIABILITIES:Long-term debt and capital leases, less current portion
        
        
        723,000
        
        
        
        1,142,000Other noncurrent liabilities
        
        
        4,783,000
        
        
        
        4,782,000Total noncurrent liabilities
        
        
        5,506,000
        
        
        
        5,924,000SHAREHOLDERS EQUITY:Preferred stock, $.01 par value; authorized 5,000,000 shares; none issued and
outstanding
        
        
        
        
        
        
        Common stock; $.01 par value; authorized 35,000,000 shares; 16,327,000 issued
and outstanding
        
        
        163,000
        
        
        
        163,000Paid-in capital
        
        
        173,975,000
        
        
        
        173,975,000Accumulated deficit
        
        
        (159,241,000
        )
        
        
        (160,589,000
        )Total shareholders equity
        
        
        14,897,000
        
        
        
        13,549,000TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
        
        $
        344,664,000
        
        
        $
        347,040,000


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Three Months Ended March 31, 2002As PreviouslyReported
        
        As RestatedREVENUES:Sales and related service revenues
        
        $
        34,823,000
        
        
        $
        34,823,000Rentals and other revenues
        
        
        45,200,000
        
        
        
        45,181,000Total revenues
        
        
        80,023,000
        
        
        
        80,004,000EXPENSES AND OTHER:Cost of sales and related services
        
        
        16,275,000
        
        
        
        16,504,000Cost of rentals and other revenues, including rental equipment depreciation
        
        
        8,198,000
        
        
        
        8,186,000Operating, including bad debt expense
        
        
        45,971,000
        
        
        
        46,336,000General and administrative
        
        
        4,106,000
        
        
        
        4,262,000Earnings from joint ventures
        
        
        (1,295,000
        )
        
        
        (1,273,000
        )Depreciation, excluding rental equipment, and amortization
        
        
        914,000
        
        
        
        1,033,000Amortization of deferred financing costs
        
        
        713,000
        
        
        
        824,000Interest
        
        
        4,781,000
        
        
        
        5,203,000Gain on sale of assets of center
        
        
        (667,000
        )
        
        
        (667,000
        )Total expenses
        
        
        78,996,000
        
        
        
        80,408,000INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
        
        
        1,027,000
        
        
        
        (404,000
        )PROVISION FOR (BENEFIT FROM) INCOME TAXES
        
        
        100,000
        
        
        
        (2,012,000
        )INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
        
        
        927,000
        
        
        
        1,608,000CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE WITH NO RELATED TAX EFFECT
        
        
        (68,485,000
        )
        
        
        (68,485,000
        )NET LOSS
        
        $
        (67,558,000
        )
        
        $
        (66,877,000
        )INCOME PER COMMON SHARE BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE:- Basic
        
        $
        0.06
        
        
        $
        0.10- Diluted
        
        $
        0.06
        
        
        $
        0.09CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE PER
COMMON SHARE:- Basic
        
        $
        (4.20
        )
        
        $
        (4.20
        )- Diluted
        
        $
        (4.09
        )
        
        $
        (3.66
        )NET LOSS PER COMMON SHARE:- Basic
        
        $
        (4.14
        )
        
        $
        (4.10
        )- Diluted
        
        $
        (4.03
        )
        
        $
        (3.57
        )WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:- Basic
        
        
        16,331,000
        
        
        
        16,331,000- Diluted
        
        
        16,769,000
        
        
        
        18,729,000


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Three Months Ended March 31, 2001As PreviouslyReported
        
        As RestatedREVENUES:Sales and related service revenues
        
        $
        43,868,000
        
        
        $
        43,868,000Rentals and other revenues
        
        
        46,194,000
        
        
        
        46,396,000Total revenues
        
        
        90,062,000
        
        
        
        90,264,000EXPENSES AND OTHER:Cost of sales and related services
        
        
        22,170,000
        
        
        
        22,066,000Cost of rentals and other revenues, including rental equipment depreciation
        
        
        8,518,000
        
        
        
        8,518,000Operating, including bad debt expense
        
        
        49,620,000
        
        
        
        49,521,000General and administrative
        
        
        3,938,000
        
        
        
        4,109,000Earnings from joint ventures
        
        
        (1,059,000
        )
        
        
        (1,059,000
        )Depreciation, excluding rental equipment, and amortization
        
        
        2,704,000
        
        
        
        2,828,000Amortization of deferred financing costs
        
        
        639,000
        
        
        
        324,000Interest
        
        
        9,979,000
        
        
        
        10,228,000Total expenses
        
        
        96,509,000
        
        
        
        96,535,000LOSS FROM OPERATIONS BEFORE INCOME TAXES
        
        
        (6,447,000
        )
        
        
        (6,271,000
        )PROVISION FOR INCOME TAXES
        
        
        150,000
        
        
        
        150,000NET LOSS
        
        $
        (6,597,000
        )
        
        $
        (6,421,000
        )NET LOSS PER COMMON SHARE:- Basic
        
        $
        (0.40
        )
        
        $
        (0.40
        )- Diluted
        
        $
        (0.40
        )
        
        $
        (0.40
        )WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:- Basic
        
        
        16,352,000
        
        
        
        16,018,000- Diluted
        
        
        16,352,000
        
        
        
        16,018,000


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11.     SUBSEQUENT EVENT  BANKRUPTCY FILING

On July 31, 2002, American HomePatient, Inc. and 24 of its subsidiaries
(collectively, the Debtors) filed voluntary petitions for relief to
reorganize under Chapter 11 of the U.S. Bankruptcy Code (the Bankruptcy
Filing) in the United States Bankruptcy Court for the Middle District of
Tennessee (the Bankruptcy Court). These cases (the Chapter 11 Cases) have
been consolidated for the purpose of joint administration under Case Number
02-08915-GP3-11. Pleadings in these cases may be viewed at the Courts
website, www.tnmb.uscourts.gov. On January 2, 2003, the Debtors filed its Second Amended Joint Plan
of Reorganization (the Plan), proposed by the Debtors and the Official
Committee of Unsecured Creditors appointed by the Office of the United States
Trustee in the Chapter 11 Cases. A Disclosure Statement, the purpose of which
is to enable creditors entitled to vote on the Plan to make an informed
decision before exercising their right to vote, accompanied the Plan and was
also filed on January 2, 2003. The hearing before the Bankruptcy Court on
confirmation of the Plan has been set for April 23, 2003. The filing was
prompted by the impending December 31, 2002 maturity of the Bank Credit
Facility evidenced by the Amended Credit Agreement between the Company and Bank
of Montreal, as agent for a syndicate of lenders (the Lenders). Indebtedness
under the Bank Credit Facility as of March 31, 2002 totals $276.9 million
(which excludes letters of credit totaling $3.4 million).

As of July 31, 2002 the Debtors are operating their business as a
debtor-in-possession under the supervision of the Bankruptcy Court. As a
debtor-in-possession, the Company is authorized to operate its business but may
not engage in transactions outside its ordinary course of business without the
approval of the Bankruptcy Court. The Company has not sought to obtain
debtor-in-possession secured financing (DIP Financing) and currently does not
intend to do so. Rather, the Company has used and intends to continue using
cash flow and cash on hand to fund day-to-day operations during the bankruptcy
process, which is consistent with its operations since the Lenders terminated
the Companys ability to access a revolving line of credit in 2000. The
Bankruptcy Filing is not anticipated to have a material impact on the Companys
existing joint ventures with unrelated parties, and the Company currently does
not anticipate that any other subsidiary or affiliate of the Company will file
a voluntary petition for relief.

On October 15, 2002, the Company, the Lenders and the unsecured creditors filed
an agreed order with the Bankruptcy Court authorizing the use of cash
collateral and granting adequate protection payments to the Lenders. This
order authorizes the Company to use cash collateral, but provides certain
restrictions on the Companys ability to make cash disbursements. The Company
is authorized to use cash collateral solely for the following purposes: (i) to
make cash disbursements as set forth in a cash forecast prepared by the
Company, not to exceed 5% in any four week rolling period; (ii) to pay fees
required by the Office of the United States Trustee; (iii) to make adequate
protection payments to the Lenders; and (iv) to replace or increase certain
letters of credit. The Company agreed to make adequate protection payments to
the Lenders of $1,600,000 per month beginning with the month of August 2002,
subject to maintaining a required minimum cash balance of $12,000,000 plus the
amount necessary to fund incentive bonuses that are due through March 31, 2003,
as well as any amounts necessary to replace or increase letters of credit. An
initial payment totaling $3,200,000 for August and September 2002, in the
aggregate, was made on October 15, 2002, and additional adequate protection
payments have been paid on the 15th of each successive month. The application
of such payments is subject to further order of the Bankruptcy Court. The
Bankruptcy Court may recharacterize the application of any payment regardless
of how characterized by the Company or the Lenders.

