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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-K



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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT
OF 1934



For the Fiscal Year Ended December 31, 2004



Commission File Number 0-32601



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ESSENTIAL GROUP, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 33-0597050                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)



1325 Tri-State
Parkway, Suite 300

Gurnee, Illinois 60031

(Address of Principal Executive Offices, Including Zip Code)



(847) 855-7500

(Registrants Telephone Number, Including Area Code)





AmericasDoctor, Inc.

(Former Name or former address, if changed since last report)



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Securities registered pursuant to Section 12(b):

None



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

Class A Common Stock, par value $.001



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



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ̈



Indicate by check mark whether the registrant
is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes ̈No  x



There is no public market for the common stock of Essential Group, Inc. At March 1, 2005, there were 3,430,043 shares of Class A common stock, par value $.001 per share, and 685,324 shares of Class B common stock, par
value $.001 per share, of Essential Group, Inc. outstanding.



DOCUMENTS INCORPORATED BY REFERENCE



Part III of this Form 10-K
incorporates by reference certain information from the information statement on Schedule 14C to be filed in connection with the taking of corporate action by the stockholders of Essential Group, Inc. to elect directors without a meeting, which
information statement will be filed with the Securities and Exchange Commission on or prior to April 30, 2005.



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FORWARD-LOOKING STATEMENTS



Statements in this annual report on Form 10-K that are not strictly historical, including statements as to plans,
objectives and future performance, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. These forward-looking statements can be
identified by the use of terminology such as believe, hope, may, anticipate, should, intend, plan, will, expect, estimate,
project, positioned, strategy and similar expressions. In addition, the statements relating to our liquidity needs and expectations are forward-looking. We have based these forward-looking statements on our
current expectations and projections about future events. You should be aware that these forward-looking statements are subject to risks and uncertainties that are beyond our control. These risks and uncertainties include unanticipated trends in the
clinical research industry, changes in healthcare regulations and economic, competitive, legal, governmental, and technological factors affecting operations, markets, products, services and prices. These forward-looking statements included in this
annual report on Form 10-K are not guarantees of future performances, and actual results could differ from those contemplated by these forward-looking statements. In the light of these risks and uncertainties, there can be no assurance that the
results and events contemplated by the forward-looking information contained in this annual report on Form 10-K will in fact transpire. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their
dates.



PART I



ITEM 1. BUSINESS



Unless otherwise indicated, references to Essential Group, the Company, we,
our and us in this annual report on Form 10-K refer to Essential Group, Inc. (formerly known as AmericasDoctor, Inc.) and its consolidated subsidiary.



Company Overview



We were founded in 1994 by several physicians as an affiliated site management network. We provide pharmaceutical, biotechnology, nutritional and device
companies a single source for managing the conduct of Phase I-IV clinical research in the United States. In March 2004 we expanded our services into three separate operating units under the corporate entity of Essential Group, Inc. The three units
are Essential CRO, Essential Patient Recruitment, and AmericasDoctor. We are considered a pharmaceutical services company providing services across the majority of functions for clinical development including experienced clinical investigative
sites. We offer our complete services across all three business units to clients in the pharmaceutical, biotech, nutritional, device, and governmental research industries.



We formally launched Essential Contract Research Organization (CRO) in May 2004 as a specialty full-service provider focused
in three therapeutic areas of urology, womens health, gastroenterology, and the associated oncologies for each. The CRO services are comprehensive from study design, study initiation, project management, quality assurance, data
management/statistical analysis, report writing, study closeout and regulatory support for filings. We conduct trials from phase I-IV in humans. We contract directly with the sponsor of the research trial and then execute on their behalf as a
contractor.



In June 2003, we formally launched the brand of
Essential Patient Recruitment as a full-service patient recruitment provider for clinical trials. Many recruitment firms identify patients for clinical trials, but struggle to get them enrolled. We had been providing patient recruitment services as
a service under AmericasDoctor since 1996. This operating unit uses creative advertising and media in print, radio, and television to attract, screen and refer patients who may qualify to be enrolled in a clinical trial. The patients are referred
directly to trained medical professionals at a study site who provide final assessment and qualification of the patient to be enrolled in a study. We provide patient recruitment services in over 60 different disease states. We contract directly with
the sponsor of the research project and then execute on their behalf as a contractor.



Our AmericasDoctor operating unit provides clinical research investigative site services through approximately 107 independently owned investigative sites encompassing approximately 275 principal investigators, with
over 900 total physicians, operating in 32 states in the United States and the District of



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Columbia. Through our network of investigative sites, we provide sponsors of clinical research with study management services, including access to
experienced investigators and study coordinators and large numbers of patients and centralized management of clinical research studies. These capabilities are designed to facilitate study start-up and quality and accuracy of study data. Our network
of investigative sites provides sponsors with the ability to complete clinical research trials quickly and efficiently. By integrating a leading community-based physician network and comprehensive site management expertise, we provide a broad range
of services, including patient recruitment and project management, fundamental to executing well-controlled clinical trials expeditiously and economically.



We were originally incorporated in the State of California on November 23, 1993 and reincorporated on September 19, 1996 in the State of Delaware. On
January 6, 2000, our wholly owned subsidiary merged with AmericasDoctor.com, Inc., an interactive Internet healthcare information site for consumers based in Maryland. In this annual report, the merger is sometimes referred to as the
Merger and the Maryland-based AmericasDoctor.com, Inc. is sometimes referred to as Old AmDoc. Following the Merger, Old AmDoc became our wholly-owned subsidiary and changed its name to AmericasDoctor Internet
Operations, Inc. and we changed our corporate name to AmericasDoctor.com, Inc. In November 2001, we changed our corporate name to AmericasDoctor, Inc. In December 2002, Old AmDoc was merged into us.



On September 17, 2003, our board of directors approved a business transition
plan to position us for stronger growth as we enter our second decade of service to the pharmaceutical, biotechnology, nutritional, device and governmental research industries. The new strategy was announced on October 27, 2003 and requires us to
tightly focus on more profitable growth through expanded project management services, expanded patient recruitment services and a more focused approach to site management. Through this business plan, we are focusing our resources in clinical trial
site management in four therapeutic areas: urology, womens health, gastroenterology and central nervous system and have exited from four other therapeutic areas related to AmericasDoctor site management services. In accordance with our
business plan, we changed our name to Essential Group, Inc. on March 24, 2004 and are offering expanded project management services and patient recruitment as a specialty contract research organization, or CRO, under a business unit
named Essential and continue to offer site management services under a business unit named AmericasDoctor.



