SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                   FORM 10-KSB

[X]  Annual report under Section 13 or 15(d) of the  Securities  Exchange Act of
     1934 For the fiscal year ended: May 31, 2001

[ ]  Transition  report under Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934 For the transition period from ________ to __________.

                         Commission File Number: 0-16206

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

                         OAK TREE MEDICAL SYSTEMS, INC.
             (Exact name of Registrant as specified in its charter)

               DELAWARE                                         02-0401674
     (State or other jurisdiction                            (I.R.S. Employer
   of incorporation or organization)                        Identification No.)

                              10155 Collins Avenue
                           Bal Harbour, Florida 33154
                                 (305) 868-3388
    (Address, including zip code, and telephone number, including area code,
                  of Registrant's principal executive offices)

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

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


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

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

         The Registrant's revenues for its most recent fiscal year:  $0

         The  number  of  shares of Common  Stock,  par value  $0.01 per
share, outstanding as of September 10, 2001:  7,999,945.

<PAGE>

         The aggregate market value of voting and non-voting Common Stock
(5,650,022 shares) held by non-affiliates computed by reference to the closing
price of the Common Stock as of September 10, 2001: $904,004.

         Transactional Small Business Disclosure Format:  Yes:__   No:  X


PART I


Item 1.  Business

         Oak Tree Medical Systems, Inc., a Delaware corporation (the "Company"),
was incorporated in Delaware on May 27, 1986, as Oak Tree Construction
Computers,Inc. From 1986 through 1990, the Company was engaged in the sale of
computer systems for the construction industry. For a number of years
thereafter, the Company was inactive. The Company changed its name to Oak Tree
Medical Systems, Inc. in August 1994. Since January 1995, the Company had been
engaged in the business of operating and managing physical therapy care centers
and related medical practices. As of May 31, 2000, the Company closed the one
remaining medical facility in New York City and has been inactive since. The
Company is exploring acquisition, investment and business opportunities.

      Unless otherwise indicated by the text, reference herein to the term
"Company" will be deemed to refer to Oak Tree Medical Systems, Inc. and all its
subsidiaries.

         Until it ceased operations, the primary focus of the Company had been
the provision of physical therapy and related rehabilitative services. Physical
therapy aids in the restoration of patients who have been disabled by injury or
disease or are recovering from surgery. The Company's physical therapy care
centers offered preventive, rehabilitative and pre- and post-operative care for
neuromuscular and musculoskeletal injury, including a variety of
orthopedic-related disorders, sports-related injuries, neurologically related
injuries, motor vehicle injuries and work-related injuries.

Former New York City Facilities

         In October 1996, the Company acquired the management and assets of
three New York City based physical therapy care centers for an aggregate
purchase price of $900,000 (in cash and assumed debt) and 10,000 shares of
Common Stock (with a guaranteed value of not less than $100,000 and issuable in
October 1998). Included in the acquisition was a contract for the provision of
physical therapy services to a county hospital in Westchester, New York. In
connection with the acquisition, the Company entered into a three-year
employment agreement with the seller of the clinics, a licensed physical
therapist, who served as the director of operations of the New York City clinics
and Chief Operating Officer of the Company until February 1998. The Company also
assumed three leases for the physical therapy care centers. In July 1998, the
Company sold substantially all of the equipment and operations of two of the
three facilities it acquired in 1996 to a subsidiary of SMR Management Corp.,
Nesconset Sports, Inc. ("Nesconset Sports"), because the cash flows from these
facilities were insufficient to support their operations. The aggregate sales
price was $375,000 in cash, of which $365,000 was used to repay certain of the
Company's lease obligations. The purchaser assumed the outstanding leases.

         In July 1997, the Company acquired the management and assets of an
additional center in New York City for a purchase price of $400,000. The
purchase price was reduced by $100,000 since the center did not attain a certain
level of billings as of the end of July 1998. In connection with the
acquisition, the Company entered into a lease for the acquired center through
August 2003, and the seller entered into a four-year noncompetition agreement.
In addition, the seller entered into a six-month consulting agreement with the
Company continuing thereafter on a month-to-month basis, at $150,000 per annum.
The Company also entered into a six-month consulting agreement with the physical

<PAGE>

therapy care center administrator, a relative of the seller, continuing
thereafter on a month-to-month basis, at $50,000 per annum. On November 2, 1998,
the Company sold all the assets (excluding accounts receivable) of this facility
for $250,000 in cash plus the assumption of outstanding equipment lease
obligations of $194,000. Proceeds of $200,000 were used to repay a note payable
to the previous owner of the facility. On December 22, 1998, the Company sold
the accounts receivable relating to the facility for 50% value of subsequent
cash receipts.

         As of May 31, 2000, the Company closed the one remaining facility which
was acquired in October 1996 because the primary medical group referring
patients to the therapy center ceased operations. The cash flows from this
facility was thus insufficient to support its operations.

         In compliance with the laws of the State of New York, all treatment
related activities at the Company's New York City clinics were conducted by Oak
Tree Medical Practice, P.C. ("Oak Tree P.C."), an independently owned
professional corporation. The Company had agreements with Oak Tree P.C. pursuant
to which the Company provided to Oak Tree P.C. all administrative and management
services and leased to Oak Tree P.C. facilities and equipment. Because of the
significant influence and control exercised by the Company over Oak Tree P.C.
(other than with respect to patient treatment), the financial results of Oak
Tree P.C. are consolidated with those of the Company.


Sales of Florida Physical Therapy Care Centers

         Following the Company's October 1996 acquisition of three New York City
based physical therapy care centers and the hospital service contract, the
Company determined to shift its geographic focus from North Florida to the New
York City area. Consistent with this approach, in February 1997 the Company sold
substantially all of the assets and operations of its clinics in Jacksonville
and Orange Park, Florida. The Jacksonville assets were held by the Company's
Acorn CORF I, Inc. subsidiary and the Orange Park assets were held by the
Company's Riverside CORF, Inc. subsidiary. In addition, the Company sold all the
shares of Oak Tree Receivables, Inc. ("OT Receivables"), a wholly-owned
subsidiary of the Company, which helped finance the operations of the two
facilities by buying certain of their receivables and financing the purchase
through a receivables funding facility which used the receivables as collateral.
The aggregate sales price was $200,000, consisting of $100,000 in cash paid at
closing and a note in the amount of $100,000 payable in two installments in
April and May 1997. Neither installment has been paid and, as collection is not
probable, the Company has established a reserve in the amount of the note. In
connection with the sale of the North Florida centers, the purchaser assumed
$86,150 of accounts payable and the balance of the obligation of the receivables
funding facility in the amount of $1,812,500. In exchange for the consent of the
lender of the patient care receivables funding facility, the Company pledged as
collateral to the lender additional accounts receivable in the amount of
$700,000. The Company also terminated the employment agreement with the
facilities' medical director, was given back 400,000 shares of Common Stock
which had been issued in connection with the Company's acquisition of the
facilities in 1995 and was relieved from its obligation to issue an additional
145,000 shares of Common Stock.

         Continuing the divestiture of its Florida operations, the Company
disposed of its remaining North Florida facility, located in St. Augustine,
Florida, in April 1997. The sales price was $25,000 in cash, with $15,000 paid
at closing and $10,000 paid in April and May 1997.