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ITEM 2 -     MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q/A includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 including,
without limitation, statements containing the words believes, anticipates,
intends, expects, estimates, projects, may, will, likely, could
and words of similar import. Such statements include statements concerning the
Companys business strategy, operations, cost savings initiatives, future
compliance with accounting standards, industry, economic performance, financial
condition, liquidity and capital resources, existing government regulations and
changes in, or the failure to comply with, governmental regulations, future
compliance with Bank Credit Facility covenants, legislative proposals for
healthcare reform, the ability to enter into strategic alliances and
arrangements with managed care providers on an acceptable basis, and changes in
reimbursement policies. Such statements are not guarantees of future
performance and are subject to various risks and uncertainties. The Companys
actual results may differ materially from the results discussed in such
forward-looking statements because of a number of factors, including those
identified in the Risk Factors section and elsewhere in this Quarterly Report
on Form 10-Q/A. The forward-looking statements are made as of the original
filing date of the Quarterly Report on Form 10-Q and the Company does not
undertake to update to the filing date of this Form 10-Q/A the forward-looking
statements or to update the reasons that actual results could differ from those
projected in the forward-looking statements.

Subsequent to the issuance of the Companys interim consolidated financial
statements as of and for the three months ended March 31, 2002, the
Companys management determined that the accounting treatment initially
afforded to certain transactions was not correct. This Form 10-Q/A is being
filed for the purpose of amending and restating Part I, Items 1 and
2, and Part II, Item 6 of the Companys
Form 10-Q for the quarterly period ended March 31, 2002 originally filed on May
15, 2002. As a result, the Companys condensed consolidated financial
statements for the three months ended March 31, 2002 and 2001 and as of
December 31, 2001 have been restated. See Note 10 to the interim condensed
consolidated financial statements for a summary of the significant effects of
the restatement. The following discussion and analysis gives effect to the
restatement.

See Note 11 Subsequent Event
 Bankruptcy Filing as it pertains to our filing of
bankruptcy on July 31, 2002.

General

The Company provides home health care services and products to patients through
its 287 centers in 35 states. These services and products are primarily paid
for by Medicare, Medicaid and other third-party payors. The Company has three
principal services or product lines: home respiratory services, home infusion
services and home medical equipment and supplies. Home respiratory services
include oxygen systems, nebulizers, aerosol medications and home ventilators
and are provided primarily to patients with severe and chronic pulmonary
diseases. Home infusion services are used to administer nutrients, antibiotics
and other medications to patients with medical conditions such as neurological
impairments, infectious diseases or cancer. The Company also sells and rents a
variety of home medical equipment and supplies, including wheelchairs, hospital
beds and ambulatory aids.

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##### Table of Contents



The following table sets forth the percentage of the Companys revenues
represented by each line of business for the periods presented:

Three Months Ended March 31,2002
        
        2001Home respiratory therapy services
        
        
        65
        %
        
        
        58
        %Home infusion therapy services
        
        
        15
        
        
        
        18Home medical equipment and medical supplies
        
        
        20
        
        
        
        24Total
        
        
        100
        %
        
        
        100
        %


Prior to 1998, the Company had significantly expanded its operations through a
combination of home health care acquisitions and joint ventures and strategic
alliances with integrated health care delivery systems. In 1998, the Company
purposefully slowed its acquisition activity compared to prior years to focus
on existing operations. Since 1998, the Company has not acquired any home
health care businesses or developed any new joint ventures other than
converting several of its previously owned 50% joint ventures to wholly-owned
operations during 1999 and 2000. During 2001, the Company sold certain
non-core assets. These consisted of its rehab centers, three infusion centers,
and two respiratory and home medical equipment centers, which were sold for an
aggregate of $11.1 million in cash. The Company used proceeds from those sales
to pay down the Bank Credit Facility. In addition, during 2001 the Company
used $1.0 million in proceeds from the sales of its wholly-owned real estate
and $0.5 million in proceeds from the collection of patient receivables
associated with the sold centers to pay down the Bank Credit Facility. In
March 2002, the Company sold substantially all of the assets of an infusion
center for $1.3 million in cash and used the proceeds to pay down the Bank
Credit Facility. In addition, during 2002 the Company used $0.9 million in
proceeds from the collection of patient receivables associated with the sold
centers to pay down the Bank Credit Facility.

The Companys strategy for 2002 is to maintain a diversified offering of home
health care services reflective of its current business mix. Respiratory
services will remain a primary focus along with home medical equipment rental
and enteral nutrition products and services.

Government Regulation

General.The Company, as a participant in the health care industry, is
subject to extensive federal, state and local regulation. In addition to the
False Claims Act and other federal and state anti-kickback and self-referral
laws applicable to all of the Companys operations (discussed more fully
below), the operations of the Companys home health care centers are subject to
federal laws covering the repackaging and dispensing of drugs (including
oxygen) and regulating interstate motor-carrier transportation. Such centers
also are subject to state laws (most notably licensing and controlled
substances registration) governing pharmacies, nursing services and certain
types of home health agency activities.

The Companys operations are also subject to a series of laws and regulations
dating back to the Omnibus Budget Reconciliation Act of 1987 (OBRA 1987)
which apply to the Companys operation. Periodic changes have occurred from
time to time since the enactment of OBRA 1987, including reimbursement
reductions and changes to payment rules.

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The Federal False Claims Act imposes civil liability on individuals or entities
that submit false or fraudulent claims to the government for payment. False
Claims Act penalties for violations can include sanctions, including civil
monetary penalties. As a provider of services under the federal reimbursement
programs such as Medicare, Medicaid and TRICARE (formerly CHAMPUS), the Company
is subject to the anti-kickback statute, also known as the fraud and abuse
law. This law prohibits any bribe, kickback, rebate or remuneration of any
kind in return for, or as an inducement for, the referral of patients for
government-reimbursed health care services. The Company may also be affected
by the federal physician self-referral prohibition, known as the Stark Law,
which, with certain exceptions, prohibits physicians from referring patients to
entities with which they have a financial relationship. Many states in which
the Company operates have adopted similar self-referral laws, as well as laws
that prohibit certain direct or indirect payments or fee-splitting arrangements
between health care providers, under the theory that such arrangements are
designed to induce or to encourage the referral of patients to a particular
provider. In many states, these laws apply to services reimbursed by all payor
sources.

In 1996, the Health Insurance Portability and Accountability Act (HIPAA)
introduced a new category of federal criminal health care fraud offenses. If a
violation of a federal criminal law relates to a health care benefit, then an
individual is guilty of committing a federal health care offense. The specific
offenses are: health care fraud; theft or embezzlement; false statements;
obstruction of an investigation; and money laundering. These crimes can apply
to claims submitted not only to government reimbursement programs such as
Medicare, Medicaid and TRICARE, but to any third-party payor, and carry
penalties including fines and imprisonment.

The Company must follow strict requirements with paperwork and billing. As
required by law, it is Company policy that certain service charges (as defined
by Medicare) falling under Medicare Part B are confirmed with a Certificate for
Medical Necessity (CMN) signed by a physician. In January 1999, the OIG
published a draft Model Compliance Plan for the Durable Medical Equipment,
Prosthetics, Orthotics and Supply Industry. The OIG has stressed the
importance for all health care providers to have an effective compliance plan.
The Company has created and implemented a compliance program, which it believes
meets the elements of the OIGs Model Plan for the industry. As part of its
compliance program, the Company performs internal audits of the adequacy of
billing documentation. The Companys policy is to voluntarily refund to the
government any reimbursements previously received for claims with insufficient
documentation that are identified in this process and that cannot be corrected.
The Company periodically reviews and updates its policies and procedures in an
effort to comply with applicable laws and regulations; however, certain
proceedings have been and may in the future be commenced against the Company
alleging violations of applicable laws governing the operation of the Companys
business and its billing practices.

The Balanced Budget Act of 1997 introduced several government initiatives which
are either in the planning or implementation stages and which, when fully
implemented, could have a material adverse impact on reimbursement for products
and services provided by the Company. These initiatives include: (i)
Prospective Payment System (PPS) requirements for skilled nursing facilities
and PPS for home health agencies, which do not affect the Company directly but
could

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affect the Companys contractual relationships with such entities; (ii)
deadlines (as yet undetermined) for obtaining Medicare and Medicaid surety
bonds for home health agencies and DME suppliers; and (iii) pilot projects in
Polk County, Florida and San Antonio, Texas which were effective between
October 1, 1999 and September 30, 2002, and February 1, 2002 and December 31,
2002, respectively, to determine the efficacy of competitive bidding for
certain durable medical equipment (DME), under which Medicare reimbursements
for certain items are reduced between 19% to 34% from the current fee schedules
(the Company participated to some extent in both pilot projects). At
expiration, the DME items reverted to normal Medicare fees and procedures,
although the Bush administration has announced that it intends to expand
competitive bidding on a national basis, building on these two pilot projects
that yielded savings to Medicare. The United States House of Representatives
recently passed a bill that includes provisions for a national competitive
bidding program for durable medical equipment, including home oxygen equipment.
The United States Senate has recently considered three separate bills that
include some provision for national competitive bidding. At the present time,
the Senate has not voted on any of these three bills under consideration. The
Company cannot predict at this time the outcome of proposed legislation related
to a national competitive bidding program or the financial impact of such a
program on the Companys business, if it should become law.