Research Services



General



We have built three operating units that operate across the general scope of services required to conduct phase I-IV clinical research in humans. The
Essential CRO unit provides the overall project management for a clinical trial and is a replica of the clinical development organizations in the pharmaceutical industry. Our Essential Patient Recruitment unit provides the services now required in
many clinical studies to identify and enroll patients into clinical trials. Our third operating unit of AmericasDoctor is a U.S. network of independently owned investigative sites to facilitate and coordinate independent clinical research trials on
drugs and devices for pharmaceutical, biotechnology, nutritional and device companies and CROs located throughout the world; these entities are commonly referred to as sponsors. Each of the sites in our network is a party to an exclusive
clinical research services agreement with us. Pursuant to the agreement, we perform various services for the site through our central office, including patient recruitment, source documentation, regulatory services, quality assurance and other
consultation services. Although we provide various services to facilitate clinical research, the actual clinical trials are performed by the investigative sites. Through our network of investigative sites, we provide sponsors of clinical research
with study management services, including access to experienced investigators and study coordinators and large numbers of patients and centralized management of clinical research studies. These capabilities are designed to facilitate study start-up
and quality and accuracy of study data. Our collective operating units provide an array of services and a network of investigative sites to sponsors with the ability to complete clinical research trials quickly and efficiently. Our business is
currently focused on the U.S. markets.



By facilitating
business development and study start-up activities and providing management support and patient recruitment, we assist the investigative sites in growing their research practices.



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The Pharmaceutical Industry



Before a new pharmaceutical or biotechnology product can be marketed in the U.S., it must undergo extensive testing and
regulatory review to determine its relative safety and effectiveness. This process involves preclinical testing, which typically lasts for up to three years and involves animal testing and laboratory analysis to determine the basic biological
activity and safety of the product. Upon successful completion of the preclinical phase, the product undergoes a series of clinical tests in humans, including healthy volunteers as well as patients with the targeted disease. The clinical trial phase
is generally longer than preclinical testing, typically lasting five to seven years. In the U.S., preclinical and clinical testing must comply with the requirements of Good Clinical Practices and other standards promulgated by the Food and Drug
Administration, or the FDA, and other federal and state governmental authorities.



The need of pharmaceutical, biotechnology and device companies to both produce new products at low costs and comply with governmental regulations drives the clinical research industry. Competition and the increasing
pressure to control costs are forcing these companies to more efficiently develop new drugs and to seek ways to save time in the clinical development process in order to bring products to market faster. In an effort to save time and cut costs,
sponsors often outsource certain aspects of the clinical research process to third parties, including research networks. In addition, sponsors have found that investigator-prescribers, physicians who conduct clinical trials, help decrease the time
it takes to bring products to market. The physicians familiarity with the product, which results from them conducting the clinical trials, may accelerate the clinical investigators use of the medicine when it is marketed and assists with
the success of the market launch of the product.



CRO
Industry



The CRO industry is global with over 600
public and private companies providing an array of services to the pharmaceutical, biotech, nutritional, device, and governmental research industries. These CRO services range from pre-clinical animal testing to post-marketing product support. The
industry is dominated by companies who provide the full array of services across all therapeutic areas. The remainder of the CRO industry is specialized or niche in some manner. These niches can be by study phase, by therapeutic area, or by
functional service provided. Global capability is achieved either through global owned assets or through partnerships/joint ventures. CROs range in size from six to eight figure annual revenue. Many are publicly owned such as PPD, ICON, PRA, Parexel
and Covance. Most CROs are privately held.



Patient
Recruitment Industry



The patient recruitment industry
has emerged since the late 1990s led by major advertising and communication companies who have seen the move into the R&D market as a natural extension of their product marketing expertise. These ad agencies have pursued clinical trial
patient recruitment as a market segmentation strategy that provides them earlier access to products and clients for building relationships while applying their experience in building consumer awareness and response. The segmentation strategy of the
major ad agencies into the clinical trial patient recruitment domain has had questionable results. Accordingly, a growing number of pure-play patient recruitment firms, such as ours at Essential, have emerged with a distinct focus on expanding
awareness, opportunity and access to all patients for enrollment into clinical trials. This opportunity provides patients with controlled and early access to products and devices that may assist their medical condition years before the product or
device is available in the market. The service can provide the sponsor with accelerated or timely enrollment that can help them meet critical timelines with an associated potential reduction in the overall cost of clinical research from timely study
completion.



Investigative Sites



The investigative site industry includes all of the clinical investigators
who enroll patients in clinical trials and collect information at the patient level for pharmaceutical, biotechnology and device companies and CROs. All of the investigative sites in our network are owned by private practice physicians, and a few of
these sites conduct only clinical research trials. The size of the private physician practices in our network range from one physician to approximately twenty physicians. Typically, the investigative sites in our network consist of two to four
physician partners in a private practice medical office. We require the investigative sites to enter into a clinical research services agreement with us, which we believe creates significant stability for our business and our clients. These



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agreements govern the terms and conditions upon which the investigative site performs studies and outlines the scope of services we provide to the sites.
Pursuant to the terms of the clinical research services agreement, all clinical research services performed by the site are required to be conducted exclusively through us, except for studies in which we elect not to participate. In addition, these
agreements contain non-competition and non-solicitation covenants that limit or prohibit these sites from competing with us or hiring our personnel for a period of time after the termination of the agreement. The clinical research services agreement
provides that a percentage of the contract amount paid to us by study sponsors will be paid to the sites as investigator fees. The percentage of fees paid to investigative sites varies by contract depending upon the level of services provided to
these sites. The term of the clinical research services agreement is typically two years and automatically renews for additional terms of two years, unless either party terminates with 120 days prior written notice. The agreement may also be
terminated immediately if the investigative site loses its license, fails to comply with Good Clinical Practices or maintain standards of quality and scientific integrity, or is debarred from clinical research participation by local, state or
federal authorities.