Investment in Gold Ore

         In May 1993, the Company acquired 50,000 tons of gold ore from Nevada
Minerals Corporation in exchange for the issuance of 1,350,000 shares of Common

<PAGE>

Stock. The ore was appraised as having a $5,000,000 value. The Company
subsequently formed a wholly-owned subsidiary, Aurum Mining Corporation
("Aurum"), with the gold ore as its only asset. In June 1995, the Company
exchanged the stock of Aurum for 6,000,000 shares of common stock of Accord
Futronics Corp. ("Accord"), an unaffiliated privately-held company with other
mining related assets. The Company had the right to receive a royalty of 12.5%
of the net mining income from processing of the gold ore transferred to Accord.

         In November 1997, the Company returned the 6,000,000 shares of common
stock of Accord in exchange for 100% of the common stock of Aurum. At the time
of the return of the Accord stock, Accord had neither commenced nor anticipated
commencing mining operations, and the Company desired to take action to realize
the value of the gold ore. Due to (i) the absence of current financial and other
information for Accord, as to both the subsidiary and the underlying gold ore,
(ii) the Company's lack of resources to commence mining, and (iii) the Company's
inability to sell the ore, the Company wrote down its investment in the ore to
$0.

Employees

         As of May 31, 2001, the Company had no full-time employees and no
part-time employees.

Item  2. Property

         The Company's headquarter office is temporarily located at 10155
Collins Avenue, Bal Harbour, Florida 33154.

Item 3.  Legal Proceedings

         The Company is not a party to any material litigation or other
proceedings that management believes would result in judgements that would have
a material adverse effect on the Company.


                                     PART II

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

         The Company's Common Stock is currently traded in the over-the-counter
market on the OTC Electronic Bulletin Board of the National Association of
Securities Dealers (the "NASD"). The following table sets forth, for the fiscal
quarters indicated, high and low closing bid prices for the Common Stock in the
over-the-counter market as reported by the NASD. The information below reflects
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions.

                                                          Low Bid      High Bid
                                                          -------      --------

     Fiscal Year Ended May 31, 2001:
          First Quarter.............................       $ 0.625      $1.563
          Second Quarter............................         0.438       1.188
          Third Quarter.............................         0.203       0.938
          Fourth Quarter............................         0.090       0.313



     Fiscal Quarter Ended May 31, 2000:
          First Quarter.............................       $2.688       $2.938
          Second Quarter............................        2.000        2.125
          Third Quarter.............................        1.875        2.125
          Fourth Quarter............................        1.313        1.313

<PAGE>

         As of September 10, 2001, there were approximately 1,600 holders of
record of the Company's Common Stock. The closing bid and asked prices for the
Company's Common Stock on September 10, 2001, was $.16 and $.24, respectively.

         The Company has not paid any cash dividends on its Common Stock to
date, and the payment of cash dividends in the foreseeable future is not
contemplated by the Company. The future dividend policy will depend on the
Company's earnings, capital requirements, financial condition, and other factors
considered relevant to the Company's ability to pay dividends.

Recent Sales of Unregistered Securities

See "Note C- Common Stock" to the Notes to the Company's Consolidated
Financial Statements.

The issuances were made pursuant to Section 4(2) of the Securities Act of 1933,
as amended (the "Securities Act"), as transactions by an issuer not involving
any public offering, and, alternatively, in the case of employee options, on a
no-sale theory.

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

General

         Until May 31, 2000, the Company was engaged in the business of
operating and managing physical therapy care centers. As of May 31, 2000, the
Company closed the one remaining facility which was acquired in October 1996
because the cash flows from this facility was insufficient to support its
operations.

         In July 1998, the Company sold substantially all of the assets and
operations of its facilities located in Flushing and Upper Manhattan, New York,
due to insufficient cash flows from such facilities.

         In November and December 1998, the Company sold all the assets of its
Lower Manhattan, New York physical therapy facility due to insufficient cash
flows from such facility.


Results of Operations

      2001 Fiscal Year Compared to 2000 Fiscal Year

      Patient revenues decreased from $206,365 to $-0-in the fiscal year ended
May 31, 2001 ("Fiscal 2001") compared with the fiscal year ended May 31, 2000
("Fiscal 2000"). The decrease in revenues was attributable to the fact that the
primary medical group referring patients to the therapy center ceased operations
as of January 2000 and the remaining facility closed in May 2000.

         Total expenses increased by 1.9% to $3,407,193 for Fiscal Year 2001
from $3,343,468 for Fiscal 2000, primarily attributable to the write-down on the
investment in gold ore and increased consulting expenses, offset by and
decreased selling, general and administrative expenses and interest expense.
Costs of patient services, selling, general and administrative expenses,
consulting, depreciation and amortization and interest expense decreased by
57.7% from $3,343,468 to $1,412,979. Costs of patient services, as a percentage
of patient revenues, decreased from 72.4% in Fiscal 2000 to 0.0% in Fiscal 2001
because of the closing of the remaining facility in May 2000. Selling, general
and administrative expenses decreased 93.5% from $2,156,935 in Fiscal 2000 to
$139,203 in Fiscal 2000, primarily due to the closing of the remaining facility
in May 2000. Consulting expenses increased by 28.5% from $989,934 in Fiscal 2000
to $1,271,814 in Fiscal 2001, due to a higher Black Scholes stock option
adjustment in Fiscal 2001 for consultants.

         Income taxes for Fiscal 2001 and 2000 are not representative of an
effective tax rate. For Fiscal 2001 and 2000, deferred income tax benefits have
been reduced by increases in the allowance for the realization of deferred
income tax assets of $1,175,000 and $838,000, respectively, because, as of both
May 31, 2001 and 2000, it was more likely than not that the deferred tax assets

<PAGE>

would not be realized. The deferred tax assets result primarily from impairment
of the gold ore and net operating loss carryforwards and the Company may not
generate sufficient future taxable income for their utilization. As of May 31,
2001 and 2000, net operating loss carryforwards were $8,255,000 and $6,849,000,
respectively, increased due to the increases in taxable losses for each year.

         The above factors contributed to a net loss of $3,407,193 ($.48 per
share) for Fiscal 2001 compared with a net loss of $3,137,103 ($.52 per share)
for Fiscal 2000.


Liquidity and Capital Resources

      In the past, the Company has funded its capital requirements from
operating cash flow, loans against its accounts receivable, sales of equity
securities and the issuance of equity securities in exchange for assets acquired
and services rendered. Inasmuch as the Company is inactive, any funding of
operations will necessitate raising capital. The Company continues to explore
opportunities to raise private equity capital and, in conjunction therewith, to
provide credit support for the Company's operations and pending acquisitions.
Although the Company has in the past been and continues to be in discussions
with potential investors, there can be no assurance that its efforts to raise
any substantial amount of private capital will be successful. Any substantial
private equity investment in the Company will result in voting dilution of the
Company's existing stockholders and could also result in economic dilution. If
the Company is unable to obtain new capital, the Company will be unable to carry
out its strategy of growth through acquisitions and the long-term ability of the
Company to continue its operations may be in doubt.