The Company is also subject to state laws governing Medicaid, professional
training, licensure, financial relationships with physicians and the dispensing
and storage of pharmaceuticals. The facilities operated by the Company must
comply with all applicable laws, regulations and licensing standards and many
of the Companys employees must maintain licenses to provide some of the
services offered by the Company. Additionally, certain of the Companys
employees are subject to state laws and regulations governing the professional
practice of respiratory therapy, pharmacy and nursing.

Information about individuals and other health care providers who have been
sanctioned or excluded from participation in government reimbursement programs
is readily available on the Internet, and all health care providers, including
the Company, are held responsible for carefully screening entities and
individuals they employ or do business with, to avoid contracting with an
excluded provider. The entity cannot bill government programs for services or
supplies provided by an excluded provider, and the federal government may also
impose sanctions, including financial penalties, on companies that contract
with excluded providers.

Health care law is an area of extensive and dynamic regulatory oversight.
Changes in laws or regulations or new interpretations of existing laws or
regulations can have a dramatic effect on permissible activities, the relative
costs associated with doing business, and the amount and availability of
reimbursement from government and other third-party payors. There can be no
assurance that federal, state or local governments will not impose additional
standards or change existing standards or interpretations.

Enforcement Activities.In recent years, various state and federal
regulatory agencies have stepped up investigative and enforcement activities
with respect to the health care industry, and many health care providers,
including the Company and other durable medical equipment suppliers, have
received subpoenas and other requests for information in connection with their
business operations and practices. From time to time, the Company also
receives notices and subpoenas from various government agencies concerning
plans to audit the Company, or requesting

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##### Table of Contents



information regarding certain aspects
of the Companys business. The Company cooperates with the various agencies in
responding to such subpoenas and requests. The Company expects to incur
additional legal expenses in the future in connection with existing and future
investigations.

The government has broad authority and discretion in enforcing applicable laws
and regulations; therefore, the scope and outcome of any such investigations,
inquiries, or legal actions cannot be predicted. There can be no assurance
that federal, state or local governments will not impose additional regulations
upon the Companys current activities nor that the Companys past activities
will not be found to have violated some of the governing laws and regulations.
Any such regulatory changes or findings of violations of laws could adversely
affect the Companys business and financial position, and could even result in
the exclusion of the Company from participating in Medicare, Medicaid, and
other government reimbursement programs.

Legal Proceedings.On June 11, 2001, a settlement agreement (the
Settlement) was entered among the Company, the United States of America,
acting through the United States Department of Justice (DOJ) and on behalf of
the Office of Inspector General of the Department of Health and Human Services
(OIG) and the TRICARE Management Activity, and a former Company employee, as
relator. This Settlement was approved by the United States District Court for
the Western District of Kentucky, the court in which the relators false claim
action was filed. The Settlement covers alleged improprieties by the Company
during the period from January 1, 1995 through December 31, 1998, including
allegedly improper billing activities and allegedly improper remuneration to
and contracts with physicians, hospitals and other healthcare providers.
Pursuant to the Settlement, the Company made an initial payment of $3,000,000
in the second quarter of 2001 and agreed to make additional payments in the
principal amount of $4,000,000, together with interest on this amount, in
installments due at various times until March 2006. The Company also agreed to
pay the relators attorneys fees and expenses. The Company has reserved
$4,186,000 for its future obligations pursuant to the Settlement. The
Settlement does not resolve the relators claims that the Company discriminated
against him as a result of his reporting alleged violations of the law to the
government. The Company denies and intends to vigorously defend these claims.

The Company also was named as a defendant in two other False Claims Act cases.
In each of those cases, the DOJ declined to intervene and such cases were
subsequently dismissed in March 2001. The first of these cases, United States
ex rel. Kirk S. Corsello v. Lincare, et al. (N.D. Ga.), was dismissed with
prejudice on the motion of the Company on March 9, 2001. The appeal of that
dismissal was argued in November 2001, however, in December 2001 the Court of
Appeals for the Eleventh Circuit dismissed the appeal on jurisdictional grounds
and returned the case to the trial court. In January 2002, one of the other
defendants filed a Motion for Reconsideration with the Court of Appeals and the
parties are awaiting the courts decision in the case. The Company cannot
predict when the appeals court decision will be handed down, or the outcome of
the appeal. Mr. Corsellos qui tam complaint alleged that the Company and
numerous other unrelated defendants, including other large DME suppliers,
engaged in a kickback scheme to provide free or below market value equipment
and medicine to physicians who would in turn refer patients to the defendants
in violation of the False Claims Act. The other case, United States ex rel.
Alan D. Hutchison v. Respironics, et al. (S.D. NY and N.D. Ga.), was dismissed
without prejudice on Mr. Hutchisons own motion on March 22, 2001. Since that
date, the Company has not been served with any additional papers in this case.
Mr. Hutchisons qui tam complaint alleged that the Company and numerous other
unrelated defendants filed false claims with Medicare for ventilators that the
defendants allegedly knew were not medically necessary.

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The Company was informed in May 2001 that the United States is investigating
its conduct during periods after December 31, 1998, and the Company believes
that this investigation was prompted by another qui tam complaint against the
Company under the False Claims Act. The Company has not seen a complaint in
this action, but believes that it contains allegations similar to the ones
investigated by the government in connection with the False Claims Act case
covered by the Settlement discussed above. The Company believes that this
second case will be limited to allegedly improper activities occurring after
December 31, 1998.

There can be no assurances as to the final outcome of any pending False Claims
Act lawsuits. Possible outcomes include, among other things, the repayment of
reimbursements previously received by the Company related to billed claims that
are found to be improper, the imposition of fines or penalties, and the
suspension or exclusion of the Company from participation in the Medicare,
Medicaid and other government reimbursement programs. Other than the
$4,186,000 reserve discussed above which relates to the Settlement, the Company
has not recorded any reserves related to the unsettled government
investigations. The outcome of any pending lawsuits or future settlements
could have a material adverse effect on the Company.

Medicare Reimbursement for Oxygen Therapy Services

The Medicare reimbursement rate for oxygen related services was reduced by 25%
beginning January 1, 1998 as a result of the Balanced Budget Act of 1997 with
an additional reduction of 5% beginning January 1, 1999. The reimbursement
rate for certain drugs and biologicals covered under Medicare was also reduced
by 5% beginning January 1, 1998. The Company is one of the nations largest
providers of home oxygen services to patients, many of whom are Medicare
recipients, and is therefore significantly affected by this legislation.
Medicare oxygen reimbursements account for a significant portion of the
Companys on-going revenues. In January 2001, federal legislation was signed
into law that provided for a one-time increase, beginning July 1, 2001, in
Medicare reimbursement rates for home medical equipment, excluding oxygen
related services, based on the consumer price index (CPI). Medicare also has
the option of developing fee schedules for PEN and home dialysis supplies and
equipment, although currently there is no timetable for the development or
implementation of such fee schedules. Following promulgation of a final rule,
CMS will also have inherent reasonableness authority to modify payment rates
for all Medicare Part B items and services by as much as 15% without industry
consultation, publication or public comment, if the rates are grossly
excessive or grossly deficient. Therefore, the Company cannot be certain
that additional reimbursement reductions for oxygen therapy services or other
services and products provided by the Company will not occur. See Managements
Discussion and Analysis of Financial Condition and Results of Operations 
Significant Accounting Policies and Managements Discussion and Analysis of
Financial Condition and Results of Operations  Government Regulation.

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Critical Accounting Policies

Managements Discussion and Analysis of Financial Condition and Results of
Operations are based upon the Companys consolidated financial statements. The
preparation of these consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the dates of the financial statements, and the reported amounts
of revenues and expenses during the reporting periods. On an on-going basis,
management evaluates its critical accounting policies and estimates.