Services to Sponsors



CRO: We assist the sponsors through our
Essential CRO unit by providing people and infrastructure they do not have to adequately execute on the portfolio of clinical trials. Our services can be used comprehensively, or on a functional need basis by the sponsor thus giving the sponsor
flexibility in execution and resource deployment. The CRO oversees all aspects of the clinical trial in close oversight and control by the sponsor central management team.



As a specialty CRO, we offer focused full service CRO expertise in three key therapeutic areas: urology, gastroenterology
and womens health. These services include project management, patient recruitment, study start-up, therapeutic consulting, clinical and medical monitoring, clinical labs and packaging, data management, biostatistics, quality assurance,
regulatory affairs, training and medical writing, either directly or through our partners, to the pharmaceutical and biotechnology industries. Our experience and expertise in project management of clinical trials, combined with our therapeutic
focus, enable us to offer valuable services to the industry.



Overall Essential CRO Services Provided to Sponsors



| |  |  | Protocol design and therapeutic consultation
| | - |  | --------------------------------------------



| |  |  | Project management
| | - |  | ------------------



| |  |  | Rapid study startup
| | - |  | -------------------



| |  |  | Clinical monitoring
| | - |  | -------------------



| |  |  | Patient recruitment
| | - |  | -------------------



| |  |  | Medical monitoring and drug safety
| | - |  | ----------------------------------



| |  |  | Clinical labs and packaging
| | - |  | ---------------------------



| |  |  | Data management and statistical analysis
| | - |  | ----------------------------------------



| |  |  | Quality assurance
| | - |  | -----------------



| |  |  | Regulatory affairs
| | - |  | ------------------



| |  |  | Training
| | - |  | --------



| |  |  | Medical writing
| | - |  | ---------------



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Patient Recruitment: We assist sponsors through our Essential Patient Recruitment unit by
providing strategy and execution of advertising, media procurement and placement to achieve timely recruitment of prospective patients for clinical trials. We refer the patients to the study site where medical professionals screen, enroll and manage
each patient while on the clinical trial. We work directly with each study site to optimize the flow, screen and enrollment of potential interested patients. Our historical knowledge and experience from running the AmericasDoctor investigative site
network is significant in helping our collaboration on patient recruitment with all study sites.



The recruitment of patients for clinical studies has been a major obstacle to the timely completion of clinical trials for over forty years. The
pharmaceutical industrys member organization, Pharmaceutical Research Manufacturers of America, estimates that over 85% of clinical studies fail to meet their patient recruitment timelines costing the industry billions of dollars a year in
lost revenue, shortened patent life, and increased research and development expense. The delays to recruiting patients are often caused by stringent protocol requirements and other restrictions. In addition, many patient recruitment business models
do not effectively deal with delays because they only identify potential patients; they do not actually enroll patients into clinical study treatments. Since 1998, we have conducted patient recruitment for clinical studies being conducted by the
investigative sites in our network and for sites that are not in our network but are part of a multi-center trial. We intend to further focus our efforts to expand opportunities in patient recruitment.



Overall Essential Patient Recruitment Services Provided to
Sponsors



| |  |  | Situation analysis
| | - |  | ------------------



| |  |  | Strategy development
| | - |  | --------------------



| |  |  | Tactical planning
| | - |  | -----------------



| |  |  | Media acquisition and placement
| | - |  | -------------------------------



| |  |  | Site integration
| | - |  | ----------------



| |  |  | Implementation and enrollment
| | - |  | -----------------------------



| |  |  | Metrics and reporting
| | - |  | ---------------------



AmericasDoctor: We assist the investigative sites in our AmericasDoctor network with planning and coordinating of independent clinical
trials on drugs and devices for pharmaceutical, biotechnology and device companies and CROs located throughout the world. Through our network of investigative sites, we provide sponsors with access to experienced investigators and study
coordinators, facilitate quick study start-up and ensure efficient production of quality study data. We provide patient recruitment to sponsors through investigative sites within and outside our network. We provide services designed to enable
sponsors of clinical trials to complete the clinical research process efficiently, cost effectively and in a high quality manner.



The clinical research portion of the drug development process involves selection of investigative sites to conduct the trials, the actual conduct of the
trials and the gathering and completion of the data generated during the trials. We facilitate the clinical trial process for sponsors by providing a single point of contact to identify the appropriate investigative sites within our network to
conduct the trials. The investigative sites in our network perform the clinical trials, focusing on Phases II through IV of the drug development process, and we provide those sites with various services designed for each clinical trial, including
sales, marketing, administrative support, patient recruitment, Good Clinical Practices training, source documentation, quality assurance and coordinator services.



Overall AmericasDoctor Services Provided to Sponsors



| |  |  | Access to experienced investigators
| | - |  | -----------------------------------



| |  |  | Access to large patient populations
| | - |  | -----------------------------------



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| |  |  | Centralized management
| | - |  | ----------------------



| |  |  | Protocol consultation
| | - |  | ---------------------



| |  |  | Protocol approval
| | - |  | -----------------



| |  |  | Accelerated product acceptance
| | - |  | ------------------------------



Services to Investigative Sites



Our success is dependent upon our ability to attract and retain high quality investigative sites. We provide the following services to these independently
owned sites:



| |  |  | Sales and marketing
| | - |  | -------------------



| |  |  | Contract/budget negotiation
| | - |  | ---------------------------



| |  |  | Training and education
| | - |  | ----------------------



| |  |  | Administrative and regulatory service
| | - |  | -------------------------------------



| |  |  | Source documentation
| | - |  | --------------------



| |  |  | Funds management
| | - |  | ----------------



| |  |  | Patient recruitment
| | - |  | -------------------



Competition



CRO



The CRO service industry is highly
fragmented. We compete with a number of CRO firms varying greatly in size, global reach, and service offerings. Some of our competitors have greater financial resources and name recognition, greater experience in specific diseases and offer a full
range of services internal to their company. While many of these competitors are broadly focused, we are focused specifically in targeted therapeutic areas with expertise and experience in project management as an outsourced CRO service firm in
assisting our customers in managing their clinical trials. While we believe that we compete favorably as a CRO service firm, there can be no assurance that we will be able to respond to pressures or changes from competitors.