      Also see "Note C - Common Stock" to the Notes to the Company's
Consolidated Financial Statements.


Forward Looking Statements

         This Annual Report on Form 10-KSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Exchange Act, including statements regarding the
expectations, beliefs, intentions or strategies regarding the future. The
Company intends that all forward-looking statements be subject to the
safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements reflect the Company's views as of the date they
are made with respect to future events and financial performance, but are
subject to many risks and uncertainties, which could cause the actual results of
the Company to differ materially from any future results expressed or implied by
such forward-looking statements. Additional information on factors that may
affect the business and financial results of the Company can be found in the
other filing of the Company with the Securities and Exchange Commission. The
Company does not undertake to update any forward-looking statements.


Item 7.  Financial Statements

         The financial statements and information required by Item 7 are
included in the Index shown at Item 13.


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

         (a) Effective August 16, 1999, the Company's Board of Directors
appointed Grant Thornton, LLP ("Grant Thornton") as the Company's independent
accountants for the fiscal year ended May 31, 1999. On August 17, 2000 the
Company dismissed Grant Thornton as the independent accountants for the Company.
Grant Thornton's report on the financial statements of the Company for the

<PAGE>

fiscal year ended May 31, 1999 did not contain an adverse opinion or disclaimer
of opinion, and was not qualified or modified as to uncertainty, audit scope or
accounting principles. During the Company's fiscal year ended May 31, 1999 and
through August 17, 2000 there were no disagreements between the Company and
Grant Thornton on any matter of accounting principles or practices, financial
statement disclosure, or auditing or procedure, which disagreements, if not
resolved to the satisfaction of Grant Thornton, would have caused it to make
reference to the subject matter of the disagreement in connection with its
reports. During the Company's fiscal year ended May 31, 1999 and through August
17, 2000, Grant Thornton did not advise the Company of any of the matters
referred to in Item 304(a) (1)(iv) (B) of Regulation S-B.

         (b) On August 17, 2000 the Company's Board of Directors engaged Wiss &
Company, LLP as the Company's independent accountants for the fiscal year ended
May 31, 2000.


                                    PART III

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

         The directors and executive officers of the Company and their positions
at September 10, 2001 were as follows:

         Name                          Age       Position
         ----                          ---       --------

         Henry Dubbin                  85      President and Director
         Fred L. Singer                67      Vice President and Director
         Maxwell M. Rabb               91      Director
         Scott S. Rosenblum            51      Director

HENRY DUBBIN has served as President of the Company since April 1997 and a
director of the Company since May 1993. Mr. Dubbin also served as Vice Chairman
of the Board of Directors and Vice President of the Company from May 1993 to
April 1997. Mr. Dubbin currently is the President of Nevada Minerals
Corporation, a diversified company engaged in the mining business. From 1955 to
1992, Mr. Dubbin worked with Canaveral International, Inc., a diversified public
company, from which he retired as Chairman of the Board.

         FRED L. SINGER has served as a member of the Board of Directors since
April 1997 and as Vice President of the Company since August 1997. Since 1963,
Mr. Singer has served as director, producer and cinematographer for Coronado
Productions, a/k/a Coronado Studios, a video production company.

         MAXWELL M. RABB has served as a member of the Board of Directors since
October 1998 and has served as of counsel to the law firm of Kramer Levin
Naftalis & Frankel LLP since 1991 and was a partner at Stroock & Stroock & Lavan
from 1958 to 1981 and 1989 to 1991. Ambassador Rabb served as the United States
Ambassador to Italy from 1981 to 1989. Ambassador Rabb is a member of the board
of directors of Sterling National Bank, MIC Industries, Inc., Data Systems and
Software, Inc. and Preferred Employers Holdings, Inc. Ambassador Rabb also
serves as a trustee or director of the Cardinals Cooke and O'Connor Inter City
Scholarship Fund, the Lighthouse, the Eisenhower Institute, the George Marshall
International Center and Seaman's Church Institute.

         SCOTT S. ROSENBLUM has served as a member of the Board of Directors
since October 1998 and has been a partner of Kramer Levin Naftalis & Frankel LLP
since 1991. Mr. Rosenblum is a member of the board of directors of Greg Manning
Auctions, Inc. and Temco Services Industries, Inc.,

<PAGE>

         Mr. Burton Dubbin was Vice President of the Company from April 1997
until his resignation in August 1997. Directors may be elected by the
stockholders at an annual meeting or a special meeting called for that purpose
(or in the case of a vacancy, are appointed by the directors then in office) to
serve until the next annual meeting, until their successors are elected and
qualified or until their removal or resignation. Officers serve at the
discretion of the Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance

         Incorporated by reference to the Company's Proxy Statement, which will
be filed within 120 days after the Company's fiscal year end.

Item 10. Executive Compensation

      Incorporated by reference to the Company's Proxy Statement, which will be
filed within 120 days after the Company's fiscal year end.

Item 11. Security Ownership of Certain Beneficial Owners and Management

      Incorporated by reference to the Company's Proxy Statement, which will be
filed within 120 days after the Company's fiscal year end.

Item 12. Certain Relationships and Related Transactions

      Incorporated by reference to the Company's Proxy Statement, which will be
filed within 120 days after the Company's fiscal year end.


Item 13. Exhibits, Financial Statements and Reports on Form 8-K

         The following documents are filed as part of this Annual Report on Form
10-KSB.

(a)       Financial Statements:
Page

          Report of Independent Certified Public Accountants................F-2

          Consolidated Balance Sheets as of May 31, 2001 and
          2000..............................................................F-3

          Consolidated Statements of Operations for the years ended
          May 31, 2001 and 2000.............................................F-4

          Consolidated Statement of Stockholders' Equity for the
          years ended May 31, 2001 and 2000.................................F-5

          Consolidated Statements of Cash Flows for the years ended
          May 31, 2001 and 2000.............................................F-6

          Notes to Consolidated Financial Statements........................F-7

(b)       Reports on Form 8-K.

         None

(c) The following documents are filed as exhibits to this Annual Report on Form
10-KSB.

3.1      Certificate of Incorporation, as amended. Incorporated by reference
         from Registration Statement on Form S-18 - Commission File No.
         33-8166B, August 20, 1986.

<PAGE>

3.2      Amendments to Certificate of Incorporation dated August 1, 1994.
         Incorporated by reference from Exhibit 3.2 of the Annual Report on Form
         10-KSB for the fiscal year ended May 31, 1995.

3.3      By-Laws. Incorporated by reference from Registration Statement on Form
         S-18-Commission File No. 33-8166B, August 20, 1986.

4.1      Form of Common Stock Certificate. Incorporated by reference from Form
         10-KSB for the fiscal year ended May 31, 1994.

10.1     Form of 1994 Equity Performance Plan. Incorporated by reference from
         Information Statement dated July 11, 1994.

10.2     Form of Employment Agreement with Mr. Henry Dubbin. Incorporated by
         reference from Form 10-KSB for the Fiscal Year Ended May 31, 1994.

10.3     Stock Option Agreement, dated as of December 3, 1996, between
         Registrant and Burton Dubbin. Incorporated by reference from Form
         10-QSB filed for the fiscal quarter ended November 30, 1996.