A critical accounting policy is one which is both important to the
understanding of the financial condition and results of operations of the
Company and requires managements most difficult, subjective or complex
judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain. Management believes the following
accounting policies fit this definition:

Revenue Recognition and Allowance for Doubtful Accounts.The Company
provides credit for a substantial part of its non third-party reimbursed
revenues and continually monitors the credit-worthiness and collectibility of
amounts due from its patients. Approximately 61% of the Companys year to date
2002 revenues are derived from participation in Medicare and state Medicaid
programs. Amounts paid under these programs are generally based upon a fixed
rate. Revenues are recorded at the expected reimbursement rates when the
services are provided, merchandise delivered or equipment rented to patients.
Although amounts earned under the Medicare and Medicaid programs are subject to
review by such third-party payors, subsequent adjustments to reimbursements as
a result of such reviews are historically insignificant as these reimbursements
are based on fixed fee schedules. In the opinion of management, adequate
provision has been made for any adjustment that may result from such reviews.
Any differences between estimated settlements and final determinations are
reflected in operations in the year finalized.

Sales and related services revenues include all product sales to patients and
are derived from the provision of infusion therapies, the sale of home health
care equipment and supplies, the sale of aerosol medications and respiratory
therapy equipment and supplies, and services related to the delivery of these
products. Sales revenues are recognized at the time of delivery and are billed
using fixed fee schedules based upon the type of product and the payor.
Rentals and other patient revenues are derived from the rental of home health
care equipment, enteral pumps and equipment related to the provision of
respiratory therapy. All rentals of equipment are provided by the Company on a
month-to-month basis and are billed using fixed monthly fee schedules based
upon the type of rental and the payor. The fixed monthly fee encompasses the
rental of the product as well as the delivery and the set-up and instruction by
the product technician.

The Company recognizes revenues at the time services are performed. As such, a
portion of patient receivables consists of unbilled receivables for which the
Company has not obtained all of the necessary medical documentation, but has
provided the service or equipment. The Company calculates its allowance for
doubtful accounts based upon the type of receivable (billed

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or unbilled) as
well as the age of the receivable. As a receivable balance ages, an
increasingly larger allowance is recorded for the receivable. All billed
receivables over one year old and all unbilled receivables over 180 days old
are fully reserved. Management believes that the recorded allowance for
doubtful accounts is adequate and that historical collections substantiate the
percentages at which amounts are reserved. However, the Company is subject to
loss to the extent uncollectible receivables exceed its allowance for doubtful
accounts. If the Company were to experience a deterioration in the aging of
its accounts receivable due to disruptions or a slow down in cash collections,
the Companys allowance for doubtful accounts and bad debt expense would likely
increase from current levels. Conversely, an improvement in the Companys cash
collection trends and in its receivable aging would likely result in a decrease
in both the allowance for doubtful accounts and bad debt expense.

Inventory Valuation Reserves and Cost of Sales Recognition. Inventories
represent goods and supplies and are priced at the lower of cost (on a
first-in, first-out basis) or market value. The Company recognizes cost of
sales and relieves inventory at estimated amounts on an interim basis based
upon the type of product sold and payor mix, and performs physical counts of
inventory at each center on an annual basis. Any resulting adjustment from
these physical counts is charged to cost of sales. A reserve is established by
management for the valuation of inventory consisting of reserves for incorrect
cost of sales percentage estimates, inaccurate counts, obsolete and slow moving
items and reserves for specific inventory. The reserves are based on a
percentage of gross sales, a percentage of inventory or an amount for
specifically identified inventory items. Management believes the current
reserve is adequate to absorb estimated reductions in the account balance. The
Company is subject to loss for unrecorded inventory adjustments in excess of
its recorded inventory reserves.

Rental Equipment Reserves. Rental equipment is rented to patients for
use in their homes and is depreciated over the equipments estimated useful
life. On an annual basis, the Company performs physical counts of rental
equipment at each center and reconciles all recorded rental assets to internal
billing reports. Any resulting adjustment for unlocated or obsolete equipment
is charged to rental equipment depreciation expense. Since rental equipment is
maintained in the patients home, the Company is subject to loss resulting from
lost equipment as well as losses for outdated or obsolete equipment.
Management records a reserve for potentially lost, broken, or obsolete rental
equipment based upon historical adjustment amounts and believes the recorded
rental reserve is adequate. The Company is subject to loss for unrecorded
adjustments in excess of its recorded rental equipment reserves.

Valuation of Long-lived Assets. In accordance with Statement of Financial
Accounting Standards No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets (SFAS No. 144), management evaluates long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. Management utilizes
estimated undiscounted future cash flows to determine if an impairment exists.
When this analysis indicates an impairment exists, the amount of loss is
determined based upon a comparison of estimated fair value with the carrying
value of the asset. While management believes that the estimates of future
cash flows are reasonable, different assumptions regarding such cash flows
could materially affect the evaluations.

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Valuation of Goodwill and Other Intangible Assets.Goodwill represents
the excess of cost over the fair value of net assets acquired. In June 2001,
the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS No.
142). The Company was required to adopt the provisions of this Statement
effective January 1, 2002. SFAS No. 142 requires that intangible assets with
finite useful lives be amortized and that goodwill and intangible assets with
indefinite lives no longer be amortized. Instead, goodwill and intangible
assets with indefinite lives are required to be tested for impairment on an
annual basis and when an event occurs or circumstances change such that it is
reasonably possible that an impairment may exist. As of May 9, 2002, the
Company has not selected the annual testing date. The Company recorded
goodwill amortization expense of $1.4 million in the three months ended March
31, 2001, and ceased amortizing goodwill effective January 1, 2002.

Upon adoption of SFAS No. 142, goodwill was tested for impairment by comparing
the fair value of goodwill to the carrying value of goodwill. The fair value
was determined using a combination of analyses which included discounted cash
flow calculations, market multiples and other market information. Key
assumptions used in these estimates include projected operating results,
discount rates and peer market multiples. The implied fair value of goodwill
did not support the carrying value of goodwill primarily due to the Companys
highly leveraged capital structure, which resulted in impairment of $68.5
million. This impairment charge was recorded as a cumulative effect of change
in accounting principle in the first quarter of 2002. There was no tax effect
on the impairment loss due to the fact that the majority of the related
goodwill was non-tax deductible and because of the Companys federal net
operating loss position.

Self Insurance.Self-insurance reserves primarily represent the accrual
for self-insurance or large deductible risks associated with workers
compensation insurance and employee health insurance. The Company is insured
for workers compensation but retains the first $250,000 of each claim. The
Company is not maintaining annual aggregate stop loss coverage for 2002 and did
not maintain annual aggregate stop loss coverage for 2001, as such coverage was
not available. Judgments used in determining the self-insurance reserves
related to workers compensation include loss development factors, frequency of
claims and severity of claims. The estimated liability for workers
compensation claims totaled approximately $3.4 million and $3.2 million as of
March 31, 2002 and December 31, 2001, respectively. The Company utilizes
analyses prepared by its third-party administrator based on historical claims
information to support the required reserve and related expense associated with
workers compensation. The Company records claims expense by plan year based
on the lesser of the aggregate stop loss (if applicable) or the developed
losses as calculated by its third-party administrator.

The Company is also self-insured for health insurance for substantially all
employees for the first $150,000 on a per person, per year basis and maintains
annual aggregate stop loss coverage of $14.5 million and $8.9 million for 2002
and 2001, respectively. The health insurance policies are limited to maximum
lifetime reimbursements of $2.0 million per person for 2002 and had unlimited
lifetime reimbursements for 2001. The estimated liability for health insurance
claims totaled approximately $2.1 million and $1.9 million as of March 31, 2002
and December 31, 2001, respectively. The Company reviews health insurance
trends and payment history and maintains a reserve for incurred but not
reported claims based upon its assessment of lag time in reporting and paying
claims. Judgments include assessing historical paid claims, average lags
between the claims incurred dates, reported dates and paid dates, the
frequency of claims and the severity of claims.

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Management continually analyzes its reserves for incurred but not reported
claims related to its self-insurance programs and believes these reserves to be
adequate. However, significant judgment is involved in assessing these
reserves, and the Company is at risk for differences between actual settlement
amounts and recorded reserves, and any resulting adjustments are included in
expense once a probable amount is known.

Results of Operations

The Company reports its revenues as follows: (i) sales and related services
and (ii) rentals and other revenues. Sales and related services revenues are
derived from the provision of infusion therapies, the sale of home health care
equipment and supplies, the sale of aerosol and respiratory therapy equipment
and supplies and services related to the delivery of these products. Rentals
and other revenues are derived from the rental of home health care equipment,
enteral pumps and equipment related to the provision of respiratory therapies.
Cost of sales and related services includes the cost of equipment, drugs and
related supplies sold to patients. Cost of rentals and other revenues includes
the costs of oxygen and rental supplies, demurrage for leased oxygen tanks,
rent expense for leased equipment, and rental equipment depreciation expense,
and excludes delivery expenses and salaries associated with the rental set-up.
Operating expenses include operating center labor costs, delivery expenses,
division and area management expenses, selling costs, occupancy costs, billing
center costs, provision for doubtful accounts, and other operating costs.
General and administrative expenses include corporate and senior management
expenses.