Patient Recruitment



We compete with major global communications firms, niche or
pure-play patient recruitment firms, and a few CROs, some of which may be our sponsors. Although these companies primarily focus on Phase IV trials, to a growing extent, they also perform Phase II and Phase III trials.



AmericasDoctor



The clinical research industry is highly fragmented. We primarily compete
with private practice research sites. The majority of these private practice research sites are single sites dispersed throughout the country. We also compete with hospitals, academic medical centers and site management organizations, or SMOs. No
single competitor or group of competitors has a substantial presence in the clinical research industry. Some of our competitors have greater financial resources and name recognition, greater experience in specific diseases and conditions and larger
non-exclusive medical specialist networks than we do. Research sites generally compete on the basis of previous experience, medical and scientific expertise in specific therapeutic areas, quality of clinical research, ability to manage clinical
studies involving multiple sites, ability to provide administrative and regulatory services, ability to respond rapidly to requests for proposals, ability to rapidly recruit patients and geographic location. While we believe that we compete
favorably in most of these areas, there can be no assurance that we will be able to respond to these pressures or changes.



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Regulatory Matters



We are subject to substantial governmental regulation. The clinical investigation of new drugs is highly regulated by the FDA. The purpose of these
regulations is to ensure that only those products that have been proven to be safe and effective are made available to the public. Sponsors are obligated to comply with FDA regulations governing such activities as:



| |  |  | IRB oversight;
| | - |  | --------------



| |  |  | qualifications of investigators;
| | - |  | --------------------------------



| |  |  | obtaining patient informed consents;
| | - |  | ------------------------------------



| |  |  | reporting patients adverse reactions to drugs; and
| | - |  | ---------------------------------------------------



| |  |  | maintaining thorough and accurate records.
| | - |  | ------------------------------------------



FDA regulations require the principal investigator to maintain adequate and accurate records of each patient in a clinical trial, including source
documents such as medical records, eligibility screening logs, patient consent forms and drug dispensing records. Sponsors are required to maintain source documents for each study for specified periods and to make such documents available for review
by the study sponsor and the FDA during audits.



Study sponsors
monitor their research activities and compliance with study protocols by performing periodic audits at each investigative site. In addition, the FDA has the authority to investigate clinical research facilities and audit drug testing studies both
during the course of the study and after completion. If repeated or deliberate failure to comply with regulations or submission of false information is discovered, the individual investigator may be disqualified by the FDA from participating in
current or future clinical trials. The FDA may also disqualify data from previous trials conducted by the investigator.



Some other federal agencies, such as the Department of Health and Human Services, and some state and local governments may have additional regulations
regarding the use of human subjects in clinical trials. In addition, regulatory initiatives, such as the Health Insurance Portability and Accountability Act, relating to the use and retention of patient medical information may have an impact on our
storage and use of patient information in our databases. The information we currently use in connection with our study management services is de-identified and randomized in accordance with current regulations and we do not expect currently proposed
regulatory initiatives to have a significant impact on our operations. Depending on the scope of any new regulations restricting the use and retention of patient records, however, we may be obligated to incur additional costs to implement additional
systems to comply with these regulations. Although we do not expect these regulations to have a material impact on our operations, there can be no assurance that this will be the case.



As part of our clinical research trial management responsibilities, our study coordinators engage from time to time in
patient-screening activities that include physical contact with patients, such as taking blood. Accordingly, these study coordinators are subject to the requirements of the Occupational Heath and Safety Act and similar state regulations. The
Occupational Health and Safety Act and similar state laws require that our study coordinators satisfy annual training and certification requirements, which may vary significantly from state to state. The failure of our study coordinators to satisfy
these requirements may result in their disqualification from participating in clinical research studies or the imposition of fines and penalties upon us.



Several regulations have been passed that may restrict the ability of principal investigators to perform clinical research services for sponsors with whom
they have certain defined financial relationships or require additional administrative disclosure and paperwork regarding the existence of these relationships. Compliance with the financial relationship disclosure regulations has had little economic
effect on our business.



The delivery of healthcare services
and products is heavily regulated under federal and state law. For example, federal and state agencies regulate the practice of medicine and establish licensing and reimbursement requirements. In addition, through fraud and abuse laws, federal and
some state agencies prohibit payments for the referral of patients to a person participating in, or for the order, purchase or recommendation of items or services



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that are subject to reimbursement by, Medicare, Medicaid and other federal or state healthcare programs or third-party payors. While we have attempted to
structure our business activities in a manner that will not constitute the practice of medicine or involve prohibited referrals, federal and/or state healthcare regulatory authorities may determine that, in a particular case or generally, we are
engaged in the practice of medicine through the activities of our doctors or other healthcare professionals. We do not research the laws of each of the states in which we operate or obtain opinions or rulings from federal and state agencies with
authority to enforce these laws. A finding that our business activities violate any of these laws or statutes may have a material adverse effect on our business, financial condition and results of operations.



Intellectual Property



We rely primarily on a combination of copyrights, trademarks, trade secret laws, our user policy and restrictions on
disclosure to protect our intellectual property and our content, trademarks, trade names and trade secrets. We have filed several trademark applications and registrations for AmericasDoctor, Essential, Essential Group,
Inc. and other related trademarks. We license information and technology from third parties.



Employees



As of
February 1, 2005, we had approximately 114 full-time employees. None of our employees is represented by a labor union. We believe that relations with our employees are good.



ITEM 2. PROPERTIES



We lease approximately 31,153 square feet of space in Gurnee, Illinois where our headquarters are located. Our lease expires in December 2009, and may be
extended at our option, for two additional five-year terms. We also lease approximately 700 square feet in Tacoma, Washington for a coordinator site. The lease is month to month and may be terminated at any time. We believe that our properties are
generally suited for the purposes for which they are presently being used.



ITEM 3. LEGAL PROCEEDINGS



We are not aware of
any material litigation against us. In the ordinary course of our business, from time to time, we are a party to routine litigation.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



We submitted no matters to a vote of our stockholders during the fourth quarter of 2004.



PART II



ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASERS OF EQUITY SECURITIES



There is no established public trading market for our Class A common stock.
As of March 1, 2005, there were approximately 590 holders of record of our Class A common stock and one holder of record of our Class B common stock.