10.4     Consulting Agreement, dated as of August 29, 1997, between Registrant
         and Burton Dubbin. Incorporated by reference from Exhibit 10.18 of the
         Form 10-KSB for the fiscal year ended May 31, 1997 (the "1997 Form
         10-KSB").

10.5     Purchase Agreement, dated as of February 6, 1997, among Registrant,
         Acorn CORF I, Inc., Riverside CORF, Inc. and MB Data Corporation.
         Incorporated by reference from Form 8-K filed on February 27, 1997.

10.6     Agreement of Sale, dated July 16, 1997, between Oak Tree Medical
         Practice, P.C. and Peter B. Saadeh, M.D. Incorporated by reference from
         Exhibit 10.17 of the 1997 Form 10-KSB.

10.7     Agreement of Sale, dated July 16, 1998, among Oak Tree Medical
         Management, Inc., Oak Tree Medical Practice, P.C. and Nesconset Sports,
         Inc.

10.8     Agreement of Sale, dated November 2, 1998, between Rehabilitation
         Medicine Practice of N.Y., P.L.L.C. and Oak Tree Medical Management,
         Inc. Incorporated by reference from Exhibit 10.1 of the Form 10-QSB for
         the fiscal quarter ended November 30, 1998 (the "November 30, 1998 Form
         10-QSB").

10.9     Agreement of Sale, dated November 2, 1998, between Rehabilitation
         Medicine Practice of N.Y., P.L.L.C. and Oak Tree Medical Practice, P.C.
         Incorporated by reference from Exhibit 10.2 of the November 30, 1998
         Form 10-QSB.

10.10    Agreement of Sale, dated December 23, 1998, between Oak Tree Medical
         Practice, P.C. and Rehabilitation Medicine Practice of N.Y., P.L.L.C.
         Incorporated by reference from Exhibit 10.3 of the November 30, 1998
         Form 10-QSB.

10.11    Asset Purchase Agreement, dated as of July 9, 1999, by and among Oak
         Tree Medical Systems, Inc., Oak Tree Medical Systems Practice
         Management, Inc. and the other parties thereto.

10.12    Stock Purchase Agreement, dated as of December 10, 1999, by and among
         Oak Tree Medical Systems, Inc., Oak Tree Medical Systems Practice
         Management, Inc., Northeast Medical Management, Inc. and the
         stockholders of Northeast Medical Management, Inc.

16.1     Letter from Grant Thorton, LLP, dated August 22, 2000, addressed to the
         Securities and Exchange Commission. Incorporated by reference from Form
         8-K filed on August 24, 2000.

<PAGE>

21       Subsidiaries:

          Acorn CORF, Inc.                                     Florida
          Acorn CORF, Inc.                                     Nevada
          Aurum Mining Corporation                             Nevada
          Oak Tree Financial Services, Inc.                    Florida
          Oak Tree Medical Management, Inc.                    New York
          Riverside CORF, Inc.                                 Florida


                                   SIGNATURES

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

Dated:  September 12, 2001                OAK TREE MEDICAL SYSTEMS, INC.


                                          By: /s/ Henry Dubbin
                                             -----------------------
                                             Henry Dubbin, President


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


Name                                 Title                      Date
----                                 -----                      ----

 /s/ Henry Dubbin               President and Director,      September 12, 2001
------------------------        (Chief Executive Officer
Henry Dubbin                    and acting principal
                                accounting officer)

/s/ Fred L. Singer              Vice President and           September 12, 2001
------------------------        Director
Fred L. Singer

------------------------        Director
Maxwell M. Rabb


/s/ Scott S. Rosenblum          Director                     September 12, 2001
-----------------------
Scott S. Rosenblum


<PAGE>


                                    I N D E X


                                                                 Page
                                                                 ----


Report of Independent Certified Public Accountants               F-2


Consolidated Financial Statements

      Consolidated Balance Sheets                                F-3

      Consolidated Statements of Operations                      F-4

      Consolidated Statement of Stockholders' Equity             F-5

      Consolidated Statements of Cash Flows                      F-6

      Notes to Consolidated Financial Statements                 F-7



                                       F-1

<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors
Oak Tree Medical Systems, Inc.

We have audited the accompanying consolidated balance sheets of Oak Tree Medical
Systems, Inc. and Subsidiaries as of May 31, 2001 and 2000, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Oak
Tree Medical Systems, Inc. and Subsidiaries as of May 31, 2001, and the
consolidated results of their operations and their consolidated cash flows for
the two years then ended in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company incurred substantial losses from operations
since inception and at May 31, 2001 had a working capital deficiency of
$762,596. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note A. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


/s/ WISS & COMPANY, LLP
Livingston, New Jersey
August 29, 2001


                                       F-2

<PAGE>

                 OAK TREE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 May 31,    May 31,
                                                                  2001       2000
                                                                  ----       ----
<S>                                                            <C>        <C>
                          ASSETS
CURRENT ASSETS:
Cash                                                           $    951   $  145,369
Patient care receivables                                              -       20,000
Other current assets                                                  -       13,500
                                                                    951      178,869
OTHER ASSETS:
Investment in gold ore                                                -    1,994,214
Fixed assets                                                          -        1,962
                                                               $    951  $ 2,175,045
                                                               ========  ===========

           LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES -
Accounts payble and accrued expenses                          $ 740,445  $   914,868
Advances from stockholder                                        23,102            -
Total Current Liabilities                                       763,547     914,868
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 25,000,000 shares authorized,
7,285,264 and 6,617,703 shares issued and outstanding as of
May 31, 2001 and 2000, respectively                              72,853      66,176
Additional paid-in capital                                   18,944,384  17,511,404
Prepaid Consulting                                              (55,237)          -
Deficit                                                     (19,724,596) (16,317,403)
Total Stockholders' Equity                                     (762,596)   1,260,177
                                                             $      951   $2,175,045
                                                             ==========   ==========
</TABLE>


                 See notes to consolidated financial statements.

                                      F-3

<PAGE>

                 OAK TREE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                               Year Ended May 31,
                                                                2001        2000
                                                                ----        ----
<S>                                                        <C>            <C>
REVENUE-
Net patient services                                       $         -       206,365
EXPENSES:
Costs of patient services                                            -       149,365
Selling, general and administrative                            139,203     2,156,935
Consulting services                                          1,271,814       989,934
Depreciation and amortization                                    1,962         6,620
Write-down on investment in gold ore                         1,994,214             -
Interest - net                                                       -        40,614
                                                            ----------    ----------
                                                             3,407,193     3,343,468
NET LOSS                                                   $(3,407,193)  $(3,137,103)
NET LOSS PER COMMON SHARE -
 BASIC AND DILUTED                                         $     (0.48)  $     (0.52)
                                                           ===========   ===========
WEIGHTED AVERAGE NUMBER OF
 COMMON AND COMMON EQUIVALENT                                7,074,893     6,075,588
 SHARES OUTSTANDING                                        ===========   ===========
</TABLE>


                 See notes to consolidated financial statements.