The majority of the Companys hospital joint ventures are not consolidated for
financial statement reporting purposes. Earnings from hospital joint ventures
represent the Companys equity in earnings as well as management and
administrative fees from unconsolidated hospital joint ventures.

Sale of Assets of Center.In the quarter ended March 31, 2002, the
Company recorded a pre-tax gain of $0.7 million related to the sale of the
assets of an infusion business and nursing agency (collectively, the Center).
Effective March 19, 2002, substantially all of the assets of the Center were
sold for approximately $1.3 million in cash. Funds representing the value of
the remaining assets of the Center have been escrowed pending regulatory
approvals and will be released once these are obtained. During the three months
ended March 31, 2002 and 2001, the Center generated approximately $1.9 million
and $2.5 million, respectively, in total revenues. The proceeds of the sale
were used to pay down debt under the Companys Bank Credit Facility.

Cumulative Effect of Change in Accounting Principle.The Company adopted
the provisions of SFAS No. 142 effective January 1, 2002. As of the adoption
date, the Company had unamortized goodwill in the amount of $189.7 million. In
accordance with SFAS No. 142, effective January 1, 2002 the Company
discontinued amortization of goodwill. Goodwill was tested for impairment by
comparing the fair value of goodwill to the carrying value of goodwill. Fair
value was determined using a combination of analyses which included discounted
cash flow calculations, market multiples and other market information. The
implied fair value of goodwill did not support the carrying value of goodwill.

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Based upon the results of the Companys initial impairment tests, the Company
has recorded an impairment loss of $68.5 million with no related tax effect in
the quarter ended March 31, 2002, recognized as a cumulative effect of change
in accounting principle. There was no tax effect on the impairment loss due to
the fact that the majority of the related goodwill was non-tax deductible and
because of the Companys federal net operating loss position. The Company will
conduct annual impairment tests hereafter, unless specific events arise which
warrant more immediate testing. Any subsequent impairment losses will be
recognized as an operating expense in the Companys consolidated statements of
operations. The Company recorded goodwill amortization expense of $1.4 million
in the quarter ended March 31, 2001.

The following table and discussion sets forth items from the Companys
consolidated statements of operations as a percentage of revenues, for the
periods indicated:

Percentage of Revenues

Three Months Ended March 31,2002
        
        2001Revenues
        
        
        100.0
        %
        
        
        100.0
        %Cost of sales and related services
        
        
        20.6
        
        
        
        24.4Cost of rentals and other revenues, including rental
equipment depreciation expense
        
        
        10.2
        
        
        
        9.4Operating expenses, including bad debt expense
        
        
        57.9
        
        
        

        54.9General and administrative
        
        
        5.4
        
        
        
        4.6Earnings from joint ventures
        
        
        (1.6
        )
        
        
        (1.2
        )Depreciation, excluding rental equipment, and
amortization expense
        
        
        1.3
        
        
        
        3.1Amortization of deferred financing costs
        
        
        1.0
        
        
        
        0.4Interest expense
        
        
        6.5
        
        
        
        11.3Gain on sale of assets of center
        
        
        (0.8
        )
        
        
        Total expenses
        
        
        100.5
        
        
        
        106.9Loss from operations before income taxes and
cumulative effect of change in accounting principle
        
        
        (0.5
        )
        
        
        (6.9
        )(Benefit from) provision for income taxes
        
        
        (2.5
        )
        
        
        0.2Cumulative effect of change in accounting principle
        
        
        (85.6
        )
        
        
        Net loss
        
        
        (83.6
        )%
        
        
        (7.1
        )%


Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001

The results of operations between 2002 and 2001 are impacted by the asset sales
of several centers in 2002 and 2001.

Revenues. Revenues decreased from $90.3 million for the quarter ended March
31, 2001 to $80.0 million for the same period in 2002, a decrease of $10.3
million, or 11%. During 2001, the Company sold the assets of three infusion
centers, two respiratory and home medical equipment

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centers, and all of its
rehab centers, in addition to the sale of substantially all of the assets of
one infusion center during the first quarter of 2002. As a result of these
asset sales, revenues were negatively impacted by $9.9 million in the current
quarter. Without these occurrences, revenue for the quarter would have
decreased by $0.4 million compared to last year. Following is a discussion of
the components of revenues:

Sales and Related Services Revenues. Sales and related services revenues
decreased from $43.9 million for the quarter ended March 31, 2001 to
$34.8 million for the same period in 2002, a decrease of $9.1 million, or
21%. The 2001 sales of assets of three infusion centers, two respiratory
and home medical equipment centers, and all of the rehab centers, as well
as the sale of the assets of an infusion center during the first quarter
of 2002, have negatively impacted sales in the current quarter by
approximately $9.0 million.

Rentals and Other Revenues. Rentals and other revenues decreased from
$46.4 million for the quarter ended March 31, 2001 to $45.2 million for
the same period in 2002, a decrease of $1.2 million, or 3%. Rentals and
other revenues were significantly impacted by the 2001 sales of two
respiratory and home medical equipment centers which have reduced rental
revenue in the current quarter by approximately $0.9 million.

Cost of Sales and Related Services. Cost of sales and related services
decreased from $22.1 million for the quarter ended March 31, 2001 to $16.5
million for the same period in 2002, a decrease of $5.6 million, or 25%. As a
percentage of sales and related services revenues, cost of sales and related
services decreased from 50% for the quarter ended March 31, 2001 to 47% for the
same period in 2002. This decrease is primarily attributable to the sale of
the infusion centers and the rehab centers which contributed lower margins.

Cost of Rentals and Other Revenues.Cost of rentals and other revenues
decreased from $8.5 million for the quarter ended March 31, 2001 to $8.2
million for the same period in 2002, a decrease of $0.3 million, or 4%. As a
percentage of rentals and other revenue, cost of rentals and other revenues
were 18.4 % and 18.1% for the three months ended March 31, 2001 and 2002,
respectively.

Operating Expenses. Operating expenses decreased from $49.5 million for the
quarter ended March 31, 2001 to $46.3 million for the same period in 2002, a
decrease of $3.2 million, or 6%. This decrease is attributable to reduced
operating expense as a result of the sales of certain centers during 2001 and
the first quarter of 2002, offset by higher overall bad debt expense. Bad debt
expense was 4.4% of revenues for the quarter ended March 31, 2001 compared to
5.2% of revenues for the same period in 2002. The increase in bad debt expense
in the current quarter is attributable to a temporary slowdown in cash
collections during January and February of 2002.

General and Administrative Expenses. General and administrative expenses
increased from $4.1 million for the quarter ended March 31, 2001 to $4.3
million for the same period in 2002, an increase of $0.2 million, or 5%. As a
percentage of revenues, general and administrative expenses were 4.6% and 5.3%
for the three months ended March 31, 2001 and 2002, respectively. This
increase is attributable to higher personnel expenses in the quarter ended
March 31, 2002 as a result of the continued billing and collection initiatives,
corporate compliance activities and increased sales and marketing efforts as
well as higher consulting fees and higher rent expense.

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Earnings from Hospital Joint Ventures.Earnings from hospital joint ventures
increased from $1.1 million for the quarter ended March 31, 2001 to $1.3
million for the same period in 2002, an increase of $0.2 million, or 18%. This
increase is primarily attributable to continued improvements in performance of
certain joint ventures.

Depreciation and Amortization. Depreciation (excluding rental equipment) and
amortization expenses decreased from $2.8 million for the quarter ended March
31, 2001 to $1.0 million for the same period in 2002, a decrease of $1.8
million, or 64%. Effective January 1, 2002 the Company adopted the provisions
of SFAS No. 142 and accordingly, ceased the amortization of its goodwill.
Amortization expense related to goodwill was $1.4 million in the quarter ended
March 31, 2001. The remaining decrease is primarily attributable to certain
property and equipment becoming fully depreciated.

Amortization of Deferred Financing Costs.Amortization of deferred financing
costs increased from $0.3 million in 2001 to $0.8 million in 2002, an increase
of $0.5 million or 167%. This increase is primarily attributable to additional
deferred financing costs associated with the Amended Credit Agreement.

Interest. Interest expense decreased from $10.2 million for the quarter ended
March 31, 2001, to $5.2 million for the same period in 2002, a decrease of $5.0
million, or 49%. The Company recorded a provision of $1.6 million for default
interest in the quarter ended March 31, 2001, in addition to interest due under
the Bank Credit Facility prior to any events of default. Based upon the
Amended Credit Agreement signed June 8, 2001, all default rate interest was
forgiven and this provision for default rate interest was reversed in the
second quarter of 2001. This decrease is also attributable to reductions in
the prime borrowing rate and reduced principal amounts outstanding.

(Gain) Loss on Sales of Assets of Centers.In the first quarter of 2002, the
Company recorded a gain of $0.7 million on the sale of the assets of an
infusion business and nursing agency.