We have never paid a dividend on shares of our equity securities. We do not intend to pay any dividends on our Class A common stock during the foreseeable
future. It is anticipated that earnings, if any, from operations will be used to finance growth. Any future dividends on our Class A common stock will depend upon our results of operations, financial condition, working capital requirements and other
factors deemed relevant by our board of directors. In addition, our ability to declare and pay dividends on shares of our Class A common stock is restricted by the preferential rights of the holders of our Series A preferred stock to receive
specified dividends.



On February 10, 2003, we issued options
to purchase an aggregate of 23,000 shares of Class A common stock to Galen Advisors LLC and options to purchase an aggregate of 17,000 shares of Class A common stock to LHC Corporation. The options were exercisable 100% on the date of grant and
terminate on the tenth anniversary of the date of grant. These options were issued in consideration for services rendered by our directors, Zubeen Shroff and Claudie Williams, respectively, in 2002. The aggregate amount of consideration for these
options was $80,000.



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On December 16, 2003, we issued a Class A common stock warrant exercisable to purchase up to an aggregate
of 46,250 shares of our Class A common stock at $2.00 per share to Tatum CFO Partners, LLP pursuant to an employment agreement between us and our Chief Financial Officer, Dennis N. Cavender. The warrant was issued in lieu of stock options to be
granted to Mr. Cavender in consideration for his employment with us. The warrant was exercisable 25% on the first anniversary of the date of grant with the remaining portion becoming exercisable quarterly in equal installments for twelve quarters
thereafter, and terminates on the tenth anniversary of the date of grant or earlier if Dennis N. Cavender ceases to be employed by us in specified circumstances. In addition, on that date, we issued a Class A common stock warrant exercisable to
purchase up to an aggregate of 25,000 shares of our Class A common stock at $2.00 per share to AVOS LifeSciences, LLC in consideration for services rendered by an affiliate of AVOS LifeSciences, LLC to us in the aggregate amount of $50,000. The
warrant was exercisable 100% on the date of grant and terminates on the fifth anniversary of the date of grant.



On February 5, 2004, we issued a Class A common stock warrant exercisable to purchase up to an aggregate of 12,000 shares of our Class A common stock at
$2.00 per share to Galen Advisors LLC. The warrant was issued in consideration for services rendered by our director, Zubeen Shroff, in 2003. The warrant was exercisable 100% on the date of grant and terminates on the tenth anniversary of the date
of grant.



The above-described transactions were made in
reliance upon an exemption from registration under the Securities Act of 1933 pursuant to Section 4(2) of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder for transactions not involving a public offering. No underwriters
were engaged in connection with the sales of securities, and these sales were made without general solicitation or advertising.



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ITEM 6. SELECTED FINANCIAL DATA



The following table sets forth selected historical consolidated financial information of the Essential Group as of and for
each of the five years ended December 31, 2004, 2003, 2002, 2001 and 2000. The financial information for 2000 reflects the combined results of operations of Essential Group and Old AmDoc since January 6, 2000, the date of the Merger. Pro forma
financial statements to reflect the acquisition of Old AmDoc have not been presented as the financial statements as of and for the year ended December 31, 2000 reflect the Merger for the entire period (the results of operations of Old AmDoc for the
period from January 1 to January 5, 2000 were not significant).



The selected consolidated financial data as of and for each of the three years ended December 31, 2004 has been derived from our consolidated financial statements, which were audited by Grant Thornton LLP, our independent public
accountants. The selected consolidated financial data as of and for each of the two years ended December 31, 2001 has been derived from our unaudited consolidated financial statements. You should read the information in this table in conjunction
with our consolidated financial statements and the notes to those statements and Managements Discussion and Analysis of Financial Condition and Results of Operations, included in Item 7 below.



The consolidated statements of operations for each of the four years ended
December 31, 2003 are being restated as discussed in Managements Discussion and Analysis of Financial Condition and Results of Operations, included in Item 7 below. The consolidated balance sheets, consolidated statements of
stockholders deficit and consolidated statements of cash flows for each of these periods were not impacted by the restatement. You should read the information in this table in conjunction with our consolidated financial statements and the
notes to those statements and Managements Discussion and Analysis of Financial Condition and Results of Operations, included in Item 7 below.



|                                                 |  |                                       |        |   |               |   |        |               |  |   |                         |   |  |                         |         |   |  |   |         |  
|------------------------------------------------ |  | ------------------------------------- | ------ | - | ------------- | - | ------ | ------------- |  | - | ----------------------- | - |  | ----------------------- | ------- | - |  | - | ------- | -
|                                                 |  | For the Year Ended December 31,       |       
|                                                 |  | 2004                                  |        |   | 2003          |   |        | 2002          |  |   | 2001                    |   |  | 2000                    |        
|                                                 |  | (in thousands, except per share data) |       
|                                                 |  |                                       |        |   | (as restated) |   |        | (as restated) |  |   | (as restated,unaudited) |   |  | (as restated,unaudited) |        
|STATEMENT OF OPERATIONS DATA:                    |  |                                       |        |   |               |   |        |               |  |   |                         |   |  |                         |         |   |  |   |         |  
|Revenue                                          |  | $                                     | 47,985 |   |               | $ | 59,465 |               |  | $ | 66,587                  |   |  | $                       | 56,011  |   |  | $ | 57,462  |  
|Expenses                                         |  |                                       |        |   |               |   |        |               |  |   |                         |   |  |                         |         |   |  |   |         |  
|Direct study costs                               |  |                                       | 36,220 |   |               |   | 44,101 |               |  |   | 48,504                  |   |  |                         | 38,751  |   |  |   | 38,242  |  
|Selling, general and administrative              |  |                                       | 13,892 |   |               |   | 17,751 |               |  |   | 18,590                  |   |  |                         | 22,415  |   |  |   | 41,164  |  
|Class B common stock (depreciation) appreciation |  |                                       | (117   | ) |               |   | (178   | )             |  |   |                        |   |  |                         | (1,919  | ) |  |   | (1,028  | )
|Depreciation and amortization                    |  |                                       | 407    |   |               |   | 567    |               |  |   | 1,006                   |   |  |                         | 1,560   |   |  |   | 12,990  |  
|Impairment of goodwill                           |  |                                       |       |   |               |   |       |               |  |   |                        |   |  |                         | 7,208   |   |  |   | 22,964  |  
|Total expenses                                   |  |                                       | 50,230 |   |               |   | 62,241 |               |  |   | 68,100                  |   |  |                         | 68,045  |   |  |   | 114,332 |  
|Operating loss                                   |  |                                       | (2,417 | ) |               |   | (2,776 | )             |  |   | (1,513                  | ) |  |                         | (12,034 | ) |  |   | (56,870 | )
|Other (expenses) income, net                     |  |                                       | (51    | ) |               |   | (9     | )             |  |   | 95                      |   |  |                         | 305     |   |  |   | 304     |  
|Net loss                                         |  | $                                     | (2,468 | ) |               | $ | (2,785 | )             |  | $ | (1,418                  | ) |  | $                       | (11,729 | ) |  | $ | (56,566 | )
|Basic and diluted net loss per common share      |  |                                       |        |   |               |   |        |               |  |   |                         |   |  |                         |         |   |  |   |         |  
|Class A                                          |  | $                                     | (2.24  | ) |               | $ | (2.19  | )             |  | $ | (1.68                   | ) |  | $                       | (4.11   | ) |  | $ | (15.62  | )
|Class B                                          |  |                                       | (2.24  | ) |               |   | (2.19  | )             |  |   | (1.68                   | ) |  |                         | (4.11   | ) |  |   | (15.62  | )