                                      F-4

<PAGE>

                 OAK TREE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    FOR THE YEARS ENDED MAY 31, 2001 AND 2000

<TABLE>
<CAPTION>

                                                  Common Stock                                                           Total
                                             ---------------------        Additional        Prepaid                   Stockholders'
                                             Shares         Amount     Paid-in-Capital     Consulting     Deficit        Equity
                                             ------         ------     ---------------     ----------     -------     -------------
<S>                                         <C>               <C>       <C>                <C>         <C>             <C>
BALANCE, MAY 31, 1999                       5,602,703       % 56,026    $14,653,072              $-    $(13,180,300      $1,528,798

Sale of common stock (net
of expenses of $70,000)                       250,000          2,500        247,500              --              --         250,000

Issuance of shares for                             --
services                                      112,500          1,125        223,188              --         224,313

Exercise of options                           652,500          6,525      1,110,644              --              --       1,117,169

Issuance of stock options
to consultants                                     --             --        746,000              --              --         746,000

Issuance of stock options
to employees                                       --             --        531,000              --              --         531,000

Net loss                                           --             --             --              --      (3,137,103)     (3,137,103)
                                         ------------   ------------   ------------    ------------    ------------    ------------
BALANCE, MAY 31, 2000                       6,617,703         66,176     17,511,404              --     (16,317,403)      1,260,177

Sale of common stock (net
of expenses of $32,383)                        95,000            950        113,400              --              --         114,350

Issuance of shares for services               472,561          4,727        279,625              --         284,352

Exercise of options                           100,000          1,000         49,136              --              --          50,136

Stock issued in connection
with prepaid consulting                            --             --         55,237         (55,237)             --              --

Issuance of stock options
to consultants                                     --             --        935,582              --              --         935,582

Net loss                                           --             --             --              --      (3,407,193)     (3,407,193)
                                         ------------   ------------   ------------    ------------    ------------    ------------

BALANCE, MAY 31, 2001
                                            7,285,264        $72,853     18,889,147        $(55,237)   $(19,724,596)      $(762,596)
                                         ============   ============   ============    ============    ============    ============
</TABLE>


                 See notes to consolidated financial statements.

                                       F-5
<PAGE>

                 OAK TREE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                              Year Ended May 31,
                                                                2001        2000
                                                                ----        ----
OPERATING ACTIVITIES:
<S>                                                        <C>          <C>
Net loss                                                   $(3,407,193) (3,137,103)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization                                    1,962       6,620
Write-down on investment                                     1,994,214           -
Acquisition cost write-down                                          -     162,450
Stock and stock options issued for services                  1,219,934   1,751,313
Fixed assets write-down                                              -       2,244
Increase (decrease) in cash from:
Patient care receivables                                        20,000      80,000
Other current assets                                            13,500     (9,606)
Accounts payable and accrued payable                          (174,423)     50,805
                                                              --------   ---------
Net cash used in operating activities                         (332,006) (1,093,277)
                                                              --------   ---------
FINANCING ACTIVITIES:

Borrowings from shareholder                                     23,102           -
Proceeds from issuance of common stock                         164,486   1,117,169
                                                             ---------   ---------
Net cash provided by financing activities                      187,588   1,117,169
                                                             ---------   ---------
NET INCREASE (DECREASE) IN CASH                               (144,418)     23,892
CASH, BEGINNING OF PERIOD                                      145,369     121,477
                                                             ---------   ---------
CASH, END OF PERIOD                                          $     951   $ 145,369
                                                             =========   ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Interest expense paid                                        $       -   $  40,614
                                                             =========   =========
</TABLE>


                 See notes to consolidated financial statements.


                                      F-6

<PAGE>

                         OAK TREE MEDICAL SYSTEMS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2001 AND 2000


NOTE A - BACKGROUND OF THE COMPANY

         Oak Tree Medical Systems, Inc. (the "Company), a Delaware corporation,
         was incorporated in Delaware on May 27, 1986, as Oak Tree Construction
         Computers, Inc. From 1986 through 1990, the Company was engaged in the
         sale of computer systems for the construction industry. For a number of
         years thereafter, the Company was inactive. The Company changed its
         name to Oak Tree Medical Systems, Inc. in August 1994. Since January
         1995, the Company had been engaged in the business of operating and
         managing physical therapy care centers and related medical practices.
         As of May 31, 2000, the Company closed the one remaining New York
         City-based physical therapy care center and has been inactive since.

         The accompanying financial statements have been prepared in conformity
         with generally accepted accounting principles which contemplate
         continuation of the Company as a going concern. The Company has
         incurred substantial losses in 2001 and 2000, used cash from operating
         activities in 2001 and 2000, and has negative working capital at May
         31, 2001.

         In the past, the Company has funded its capital requirements from
         operating cash flow loans against its accounts receivables, sales of
         equity securities and the issuance of equity securities in exchange for
         assets acquired and services rendered. The Company continues to explore
         opportunities to raise private equity capital and, in conjunction
         therewith, to provide credit support for the Company's operations and
         pending acquisitions. Although the Company has in the past been and
         continues to be in discussions the potential investors, there can be no
         assurance that its efforts to raise any substantial amount of private
         capital will be successful. Any substantial private equity investment
         in the Company will result in voting dilution of the Company's existing
         stockholders and could also result in economic dilution.


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

            The consolidated financial statements include the accounts of Oak
            Tree Medical Systems, Inc. and its wholly-owned subsidiaries and Oak
            Tree Medical Practice, P.C., a


                                       F-7

<PAGE>

            professional practice entity. All material intercompany balances and
            transactions have been eliminated.

Revenue Recognition

            Patient service revenue was reported at the estimated net realizable
            amounts from patients, third-party payers and others for services
            rendered, on a service date basis.

                                      F-8
<PAGE>

                         OAK TREE MEDICAL SYSTEMS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2001 AND 2000


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

Use of Estimates

            In preparing financial statements in conformity with generally
            accepted accounting principles, management is required to make
            estimates and assumptions that affect the reported amounts of assets
            and liabilities and disclosure of contingent assets and liabilities
            at the date of the financial statements, as well as the reported
            amounts of revenues and expenses during the reporting period. Actual
            results could differ from those estimates.

Fixed Assets

            Physical therapy equipment and office equipment and furniture are
            stated at cost and were being depreciated on the straight-line
            method over the estimated useful lives of the assets of five years.
            Leasehold improvements were stated at cost and were being amortized
            over the terms of the leases or the estimated useful lives of the
            assets of seven years, whichever is less.

Deferred Acquisition Costs

            Deferred acquisition costs incurred in connection with the Company's
            contemplated acquisitions of ten medical practice management
            companies amounted to $98,804 for the year ended May 31,1999. Due to
            the length and prospects of this pending acquisition, the Company
            wrote off the entire costs to operations in May 2000.

Income Taxes

            Deferred tax assets and liabilities are recognized for the estimated
            future tax consequences attributable to differences between the
            financial statement carrying amounts of existing assets and
            liabilities and their respective tax bases. Deferred tax assets and
            liabilities are measured using enacted tax rates in effect for the
            years in which those temporary differences are expected to be
            recovered or settled. A valuation allowance has been established to
            reduce deferred tax assets as it is more likely than not that such
            deferred tax assets will not be realized. The effect on deferred tax
            assets and liabilities of a change in tax rates is recognized in
            income in the period that includes the enactment date.