(Benefit from) Provision for Income Taxes.The (benefit from) provision for
income taxes was $150,000 in 2001 and $(2.0) million in 2002. The benefit
recorded in 2002 was the result of the enactment of the Job Creation and
Workers Assistance Act of 2002.

Liquidity and Capital Resources

At March 31, 2002 the Company had a working capital deficit of $238.3 million
and current ratio of 0.3x as compared to a working capital deficit of $240.4
million and a current ratio of 0.3x at December 31, 2001.

The Company is the borrower under the Bank Credit Facility between the Company
and Deutsche Bank Trust Company, successor to Bankers Trust Company, as agent
for the Lenders. The Companys breach of several of the financial covenants in
the Fourth Amended and Restated Credit Agreement and its failure to make a
scheduled principal payment due March 15, 2001 caused the Company to not be in
compliance with certain covenants of the Fourth Amended and Restated Credit
Agreement. On June 8, 2001, the Company entered into the Amended Credit
Agreement that provided a new loan to the Company from which the proceeds were
used to pay

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off all existing loans under the Credit Agreement. The Amended
Credit Agreement also includes modified financial covenants and a revised
amortization schedule. In addition, the Amended Credit Agreement no longer
contains a revolving loan component; all existing indebtedness is now in the
form of a term loan which matures on December 31, 2002. The Amended Credit
Agreement requires principal payments of $750,000 on September 30, 2001 and
December 31, 2001; a principal payment of $11.6 million on March 31, 2002;
principal payments of $1.0 million on June 30, 2002 and September 30, 2002; and
a Balloon Payment of $281.5 million on December 31, 2002. As of May 9, 2002
the Company has paid the $750,000 principal payment due on September 30, 2001,
the $750,000 principal payment due on December 31, 2001, the $11.6 million
principal payment due on March 31, 2002 as well as the $1.0 million principal
payment due on June 30, 2002, $0.6 million of the $1.0 million principal
payment due on September 30, 2002, and $5.3 million of the Balloon Payment due
on December 31, 2002. These early payments of 2002 principal were generated
from operational cash flows, from the sales of assets of centers, from the
sales of the Companys wholly-owned real estate and from the collection of
patient receivables associated with the asset sales. However, there currently
is no commitment as to how the remaining Balloon Payment due on December 31,
2002 will be satisfied. Anticipated future cash flow from operations will not
be sufficient to pay the debt upon its current maturity on December 31, 2002.
There can be no assurance that the Bank Credit Facility will be renewed, and if
there is no renewal, then the Companys ability to make the Balloon Payment is
contingent upon obtaining replacement financing. There can be no assurance
that the Company can obtain such financing on terms acceptable to the Company
or at all. Additional sources of funds may be required and there can be no
assurance that the Company will be able to obtain additional funds on terms
acceptable to the Company or at all. The Amended Credit Agreement further
provides for mandatory prepayments of principal from the Companys excess cash
flow and from the proceeds of the Companys sales of securities, sales of
assets, tax refunds or excess casualty loss payments. Substantially all of the
Companys assets have been pledged as security for borrowings under the Bank
Credit Facility. Indebtedness under the Bank Credit Facility, as of May 9,
2002, totals $276.6 million (which excludes letters of credit totaling $3.4
million).

The Amended Credit Agreement further provides for the payment to the Lenders of
certain fees. These fees include a restructuring fee of $1.2 million (paid on
the effective date of the Amended Credit Agreement), $200,000 payable on each
of December 31, 2001, March 31, 2002 and June 30, 2002, as well as $459,000
payable on September 30, 2002. In addition, the Company has an obligation to
pay the agent an annual administrative fee of $75,000 and an annual fee of .50%
of the average monthly outstanding indebtedness on each anniversary of the
Amended Credit Agreement.

The Amended Credit Agreement contains various financial covenants, the most
restrictive of which relate to measurements of EBITDA (as defined in the
Amended Credit Agreement), leverage, interest coverage ratios, and collections
of accounts receivable. The Amended Credit Agreement also contains provisions
for periodic reporting.

The Amended Credit Agreement also contains restrictions which, among other
things, impose certain limitations or prohibitions on the Company with respect
to the incurrence of indebtedness, the creation of liens, the payment of
dividends, the redemption or repurchase of securities, investments,
acquisitions, capital expenditures, sales of assets and transactions with
affiliates. The Company is not permitted to make acquisitions or investments
in joint ventures without the consent

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of Lenders holding a majority of the
lending commitments under the Bank Credit Facility. In addition, proceeds of
all of the Companys accounts receivable are transferred daily into a bank
account at PNC Bank, N.A. which, under the terms of a Concentration Bank
Agreement, requires that all amounts in excess of $3.0 million be transferred
to an account at Deutsche Bank Trust Company in the Companys name. Upon
occurrence of an event of default under the Amended Credit Agreement, the
Lenders have the right to instruct PNC Bank, N.A. and Deutsche Bank Trust
Company to cease honoring any drafts under the accounts and apply all amounts
in the bank accounts against the indebtedness owed to the Lenders.

Interest is payable on the unpaid principal amount under the Amended Credit
Agreement, at the election of the Company, at either a Base Lending Rate or an
Adjusted Eurodollar Rate (each as defined in the Amended Credit Agreement),
plus an applicable margin of 2.75% and 3.50%, respectively. The Company is
also required to pay additional interest in the amount of 4.50% per annum on
that principal portion outstanding of the Amended Credit Agreement that is in
excess of four times adjusted EBITDA, as defined by the Amended Credit
Agreement. As of March 31, 2002 the weighted average borrowing rate was 7.3%.
Upon the occurrence and continuation of an event of default under the Amended
Credit Agreement, interest would be payable upon demand at a rate that is 2.00%
per annum in excess of the interest rate otherwise payable under the Amended
Credit Agreement and the Company no longer would have the right to designate
the Adjusted Eurodollar Rate plus the applicable margin as the applicable
interest rate.

The Company was required to issue effective March 31, 2001, warrants to the
Lenders representing 19.999% of the Common Stock of the Company issued and
outstanding as of March 31, 2001, pursuant to the terms of the Second Amendment
to the Fourth Amended and Restated Credit Agreement (which amendment was
entered into on April 14, 1999). To fulfill these obligations, warrants to
purchase 3,265,315 shares of Common Stock were issued to the Lenders on June 8,
2001. Fifty percent of these warrants are exercisable during the period
commencing June 1, 2001 and ending May 31, 2011, and the remaining fifty
percent are exercisable during the period commencing September 30, 2001 and
ending September 29, 2011. The exercise price of the warrants is $0.01 per
share. As of May 9, 2002 these warrants have not been exercised.

In addition to the Balloon Payment, the Companys principal capital
requirements are for working capital, capital expenditures and debt service.
The Company has financed and intends to continue to finance these requirements
with existing cash balances, net cash provided by operations and other
available capital expenditure financing vehicles. Until maturity of the Bank
Credit Facility on December 31, 2002, management believes that these sources
will support the Companys current level of operations as long as the Company
maintains compliance with its debt covenants and the due dates of amounts
outstanding under the Bank Credit Facility are not accelerated. Management
also believes these sources are adequate to fund the Settlement based upon the
payment terms, as more fully described in Managements Discussion and Analysis
of Financial Condition and Results of Operations  Government Regulation.
However, as referenced above, anticipated future cash flow from operations will
not be sufficient to pay the Balloon Payment at December 31, 2002.

Management intends to improve financial performance through stabilizing and
increasing profitable revenues, decreasing and controlling operating expenses
and improving accounts receivable performance. Managements cash flow
projections and related operating plans

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indicate the Company can remain in
compliance with the new financial covenants under the Amended Credit Agreement
and meet its expected obligations until December 31, 2002, when the Balloon
Payment is due. However, as with all projections, there is uncertainty as to
whether managements projections can be achieved. Management currently
believes that the Company also can remain in compliance with all other
covenants in the Amended Credit Agreement until the Balloon Payment is due. In
any event of noncompliance or default under the Amended Credit Agreement, the
Lenders have the ability to demand payment of all outstanding amounts and there
is currently no commitment as to how any such demand would be satisfied by the
Company. Any demands for repayment by Lenders, or the inability to obtain
waivers in the event of noncompliance with covenants, or the inability to
refinance the related debt upon maturity at December 31, 2002 would have a
material adverse impact on the financial position, results of operations and
cash flows of the Company. The consolidated financial statements do not
include any adjustments related to the recoverability of asset carrying amounts
or the amounts of liabilities that might result should the Company be unable to
continue as a going concern. The uncertainty regarding the Companys ability
to make the Balloon Payment or obtain replacement financing may impair the
Companys ability to receive trade credit from its vendors and could have a
material adverse effect on the Companys business, financial condition, results
of operations and cash flows.