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|                                             |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|-------------------------------------------- |  | ------------------ | -------- | - | ---- | - | -------- | ---- |  | - | -------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                             |  | As of December 31, |         
|                                             |  | 2004               |          |   | 2003 |   |          | 2002 |  |   | 2001     |   |  | 2000 |        
|                                             |  | (in thousands)     |         
|BALANCE SHEET DATA:                          |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|ASSETS                                       |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|                                             |  |                    |          |   |     
|Current assets                               |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|Cash and cash equivalents                    |  | $                  | 1,252    |   |      | $ | 1,984    |      |  | $ | 2,774    |   |  | $    | 5,601   |   |  | $ | 9,389   |  
|Other current assets                         |  |                    | 10,958   |   |      |   | 14,988   |      |  |   | 17,283   |   |  |      | 18,245  |   |  |   | 21,016  |  
|                                             |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|Total current assets                         |  |                    | 12,210   |   |      |   | 16,972   |      |  |   | 20,057   |   |  |      | 23,846  |   |  |   | 30,405  |  
|Fixed assets, net                            |  |                    | 519      |   |      |   | 774      |      |  |   | 1,260    |   |  |      | 1,997   |   |  |   | 3,029   |  
|Goodwill and other assets                    |  |                    | 24       |   |      |   | 27       |      |  |   | 24       |   |  |      | 24      |   |  |   | 7,578   |  
|                                             |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|                                             |  | $                  | 12,753   |   |      | $ | 17,773   |      |  | $ | 21,341   |   |  | $    | 25,867  |   |  | $ | 41,012  |  
|                                             |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|LIABILITIES & STOCKHOLDERS EQUITY (DEFICIT) |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|                                             |  |                    |          |   |     
|Current liabilities                          |  | $                  | 15,786   |   |      | $ | 18,227   |      |  | $ | 18,925   |   |  | $    | 22,046  |   |  | $ | 23,597  |  
|Long-term liabilities                        |  |                    |         |   |      |   |         |      |  |   | 25       |   |  |      | 53      |   |  |   | 21      |  
|Redeemable convertible preferred stock       |  |                    | 87,443   |   |      |   | 80,673   |      |  |   | 74,442   |   |  |      | 68,928  |   |  |   | 63,746  |  
|Stockholders equity (deficit)               |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|Equity                                       |  |                    | 33,013   |   |      |   | 33,124   |      |  |   | 33,184   |   |  |      | 33,142  |   |  |   | 35,040  |  
|Accumulated deficit                          |  |                    | (123,489 | ) |      |   | (114,251 | )    |  |   | (105,235 | ) |  |      | (98,302 | ) |  |   | (81,392 | )
|                                             |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|Total stockholders equity (deficit)         |  |                    | (90,476  | ) |      |   | (81,127  | )    |  |   | (72,051  | ) |  |      | (65,160 | ) |  |   | (46,352 | )
|                                             |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|                                             |  | $                  | 12,753   |   |      | $ | 17,773   |      |  | $ | 21,341   |   |  | $    | 25,867  |   |  | $ | 41,012  |  
|                                             |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  





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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Overview



We provide pharmaceutical, biotechnology, nutritional and device companies a single source for managing the conduct of Phase
I-IV clinical research in the United States. In March 2004 we expanded our services into three separate operating units under the corporate entity of Essential Group, Inc. The three units are Essential CRO, Essential Patient Recruitment, and
AmericasDoctor. We are considered a pharmaceutical services company providing services across the majority of functions for clinical development including experienced clinical investigative sites. We offer our complete services across all three
business units to clients in the pharmaceutical, biotech, nutritional, device, and governmental research industries.



We formally launched Essential Contract Research Organization (CRO) in May 2004 as a specialty full-service provider focused in three therapeutic areas of
urology, womens health, gastroenterology, and the associated oncologies for each. The CRO services are comprehensive from study design, study initiation, project management, quality assurance, data management/statistical analysis, report
writing, study closeout and regulatory support for filings. We conduct trials from phase I-IV in humans. We contract directly with the sponsor of the research trial and then execute on their behalf as a contractor.



In June 2003, we formally launched the brand of Essential Patient Recruitment
as a full-service patient recruitment provider for clinical trials. Many recruitment firms identify patients for clinical trials, but struggle to get them enrolled. We had been providing patient recruitment services as a service under AmericasDoctor
since 1996. This operating unit uses creative advertising and media in print, radio, and television to attract, screen and refer patients who may qualify to be enrolled in a clinical trial. The patients are referred directly to trained medical
professionals at a study site who provide final assessment and qualification of the patient to be enrolled in a study. We provide patient recruitment services in over 60 different disease states. We contract directly with the sponsor of the research
project and then execute on their behalf as a contractor.