                                       F-9
<PAGE>

                         OAK TREE MEDICAL SYSTEMS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2001 AND 2000


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

Net Loss Per Share

            Net loss per common share is based on the weighted-average number of
            common shares outstanding during the periods.

            Basic earnings per share exclude dilution and are computed by
            dividing income (loss) available to common shareholders by the
            weighted-average common shares outstanding for the period. Diluted
            earnings per share reflect the weighted-average common shares
            outstanding plus the potential dilutive effect of securities or
            contracts which are convertible to common shares, such as options,
            warrants, and convertible preferred stock.

            Options to purchase shares of common stock of 4,012,500 and
            1,601,250 remain outstanding at May 31, 2001 and 2000, respectively,
            but were not included in the computation of diluted EPS because to
            do so would have been anti dilutive for the periods presented.

Financial Instruments

            Financial instruments include cash, accounts payable, accrued
            expenses and advances to stockholder. The amounts reported for
            financial instruments are considered to be reasonable approximations
            of their fair values. The fair value estimates presented herein were
            based on market or other information available to management. The
            use of different market assumptions and/or estimation methodologies
            could have a material effect on the estimated fair value amounts.

NOTE C - COMMON STOCK

1.    Issuance of Common Stock

            In February 2000, the Company issued 50,000 shares of Common Stock
            to Rush & Co. in a subscription agreement. These shares were valued
            at an average price of $1.00 per share.

            In April 2000, the Company issued 50,000 shares of Common Stock to
            Washburn & Enright in consideration of consulting services outside
            of the United States. These shares were valued at a price of $1.50
            per share.

            In May 2000, the Company issued 200,000 shares of Common Stock in a
            private placement to TTC Vermogensberatung A.G. at an offering price
            of $1.35 per share, with net proceeds to the Company of $1.00 per
            share for consulting services.

                                      F-10
<PAGE>


                         OAK TREE MEDICAL SYSTEMS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2001 AND 2000


NOTE C - COMMON STOCK - (CONTINUED)

            Through May 31, 2000, the Company issued an aggregate of 7,500
            shares of common stock in exchange for legal services. The shares
            were valued at an average price of $2.00 per share.

            Through May 31, 2000, the Company issued an aggregate of 25,000
            shares of common stock in exchange for consulting services. The
            shares were valued at an average price of $2.00 per share.

            In June 2000, the Company entered into a consulting agreement with
            American Financial Communications, Inc. (Richard Carpenter and
            Jeffrey Lamberson) for a six month period. Mrsrs. Carpenter and
            Lamberson acted as a public and financial relations advisor and
            consultant to the Company. Mrsrs. Carpenter and Lamberson received
            25,000 shares of the Company's Common Stock in March 2001. These
            shares are "restricted securities" within the meaning of Rule 144
            under the Securities Act and were valued at a price of $1.38 per
            share.

            In July 2000, the Company closed an offshore placement of 57,000
            shares of common stock, for aggregate purchase prices of $88,350.
            The Company incurred expenses of $32,383 in connection with such
            placement, resulting in net proceeds of $55,967.

            In October 2000, Mr. Timothy Stoakes, consultant to the Company,
            exercised options to acquire 100,000 shares of Common Stock at $0.69
            per share.

            In November 2000, the Company completed a registration of 1,844,600
            shares of its Common Stock to be issued to Employees, Directors and
            Consultants for services provided.

            In November 2000, the Company issued 45,000 shares of common stock
            to Timothy Stokes for consulting services . Those shares were valued
            at $.75 per share.

            In December 2000, the Company issued 10,000 shares of Common Stock
            to Richard Greene in consideration of legal services. These shares
            were valued at $0.75 per share.

            In April 2001, the Company issued 70,000 shares of Common Stock to
            Investec Earnst & Company in consideration of investment banking
            services. These shares were valued at $0.15 per share.

            In May 2001, the Company issued 25,000 shares of Common Stock to
            Richard Greene in consideration of legal services. These shares were
            valued at $0.19 per share.

            In May 2001, the Company completed a registration of 1,100,000
            shares of its common stock to be issued to employees, directors and
            consultants for services provided.

                                      F-11

<PAGE>

                         OAK TREE MEDICAL SYSTEMS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2001 AND 2000


NOTE C - COMMON STOCK - (CONTINUED)

2.    Consulting Agreements

             In August 1997, Mr. Burton Dubbin terminated his employment with
            the Company and entered into a two-year consulting agreement at a
            fee of $150,000 per annum, plus 125,000 shares of Common Stock, of
            which 25,000 shares were immediately issuable and 5,000 shares are
            issuable monthly (in an aggregate amount not to exceed 100,000
            shares) for the duration of Mr. Burton Dubbin's service with the
            Company. In addition, the Company amended the terms of the options,
            making such options immediately exercisable and extending the
            expiration date until 2007. In June 1998, the Company extended Mr.
            Burton Dubbin's consulting agreement until August 31, 2002. In
            addition, the Company granted Progressive Planning Associates, Inc.
            in which Burton Dubbin is a shareholder options to purchase 500,000
            shares of Common Stock at an exercise price of $2.17 per share and
            were exercisable six months from date of grant. The Company recorded
            consulting expenses of approximately $925,000 and $517,000 in years
            1999 and 2000,respectively relating to these options. During the
            fiscal year ended May 31, 1999, Mr. Burton Dubbin exercised options
            to acquire 100,000 shares of Common Stock. During the year ended May
            31, 2000, the Company granted Mr. Burton Dubbin options to purchase
            300,000 shares of Common Stock at an exercise price of $1.50 per
            share. Mr. Burton Dubbin exercised options to acquire 275,000 shares
            of Common Stock at $1.69 per share and 20,000 shares of Common Stock
            at $1.50 per share. During the fiscal year ended May 31, 2001, the
            Company granted Mr. Dubbin options to purchase 300,000 shares of
            common stock at $.68 per share and 500,000 shares of common stock at
            $.19 per share.

            In June 2000, the Company entered into a consulting agreement with
            EBI Securities Corporation (EBI) for a one year term. EBI will act
            as a public relations advisor and consultant to the Company. EBI
            received options to acquire 25,000 shares of the Company's common
            stock with an exercise price of $1.75 per share and 25,000 shares of
            the Company's common stock with an exercise price of $2.00 per
            share.

            In July 2000, the Company entered into a consulting agreement with
            Timothy Stoakes for a one-year term. Stoakes will act as a public
            relations advisor and consultant to the Company outside the United
            States. Stoakes received options to acquire 150,000 shares of the
            Company's common stock with an exercise price of $0.60 per share and
            650,000 shares of the Company's stock with an exercise price of $.68
            per share.

            In July 2000, the Company entered into a consulting agreement with
            The Titan Group LLC (Titan) for a one-year term. Titan was to
            provide consulting and advisory services relating to business
            management and marketing. Titan received options to acquire 70,000
            shares of the Company's common stock with an exercise price of $0.60
            per share, 50,000 shares with an exercise price of $2.25 per share,
            50,000 shares with an exercise price of $3.00 per share, and 50,000
            shares with an exercise price of $6.00 per share. During July 2000,
            the consulting agreement and options were cancelled.