The Companys future liquidity will continue to be dependent upon the relative
amounts of current assets (principally cash, accounts receivable and
inventories) and current liabilities (principally accounts payable and accrued
expenses). In that regard, accounts receivable can have a significant impact
on the Companys liquidity. The Company has various types of accounts
receivable, such as receivables from patients, contracts, and former owners of
acquisitions. The majority of the Companys accounts receivable are patient
receivables. Accounts receivable are generally outstanding for longer periods
of time in the health care industry than many other industries because of
requirements to provide third-party payors with additional information
subsequent to billing and the time required by such payors to process claims.
Certain accounts receivable frequently are outstanding for more than 90 days,
particularly where the account receivable relates to services for a patient
receiving a new medical therapy or covered by private insurance or Medicaid.
Net patient accounts receivable were $59.4 million and $60.1 million at March
31, 2002 and December 31, 2001, respectively. Average days sales in accounts
receivable (DSO) was approximately 70 and 68 days at March 31, 2002 and
December 31, 2001, respectively. The Company calculates DSO by dividing the
previous 90 days of revenue (excluding dispositions and acquisitions), net of
bad debt expense into net patient accounts receivable and multiplying the ratio
by 90 days. The Companys level of DSO and net patient receivables reflect the
extended time required to obtain necessary billing documentation, the ongoing
efforts to implement a standardized model for reimbursement and the
consolidation of billing activities.

The accompanying condensed financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has
incurred net losses of $66,877,000 and $12,892,000 for the three months ended
March 31, 2002, and the year ended December 31, 2001, respectively, and has a
shareholders deficit of $53,317,000 at March 31, 2002. As discussed above,
the Company has substantial debt balances, which, pursuant to the Amended
Credit Agreement becomes due on December 31, 2002. These factors among others
raise substantial doubt about the Companys ability to continue as a going
concern. The accompanying financial statements do not include any adjustments
related to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.

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Net cash provided by operating activities was $4.1 million and $8.0 million for
the three months ended March 31, 2002 and 2001, respectively. This decrease of
$3.9 million is primarily due to the current year change in accounts payable,
other payables and accrued expenses. These items used cash of $2.0 million for
the three months ended March 31, 2002, while these same items provided cash of
$2.6 million for the same period in 2001. In addition, the Companys
recognition of a federal income tax receivable related to a carryback of
additional operating losses in the quarter ended March 31, 2002 resulted in a
decrease of cash provided by operating activities of $2.1 million. Net cash
used in investing activities was $2.8 million and $4.9 million for the three
months ended March 31, 2002 and 2001, respectively. Capital expenditures were
$5.8 million for the three months ended March 31, 2002 compared to $4.7 million
for the same period in 2001, and the sales of assets of centers contributed
$1.8 million for the same period in 2002. Net cash used in financing
activities was $4.1 million and nil for the three months ended March 31, 2002
and 2001, respectively. The cash used in financing activities for the three
months ended March 31, 2002 and 2001 primarily relates to principal payments on
long-term debt and capital leases.

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Risk Factors

This section summarizes certain risks, among others, that should be considered
by stockholders and prospective investors in the Company.

Business Risks

Substantial Leverage.The Company maintains a significant amount of debt.
Indebtedness under the Bank Credit Facility totaled approximately $276.6
million (which excludes letters of credit totaling $3.4 million) as of May 9,
2002. If the Company is not able to obtain replacement financing, other
outcomes likely would have a material adverse effect on the current
shareholders of the Company and also could have a material adverse effect on
the Company or its business prospects. If the Company is unable to generate
sufficient cash flow to meet its obligations, it likely would have a material
adverse effect on the Company. The substantial leverage could adversely affect
the Companys ability to grow its business or to withstand adverse economic
conditions or competitive pressures. See Note 11 Subsequent Event 
Bankruptcy Filing.

Medicare Reimbursement for Oxygen Therapy and Other Services.The Company
has been affected by previous cuts in Medicare reimbursement rates for oxygen
therapy and other services. Additional reimbursement reductions for oxygen
therapy services or other services and products provided by the Company could
occur. Reimbursement reductions already implemented have materially adversely
affected the Companys revenues and net income, and any such future reductions
could have a similar material adverse effect. See Managements Discussion and
Analysis of Financial Condition and Results of Operations  Medicare
Reimbursement for Oxygen Therapy Services.

Dependence on Reimbursement by Third-Party Payors.For the three months
ended March 31, 2002, the percentage of the Companys revenues derived from
Medicare, Medicaid and private pay was 51%, 10% and 39%, respectively. The
revenues and profitability of the Company may be impacted by the efforts of
payors to contain or reduce the costs of health care by lowering reimbursement
rates, narrowing the scope of covered services, increasing case management
review of services and negotiating reduced contract pricing. Reductions in
reimbursement levels under Medicare, Medicaid or private pay programs and any
changes in applicable government regulations could have a material adverse
effect on the Companys revenues and net income. Changes in the mix of the
Companys patients among Medicare, Medicaid and private pay categories and
among different types of private pay sources may also affect the Companys
revenues and profitability. There can be no assurance that the Company will
continue to maintain its current payor or revenue mix. See Managements
Discussion and Analysis of Financial Condition and Results of Operations 
Significant Accounting Policies  Revenue Recognition and Allowance for
Doubtful Accounts.

Collectibility of Accounts Receivable.The Company has substantial
accounts receivable, as well as DSO of 70 days as of March 31, 2002. No
assurances can be given that future bad debt expense will not increase above
current operating levels as a result of difficulties associated with the
Companys billing activities and meeting payor documentation requirements and
claim

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submission deadlines. Increased bad debt expense or delays in collecting
accounts receivable could have a material adverse effect on cash flows and
results of operations. See Managements Discussion and Analysis of Financial
Condition and Results of Operations  Significant Accounting Policies  Revenue
Recognition and Allowance for Doubtful Accounts.

Government Regulation.The Company is subject to extensive and frequently
changing federal, state and local regulation. In addition, new laws and
regulations are adopted periodically to regulate products and services in the
health care industry. Changes in laws or regulations or new interpretations of
existing laws or regulations can have a dramatic effect on operating methods,
costs and reimbursement amounts provided by government and other third-party
payors. There can be no assurance that the Company is in compliance with all
applicable existing laws and regulations or that the Company will be able to
comply with any new laws or regulations that may be enacted in the future.
Changes in applicable laws, any failure by the Company to comply with existing
or future laws, regulations or standards, or discovery of past regulatory
noncompliance by the Company could have a material adverse effect on the
Companys results of operations, financial condition, business or prospects.
See Managements Discussion and Analysis of Financial Condition and Results of
Operations  Government Regulation.

Government Investigations and Federal False Claims Act Cases.In addition
to the regulatory initiatives mentioned above, the OIG has received funding to
expand and intensify its auditing of the health care industry in an effort to
better detect and remedy errors in Medicare and Medicaid billing. The Company
has reason to believe a qui tam complaint has been filed against the Company
under the False Claims Act alleging violations of law occurring after December
31, 1998. The Company has not seen a complaint in this action, but believes
that it contains allegations similar to the ones alleged in the 2001 settlement
of another False Claims Act case. The Company believes that this second case
will be limited to allegedly improper activities occurring after December 31,
1998. There can be no assurances as to the final outcome of the pending False
Claims Act lawsuits or any lawsuits that may be filed in the future. Possible
outcomes include, among other things, the repayment of reimbursements
previously received by the Company related to improperly billed claims, the
imposition of fines or penalties, and the suspension or exclusion of the
Company from participation in the Medicare, Medicaid and other government
reimbursement programs. The outcome of any of the pending lawsuits could have a
material adverse effect on the Company. See Managements Discussion and
Analysis of Financial Condition and Results of Operations  Government
Regulation.

Liquidity.Effective at the close of business on September 1, 1999,
Nasdaq de-listed the Companys common stock and it is no longer listed for
trading on the Nasdaq National Market. As a result, between September 1, 1999
and May 9, 2002, trading of the Companys common stock was conducted on the
over-the-counter market (OTC) or, on application by broker-dealers, in the
NASDs Electronic Bulletin Board using the Companys current trading symbol,
AHOM.

Role of Managed Care.As managed care assumes an increasingly significant
role in markets in which the Company operates, the Companys success will, in
part, depend on retaining and obtaining profitable managed care contracts.
There can be no assurance that the Company will retain or obtain such managed
care contracts. In addition, reimbursement rates

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under managed care contracts
are likely to continue to experience downward pressure as a result of payors
efforts to contain or reduce the costs of health care by increasing case
management review of services and negotiating reduced contract pricing.
Therefore, even if the Company is successful in retaining and obtaining managed
care contracts, it will experience declining profitability unless the Company
also decreases its cost for providing services and increases higher margin
services.