Our
AmericasDoctor operating unit provides clinical research investigative site services through approximately 107 independently owned investigative sites encompassing approximately 275 principal investigators, with over 900 total physicians,
operating in 32 states in the United States and the District of Columbia. Through our network of investigative sites, we provide sponsors of clinical research with study management services, including access to experienced investigators and study
coordinators and large numbers of patients and centralized management of clinical research studies. These capabilities are designed to facilitate study start-up and quality and accuracy of study data. Our network of investigative sites provides
sponsors with the ability to complete clinical research trials quickly and efficiently. By integrating a leading community-based physician network and comprehensive site management expertise, we provide a broad range of services, including patient
recruitment and project management, fundamental to executing well-controlled clinical trials expeditiously and economically.



On September 17, 2003, our board of directors approved a business transition plan to position us for stronger growth as we enter our second decade of
service to the pharmaceutical, biotechnology, nutritional, device and governmental research industries. The new strategy was announced on October 27, 2003 and requires us to tightly focus on more profitable growth through expanded project management
services, expanded patient recruitment services and a more focused approach to site management. Through this business plan, we are focusing our resources in clinical trial site management in four therapeutic areas: urology, womens health,
gastroenterology and central nervous system and have exited from four other therapeutic areas related to AmericasDoctor site management services. In accordance with our business plan, we changed our name to Essential Group, Inc. on March
24, 2004 and are offering expanded project management services and patient recruitment as a specialty contract research organization, or CRO, under a business unit named Essential and continue to offer site management services under a
business unit named AmericasDoctor.



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As part of this plan, we have terminated contracts with a number of sites, resulting in a reduction in
workforce. The plan was completed in 2004 and resulted in the recognition of approximately $716,000 of severance costs between October 2003 and December 2004. We intend to invest additional capital and incur additional losses as we expand our
services as a CRO, while managing our site management and patient recruitment services. We expect to operate our existing site management and patient recruitment services businesses in a manner that will require minimal capital expenditures.



Our Class B common stock was established in 1996 as a
mechanism by which our research sites that have signed a clinical research service agreement and own Class A common stock could have an opportunity to participate in our equity. All of our Class B common stock is currently held by Affiliated
Research Centers, LLC, a Delaware limited liability company, or the LLC, for the benefit of its members. The amounts reflected in the results of operations represent non-cash charges or credits relating to changes in value of the LLC and the Class B
common stock which it owns. The value of the LLC and of the Class B common stock is determined periodically by an independent appraisal with interim valuations being made by our board of directors. Each LLC members percentage interest in the
limited liability company determines that members share of the Class B common stock to which they would be entitled if a distribution of those shares occurs. Each members percentage is determined based on a formula which includes the
amount of gross revenues earned by us through that member as a percentage of the total qualifying research revenues of all members of the LLC.



We have recognized operating losses in each fiscal year since our formation. Our site management services business relies heavily on the revenues
generated by our investigative sites. We experienced significant capital and operational expenditures associated with the acquisition of our on-line services in January 2000. Although we ceased all of the on-line services business in the fourth
quarter of 2001, we expect to incur operating losses and negative cash flows for the foreseeable future as we fund operating and other expenditures designed to expand our CRO business. Our site management services business has a history of losses.
We believe our site management services business and our new CRO business will be cash positive and generate income over the long-term; however, there can be no assurance that this will be the case.



Restatement of 2003 and 2002 Financial Statements



The consolidated statements of operations for our fiscal years ended
December 31, 2003 and 2002, for the first three quarters of 2004 and for each quarter of 2003 and 2002 are being restated as discussed below. The consolidated balance sheets, consolidated statements of stockholders deficit and consolidated
statements of cash flows for each of these periods were not impacted by the restatement.



As part of our business, we provide patient recruitment services to our customers. Patient recruitment services include advertising for study participants, call center operations and other related services provided by
us. These services can be contracted by the customer independent of or in conjunction with other services. Upon entering into an agreement to provide these services to a customer, we contract with third-party vendors to provide various aspects of
these services. We are responsible for the selection of vendors and the negotiation of terms such as price. Further, we are directly liable for all payments arising under these third-party vendor agreements, regardless of whether we receive payment
from our customers.



We have historically recorded revenues
derived from our patient recruitment services business net of any related costs incurred. Although the treatment of these revenues on a net basis was consistent with what our management understood to be industry practice at the time the revenue
recognition policy was adopted, management, in consultation with the Audit Committee of our Board of Directors and our independent auditor, Grant Thornton L.L.P., reviewed the above-mentioned facts in light of the multi-factor test set forth in the
Financial Accounting Standards Boards Emerging Issues Task Force Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent (EITF 99-19). This review was conducted to determine whether revenue
derived from our patient recruitment services business should be recorded on a gross basis.



On March 17, 2005, the Audit Committee and management determined that EITF 99-19 requires revenues derived from our patient recruitment services business to be recorded as gross revenue inclusive of any related costs
incurred. The Audit Committee and management discussed this change with our independent auditor, who agreed with this determination. As such, we are restating our consolidated statements of operations to present such revenues on a gross basis in
accordance with accounting principles generally accepted in the United States, or U.S. GAAP, and EITF 99-19.



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Patient recruitment revenues are reflected at gross in the consolidated statements of operations for the
years ended December 31, 2004, 2003 and 2002 included in this annual report on Form 10-K and will be reflected at gross in the consolidated statements of operations in our quarterly reports on Form 10-Q to be filed with the SEC for the first three
quarters of 2005. Operating losses and net losses for the restated periods are not affected by this restatement. We have not amended our previously filed annual reports on Form 10-K or quarterly reports on Form 10-Q to reflect the restatement, and
the financial statements and related financial information contained in those reports should no longer be relied upon.