            In July 2000, the Company entered into a consulting agreement with
            David Casterline. Casterline will provide consulting and advisory
            services relating to business management and marketing. Casterline
            received options to acquire 250,000 shares as follows: 100,000
            shares at $.60 per share, 50,000 shares at $2.25 per share, 50,000
            shares at $3.00 per share and 50,000 shares at $6.00 per share.

                                      F-12

<PAGE>

                         OAK TREE MEDICAL SYSTEMS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2001 AND 2000


NOTE C - COMMON STOCK - (CONTINUED)

            In October 2000, the Company entered into an agreement with Burton
            Dubbin for the 12 month period ended August 2001, pursuant to which
            the Company agreed to issue to Mr. Dubbin an aggregate of 219,600
            shares of common stock of the Company in lieu of his monthly cash
            consulting fee of $12,500. The shares were covered under the
            registration statement referred to above. In December 2000, Mr.
            Dubbin received 50,000 shares under the agreement. In January 2001,
            in light of current market conditions the Company issued Mr. Dubbin
            the remaining 169,000 shares.

            In December 2000, the Company issued Washburn & Enright 45,000
            shares of common stock, valued at a price of $0.68 per share for
            consulting services.

3.    Options

            On September 1, 1998, the Company entered into an employment
            agreement with Mr. Simon Boltuch as its Chief Financial Officer for
            a three year term expiring on August 31, 2001 which provides for
            (I)an annual salary of $175,000 per year,(ii)performance bonus of up
            to $35,000 annually and (iii) annual options to acquire 20,000
            shares of Common Stock at an exercise price equal to the fair market
            value of the shares on dates of grant. In connection with his
            employment, the Company issued options to acquire 20,000 shares of
            Common Stock to Mr. Boltuch at an exercise price of $2.00 per share
            and were exercisable on the one year anniversary from date of grant.
            All options will expire on the earlier of (I) 10 years from date of
            grant, (ii) 90 days after termination of employment for any reason
            other than cause, or (iii) immediately upon termination of
            employment for cause. Mr. Boltuch resigned in January 2001, per (ii)
            above, Mr. Boltuch's options expired in April 2001. During November
            2000, the Company issued 20,000 options to Mr. Boltuch with an
            exercise price of $.68 per share.

            In  August  1999,  Mr.  Fredrick  Veit,  counsel  to  the  Company
            exercised options to acquire 2,500 shares of Common Stock.

            In July 1999 Mr. Fred Singer, secretary to the Company,  exercised
            options to acquire  5,000 shares of Common  Stock.  In April 2000,
            Mr. Singer had 10,000 options to purchase Common Stock expire.

            From September 1999 to February 2000, in order to provide the
            Company with working capital, Mr. Henry Dubbin, president, exercised
            options to acquire 350,000 shares of Common Stock. Mr. Henry Dubbin
            has remaining options to acquire 150,000 shares of Common Stock
            which expire on January 24, 2005.

            During November 2000, the Company, under its Officer and Director
            Compensation Plan, issued options to acquire common stock with an
            exercise price of $.68 per share to the following directors for
            serving on the Board of Directors and services provided on behalf of
            the Company:

            Scott Rosenblum     330,000
            Maxwell M. Rabb      30,000
            Henry Dubbin         30,000
            Jerry D. Klepner     30,000

                                      F-13

<PAGE>

                         OAK TREE MEDICAL SYSTEMS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2001 AND 2000


NOTE C - COMMON STOCK - (CONTINUED)

4.    Stock Option Plan

            The Company has a Performance Equity Plan (the "Plan") under which
            it may grant incentive and nonqualified stock options, stock
            appreciation rights, restricted stock awards, deferred stock, stock
            reload options and other stock-based awards to purchase up to
            600,000 shares of common stock to officers, directors, key employees
            and consultants. The Company may not grant any options with a
            purchase price less than fair market value of common stock as of the
            date of the grant. In April 2001, the Company granted the following
            options under the plan:

                  Scott S. Rosenblum     500,000       $  0.19
                  Henry Dubbin            20,000          0.19
                  Fred L. Singer          40,000          0.19
                  Maxwell M. Rabb         40,000          0.19


5.    Reserved Shares

            As of May 31, 2001, the Company has reserved the following shares of
            common stock:

                  Options              3,412,500
                  Plan                   600,000
                                     -----------
                                       4,012,500

         For the years ended May 31, 2001 and 2000, a summary of the status of
         stock options was as follows:


                                    2001                   2000
                                   -------------------    ----------------
                                              Weighted             Weighted
                                              Average              Average
                                   Number of  Exercise  Number of  Exercise
                                    Shares     Price     Shares    Price
                                    ------     -----     ------    -----
           Outstanding-beginning
           of year                1,601,250     $2.08  1,401,250    $2.29
           Granted                3,090,000       .81    862,500     1.50
           Exercised               (100,000)     1.50   (652,500)    1.77
           Expired                 (278,750)     3.50    (10,000)    1.00
           Cancelled               (300,000)     2.48          -        -
                                  ----------    -----  -----------  -----
           Outstanding and
           exercisable end of     4,012,500     $ .99  1,601,250    $2.08
           year                   =========     =====  =========    =====

                                      F-14

<PAGE>

                         Oak Tree Medical Systems, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              May 31, 2001 AND 2000


NOTE C - COMMON STOCK - (CONTINUED)


         The following table summarizes option data as of May 31, 2001:

                                      Weighted
                                       Average    Weighted             Weighted
                                     Remaining    Average              Average
                          Number     Contractual  Exercise   Number    Exercise
                         Outstanding    Life      Price    Exercisable  Price
                         -----------    ----      -----    -----------  -----

           $0 to $0.991  2,670,000    $ 7.06       $0.10   2,670,000    $0.10
           $1 to $1.99     607,500      3.66        1.50     607,500     1.50
           $2 to $3.50     685,000      3.05        2.14     685,000     2.14
           $3.51 to         50,000      5.00        6.00      50,000     6.00
           $6.00         4,012,500                         4,012,500
                         =========                         =========

         Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
         "Accounting for Stock-Based Compensation," establishes financial
         accounting and reporting standards for stock-based employee
         compensation plans. The financial accounting standards of SFAS No. 123
         permit companies to either continue accounting for stock-based
         compensation under existing rules or adopt SFAS No. 123 and reflect the
         fair value of stock options and other forms of stock-based compensation
         in the results of operations as additional expense. The disclosure
         requirements of SFAS No. 123 require companies which elect not to
         record the fair value in the statement of operations to provide pro
         forma disclosures of net income and earnings per share in the notes to
         the financial statements as if the fair value of stock-based
         compensation had been recorded.

         The  Company  follows  Accounting   Principles  Board  Opinion
         No.  25 and its  related  interpretations  in  accounting  for
         its  stock-based  compensation plan.
         The Company utilized the Black-Scholes option pricing model to quantify
         the expense of options issued to nonemployees and the pro forma effects
         on net loss and net loss per share for the value of the options granted
         to employees during the fiscal years ended May 31, 2001 and 2000.