Health Care Initiatives.The health care industry continues to undergo
dramatic changes influenced in larger part by federal legislative initiatives.
Under the Bush administration, new federal health care initiatives may be
launched. For example, adding a prescription drug benefit to Medicare, a
patients bill of rights, providing an array of protections for managed care
patients, and changes to Medicare funding are a few of the initiatives
currently under discussion. There can be no assurance that these or other
federal legislative and regulatory initiatives will not be adopted in the
future. It is also possible that proposed federal legislation will include
language that provides incentives to further encourage Medicare recipients to
shift to Medicare at-risk managed care programs, potentially limiting patient
access to, and reimbursement for, products and services provided by the
Company. Some states are adopting health care programs and initiatives as a
replacement for Medicaid. There can be no assurance that the adoption of such
legislation or other changes in the administration or interpretation of
government health care programs or initiatives will not have a material adverse
effect on the Company.

HIPAA Compliance.HIPAA has mandated an extensive set of regulations to
protect the privacy of individually identifiable health information. The
regulations consist of three sets of standards, each with a different date for
required compliance: (1) Privacy Standards have a compliance date of April 14,
2003; (2) Transactions and Code Sets Standards required compliance by October
16, 2002 except as extended by one year to October 16, 2003 for providers that
filed a compliance extension form by October 15, 2002; and (3) Security
Standards which are yet to be published in final form and therefore have no
compliance date. The Company has filed its compliance extension form and is
actively pursuing its strategies toward compliance with the final Privacy
Standards and Transaction and Code Sets Standards. The Companys HIPAA
compliance plan will require modifications to existing information management
systems and physical security mechanisms, and may require additional personnel
as well as extensive training of existing personnel, the full cost of which has
not yet been determined. The Company cannot predict the impact that final
regulations, when fully implemented, will have on its operations.

Ability to Attract and Retain Management.The Company is highly dependent
upon its senior management, and competition for qualified management personnel
is intense. Although there has been no material adverse impact to date from
the Bankruptcy Filing, the Companys Bankruptcy Filing and current financial
results, among other factors, may limit the Companys ability to attract and
retain qualified personnel, which in turn could adversely affect profitability.

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Competition.The home health care market is highly fragmented and
competition varies significantly from market to market. In the small and
mid-size markets in which the Company primarily operates, the majority of its
competition comes from local independent operators or hospital-based
facilities, whose primary competitive advantage is market familiarity. In the
larger markets, regional and national providers account for a significant
portion of competition. Some of the Companys present and potential competitors
are significantly larger than the Company and have, or may obtain, greater
financial and marketing resources than the Company. In addition, there are
relatively few barriers to entry in the local markets served by the Company,
and it encounters substantial competition from new market entrants. The
Companys competitors may attempt to use the Bankruptcy Filing to convince
referral sources and patients to use the Company less frequently or not at all.

Liability and Adequacy of Insurance.The provision of health care
services entails an inherent risk of liability. Certain participants in the
home health care industry may be subject to lawsuits that may involve large
claims and significant defense costs. It is expected that the Company
periodically will be subject to such suits as a result of the nature of its
business. The Company currently maintains product and professional liability
insurance intended to cover such claims in amounts which management believes
are in keeping with industry standards. There can be no assurance that the
Company will be able to obtain liability insurance coverage in the future on
acceptable terms, if at all. There can be no assurance that claims in excess
of the Companys insurance coverage will not arise. A successful claim against
the Company in excess of the Companys insurance coverage could have a material
adverse effect upon the results of operations, financial condition or prospects
of the Company. Claims against the Company, regardless of their merit or
eventual outcome, may also have a material adverse effect upon the Companys
ability to attract patients or to expand its business. In addition, the
Company is self-insured for its workers compensation insurance and employee
health insurance and is at risk for claims up to individual stop loss and
aggregate stop loss amounts.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 141, Business Combinations
(SFAS No. 141) and SFAS No. 142. SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. SFAS No. 141 also specifies criteria which intangible assets
acquired in a purchase method business combination must meet to be recognized
and reported apart from goodwill. The Company adopted SFAS No. 141 effective
July 1, 2001. See Footnote 9  Adoption of SFAS No. 142 for disclosure of
the impact of SFAS No. 142. The Company adopted SFAS No. 142 on January 1,
2002.

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
143, Accounting for Asset Retirement Obligations (SFAS No. 143) effective
for fiscal years beginning after June 15, 2002. SFAS No. 143 requires that a
liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
Company does not expect the future adoption of SFAS No. 143 to have a material
effect on its financial position or results of operations.

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In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS
No. 144) effective for fiscal years beginning after December 15, 2001. SFAS
No. 144 establishes a single accounting model for long-lived assets to be
disposed of by sale, whether previously held and used or newly acquired, and
broadens the presentation of discontinued operations to include more disposal
transactions. The Companys January 1, 2002 adoption of SFAS No. 144 did not
have a material impact on its financial position or results of operations.

In April 2002, the FASB issued Statement of Financial Accounting Standards No.
145,  Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections (SFAS No. 145). SFAS No. 145
rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt,
and an amendment of that Statement, SFAS No. 64, Extinguishment of Debt Made
to Satisfy Sinking-Fund Requirements. SFAS No. 145 also rescinds SFAS No. 44,
Accounting for Intangible Assets of Motor Carriers. SFAS No. 145 amends SFAS
No. 13, Accounting for Leases, to eliminate an inconsistency between the
required accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. This Statement also makes several technical
corrections and clarifications to other existing authoritative pronouncements.
The provisions of this Statement related to the rescission of SFAS No. 4 are
effective for fiscal years beginning after May 15, 2002. The provisions of
this Statement related to SFAS No. 13 are effective for transactions occurring
after May 15, 2002. All other provisions of this Statement are effective for
financial statements issued on or after May 15, 2002. The Companys does not
anticipate that the future adoption of the provisions of SFAS No. 145 which
will be effective for transactions after May 15, 2002 will have a material
effect on its financial statements. The Company is evaluating the remaining
provisions of SFAS No. 145 and will adopt the remaining provisions
prospectively on January 1, 2003.

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PART II. OTHER INFORMATION

ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K



|(A) |  | Exhibits. The exhibits filed as part of this Report are listed on the
Index to Exhibits immediately following the signature page.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------



|(B) |  | Reports on Form 8-K. No reports on Form 8-K have been filed during the
quarter for which this report is filed.
|--- |  | --------------------------------------------------------------------------------------------------------------

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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.

AMERICAN HOMEPATIENT, INC.April 29, 2003
        
        By:
        
        /s/ Marilyn A. OHaraMarilyn A. OHaraChief Financial Officer and An Officer DulyAuthorized to Sign on Behalf of the registrant


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CERTIFICATIONS PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Joseph F. Furlong, certify that:

1.          I have reviewed this quarterly report on Form 10-Q/A of American
HomePatient, Inc.;

2.          Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.          Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

Date: April 29, 2003/s/ Joseph F. FurlongJoseph F. FurlongChief Executive Officer


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CERTIFICATION

I, Marilyn OHara, certify that:

1.          I have reviewed this quarterly report on Form 10-Q/A of American
HomePatient, Inc.;

2.          Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.          Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

Date: April 29, 2003/s/ Marilyn OHara

Marilyn OHaraChief Financial Officer


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INDEX TO EXHIBITS

EXHIBITNUMBER
        
        DESCRIPTION OF EXHIBITS3.1
        
        Certificate of Amendment to the Certificate of Incorporation of the
Company dated October 31, 1991 (incorporated by reference to Exhibit
3.2 to Amendment No. 2 to the Companys Registration Statement No.
33-42777 on Form S-1).3.2
        
        Certificate of Amendment to the Certificate of Incorporation of the
Company dated October 31, 1991 (incorporated by reference to Exhibit
3.2 to Amendment No. 2 to the Companys Registration Statement No.
33-42777 on Form S-1).3.3
        
        Certificate of Amendment to the Certificate of Incorporation of the
Company dated May 14, 1992 (incorporated by reference to Registration
Statement on Form S-8 dated February 16, 1993).3.4
        
        Certificate of Ownership and Merger merging American HomePatient, Inc.
into Diversicare Inc. dated May 11, 1994 (incorporated by reference to
Exhibit 4.4 to the Companys Registration Statement No. 33-89568 on
Form S-2).3.5
        
        Certificate of Amendment to the Certificate of Incorporation of the
Company dated July 8, 1996 (incorporated by reference to Exhibit 3.5 to
the Companys Report of Form 10-Q for the quarter ended
June 30, 1996).3.6
        
        Bylaws of the Company, as amended (incorporated by reference to Exhibit
3.3 to the Companys Registration Statement No. 33-42777 on
Form S-1).99.1
        
        Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002  Chief Executive
Officer.99.2
        
        Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002  Chief Financial
Officer.


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