         The following assumptions were made in estimating fair value:

                                             2001          2000
                                          -----------------------
                  Risk-free interest           5%             6%
                  rate
                  Expected volatility        204%            42%
                  Expected option life    5-10 years      10 years


                                      F-15

<PAGE>

                         OAK TREE MEDICAL SYSTEMS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2001 AND 2000


NOTE C - COMMON STOCK - (CONTINUED)

         Had compensation cost been determined under SFAS No. 123 for the years
         ended May 31, 2001 and 2000, net loss and net loss per share would have
         been increased as follows:

                                                2001         2000
                                            -----------   -----------
                  Net loss:
                     As reported            $(3,407,193)  $(3,137,103)
                     Proforma for stock     $(3,843,403)  $(3,362,103)
                     options

                  Net loss per share:
                     As reported               $(.48)       $(.52)
                     Proforma for stock        $(.51)       $(.55)
                     options


NOTE D  -   INVESTMENT IN GOLD ORE

         As of May 31, 2001 and 2000, investment in gold ore is as follows:

                                            2001           2000
                                         -----------    -----------

                  Investment in gold      $4,994,214     $4,994,214
                  ore
                  Allowance for           (4,994,214)    (3,000,000)
                  impairment             -----------    -----------

                                         $         -    $ 1,994,214
                                         ===========    ===========

         During February 2001, due to lack of resources and inability to sell
         its investment in Gold Ore, management determined that its investment
         in Gold Ore should be fully offset by a valuation allowance.

NOTE E - FIXED ASSETS

         As of May 31, 2001 and 2000, fixed assets consisted of the following:

                                                     2001          2000
                                                 ------------- --------

                  Office equipment and furniture   $26,483        $26,483
                  Less accumulated depreciation
                    and amortization                26,843         24,521
                                                  --------       --------

                                                 $       -      $   1,962
                                                 =========      =========

         For the years ended May 31, 2001 and 2000, depreciation expense was
         $1,962 and $6,620 respectively.

                                      F-16

<PAGE>

                        OAK TREE MEDICAL SYSTEMS, INC.
                                AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MAY 31, 2001 AND 2000


NOTE F  -   INCOME TAXES

         For the years ended May 31, 2001 and 2000, the tax effects of timing
         differences which gave rise to deferred income taxes were as follows:

                                                        2001         2000
                                                        ----         ----

                  Net operating loss carryforwards  $   357,000  $   780,000
                  Cash basis                            (59,000)      58,000
                  Less valuation allowance           (1,175,000)    (838,000)
                  Allowance for  impairment of
                  Gold Ore                              877,000            -

                                                    $         -  $         -
                                                    ===========  ===========

         As of May 31, 2001 and 2000, the tax effects of the components of
         deferred income tax payable were as follows:

                                                     2001          2000
                                                     ----          ----

                  Allowance for impairment   of   $2,197,000    $ 1,324,000
                  gold ore
                  Net operating                    3,221,000      2,864,000
                  loss carryforwards
                  Cash basis                         335,000        394,000
                  Less valuation allowance        (5,753,000)    (4,582,000)
                                                  ----------    -----------

                                                  $        -    $         -
                                                  ==========    ===========

         The following is a reconciliation of income tax benefit computed at the
         34% statutory rate to the provision for income taxes:

                                                      2001         2000
                                                      ----         ----

                  Tax at statutory rate           $1,158,000    $   828,000
                  State income tax                   341,000        244,000
                  Allowance for impairment of       (678,000)             -
                  Gold Ore
                  Non-deductible options for        (318,000)    (1,072,000)
                  services
                  Valuation allowance               (503,000)
                                                    ---------
                                                  $        -              -
                                                  ===========   ===========

         As of May 31, 2001, realization of the Company's deferred tax assets of
         $5,754,000 resulting primarily from impairment of gold ore and net
         operating loss carryforwards, is not considered more likely than not,
         and accordingly, a valuation allowance of $5,754,000 has been
         established.

         As of May 31, 2001, the Company had net operating loss carryforwards of
         approximately $8,255,000 to reduce future Federal taxable income,
         expiring during various years through May 31, 2021. The Company's
         ability to utilize net operating losses may be limited pursuant to
         Internal Revenue Code Section 382.

                                      F-17

<PAGE>

                         OAK TREE MEDICAL SYSTEMS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2001 AND 2000


NOTE G  - RELATED PARTY TRANSACTIONS

         Consulting Agreement

         In December 1996, the Company granted ten-year options to acquire
         375,000 shares of Common Stock to Burton Dubbin, the son of Mr. Henry
         Dubbin, the Company's president, in exchange for consulting services.
         These options had an exercise price of $1.6875 per share and were to
         vest upon the earlier to occur of (i) the Company's achievement of
         certain financial benchmarks, (ii) the five-year anniversary of the
         issuance of the options and Mr. Burton's being an employee with the
         Company or (iii) a change of control (as defined). Mr. Burton Dubbin
         became an employee of the Company in April 1997. In August 1997, Mr.
         Burton Dubbin terminated his employment with the Company and entered
         into a two-year consulting agreement at a fee of $150,000 per annum,
         plus 125,000 shares of Common Stock, of which 25,000 shares were
         immediately issuable and 5,000 shares are issuable monthly (in an
         aggregate amount not to exceed 100,000 shares) for the duration of Mr.
         Burton Dubbin's service with the Company.

         In October 2000, the Company agreed to issue to Mr. Burton Dubbin
         registered trading shares at the current market value of $0.68 per
         share in lieu of his monthly cash consulting fee of $12,500. This
         agreement was for the ensuing twelve months ended August 2001 and
         covered 219,600 shares of Common Stock. In December 2000, Mr. Dubbin
         received 50,000 shares of Common Stock. In January 2001, the Company
         due to current market conditions delivered to Mr. Burton Dubbin the
         remaining 169,000 shares of Common Stock.


NOTE H  -   SUBSEQUENT EVENTS

         In July 2001,  the Company  entered into a consulting  agreement with
         Cary Kolopsky for a twelve month period.  Mr.  Kolopsky will act as a
         public  and  financial   relations  advisor  and  consultant  to  the
         Company.  Mr. Kolopsky  received  options to purchase  200,000 shares
         of the Company's Common Stock at the following prices:

                        15,000 Shares At $0.25 Per Share
                        50,000 Shares At $0.50 Per Share
                        10,000 Shares At $0.75 Per Share
                        25,000 Shares At $1.00 Per Share
                        50,000 Shares At $1.50 Per Share
                        50,000 Shares At $2.00 Per Share

         During June 2001, the Company repriced 1,570,000 options granted during
         November 2000 and 500,000 options granted during April 1999 to $.10. In
         August 2001, Burton Dubbin exercised Stock Options to purchase 800,000
         shares of the Company's Common Stock at $0.10 per share.

         During July 2001,  Mr.  Burton Dubbin  exercised  options to purchase
         800,000 shares of the Company's  stock.  Mr. Dubbin applied a $23,102
         advance  by him to the  Company as partial  payment  and the  Company
         issed a three-year,  interest-only note at prime 1% for the remaining
         amount of $56,898.


                                      F-18