The following table summarizes the restatements described above:



Effect on Consolidated Statements of Operations

(in thousands)



|                   |  |                                    |   |  |                                     |   |  |                      |   |  |             |  
|------------------ |  | ---------------------------------- | - |  | ----------------------------------- | - |  | -------------------- | - |  | ----------- | -
|                   |  | Fiscal Year EndedDecember 31, 2003 |   |  | Fiscal Year Ended December 31, 2002 |  
|                   |  | (audited)                          |  
|                   |  | AsPreviouslyReported               |   |  | AsRestated                          |   |  | AsPreviouslyReported |   |  | As Restated |  
|Revenue            |  | 45,399                             |   |  | 59,465                              |   |  | 49,381               |   |  | 66,587      |  
|Direct Study Costs |  | 30,035                             |   |  | 44,101                              |   |  | 31,298               |   |  | 48,504      |  
|Total Expenses     |  | 48,175                             |   |  | 62,241                              |   |  | 50,894               |   |  | 68,100      |  
|Operating Loss     |  | (2,776                             | ) |  | (2,776                              | ) |  | (1,513               | ) |  | (1,513      | )





|                   |  |                            |   |  |            |   |  |                      |   |  |             |   |  |                      |   |  |            |   |  |                      |   |  |            |  
|------------------ |  | -------------------------- | - |  | ---------- | - |  | -------------------- | - |  | ----------- | - |  | -------------------- | - |  | ---------- | - |  | -------------------- | - |  | ---------- | -
|                   |  | For The Three Months Ended |  
|                   |  | (unaudited)                |  
|                   |  | March 31                   |   |  | June 30    |   |  | September 30         |   |  | December 31 |  
|                   |  | AsPreviouslyReported       |   |  | AsRestated |   |  | AsPreviouslyReported |   |  | AsRestated  |   |  | AsPreviouslyReported |   |  | AsRestated |   |  | AsPreviouslyReported |   |  | AsRestated |  
|2004               |  |                            |   |  |            |   |  |                      |   |  |             |   |  |                      |   |  |            |   |  |                      |   |  |            |  
|Revenue            |  | 11,165                     |   |  | 13,823     |   |  | 9,855                |   |  | 12,028      |   |  | 8,321                |   |  | 9,830      |   |  |                     |   |  |           |  
|Direct Study Costs |  | 7,739                      |   |  | 10,397     |   |  | 6,871                |   |  | 9,044       |   |  | 5,756                |   |  | 7,265      |   |  |                     |   |  |           |  
|Total Expenses     |  | 11,613                     |   |  | 14,271     |   |  | 10,657               |   |  | 12,830      |   |  | 9,047                |   |  | 10,556     |   |  |                     |   |  |           |  
|Operating Loss     |  | (448                       | ) |  | (448       | ) |  | (802                 | ) |  | (802        | ) |  | (726                 | ) |  | (726       | ) |  |                     |   |  |           |  
|2003               |  |                            |   |  |            |   |  |                      |   |  |             |   |  |                      |   |  |            |   |  |                      |   |  |            |  
|Revenue            |  | 11,019                     |   |  | 14,937     |   |  | 12,558               |   |  | 16,759      |   |  | 10,838               |   |  | 13,839     |   |  | 10,984               |   |  | 13,930     |  
|Direct Study Costs |  | 7,012                      |   |  | 10,930     |   |  | 8,474                |   |  | 12,675      |   |  | 7,267                |   |  | 10,268     |   |  | 7,282                |   |  | 10,228     |  
|Total Expenses     |  | 11,731                     |   |  | 15,649     |   |  | 13,234               |   |  | 17,435      |   |  | 11,637               |   |  | 14,638     |   |  | 11,573               |   |  | 14,519     |  
|Operating Loss     |  | (712                       | ) |  | (712       | ) |  | (676                 | ) |  | (676        | ) |  | (799                 | ) |  | (799       | ) |  | (589                 | ) |  | (589       | )
|2002               |  |                            |   |  |            |   |  |                      |   |  |             |   |  |                      |   |  |            |   |  |                      |   |  |            |  
|Revenue            |  | 13,277                     |   |  | 20,357     |   |  | 13,315               |   |  | 16,809      |   |  | 11,875               |   |  | 15,911     |   |  | 10,914               |   |  | 13,510     |  
|Direct Study Costs |  | 8,404                      |   |  | 15,488     |   |  | 8,520                |   |  | 12,014      |   |  | 7,449                |   |  | 11,485     |   |  | 6,921                |   |  | 9,517      |  
|Total Expenses     |  | 13,463                     |   |  | 20,543     |   |  | 13,634               |   |  | 17,128      |   |  | 12,105               |   |  | 16,141     |   |  | 11,692               |   |  | 14,288     |  
|Operating Loss     |  | (186                       | ) |  | (186       | ) |  | (319                 | ) |  | (319        | ) |  | (230                 | ) |  | (230       | ) |  | (778                 | ) |  | (778       | )



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Critical Accounting Policies



Our consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting principles require us to
make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonably based upon information available to us at the time that these estimates, judgments and assumptions are
made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. To the
extent there are material differences between these estimates, judgments and assumptions and actual results, our financial statements will be affected. The significant accounting policies that we believe are the most critical to aid in fully
understanding and evaluating our reported financial results include the following:



| |  |  | Revenue recognition;
| | - |  | --------------------



| |  |  | Allowance for doubtful accounts;
| | - |  | --------------------------------



| |  |  | Impairment of long-lived assets;
| | - |  | --------------------------------



| |  |  | Accounting for income taxes; and
| | - |  | --------------------------------



| |  |  | Valuation of Class B common shares.
| | - |  | -----------------------------------



In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP and does not require managements judgment
in its application. There are also areas in which managements judgment in selecting among available alternatives would not produce a materially different result. Our senior management has reviewed these critical accounting policies and related
disclosures with our audit committee. See the notes to consolidated financial statements, which contain additional information regarding our accounting policies and other disclosures required by U.S. GAAP.



Revenue Recognition



Revenue is generated from contracts with sponsors. Revenue on each contract,
or study revenue, is recognized as the qualified patient visits occur or the service is provided. Our service agreements with the investigative sites provide that a percentage of the contract amount will be paid to the sites as investigator fees.
The percentage of fees paid to the investigator sites varies by contract depending on the level of services that we provide. As study revenue is recognized, the investigator fees to investigative sites are recognized as costs and amounts to be paid
to the sites are recorded as accrued investigator fees. Advances on contracts by sponsors are classified as deferred revenue until services are performed. The related payments to sites are classified as prepaid expenses until services are performed.



Revenue from CRO services is generated from contracts with
sponsors. Revenue on each contract is recognized as the Company provides study-related services such as project management, study start-up, therapeutic consulting, clinical and medical monitoring, clinical labs and packaging, data management,
biostatistics, quality assurance, regulatory affairs, training and medical writing, either directly or through our partners. The Companys service agreements with the investigator sites and third party service providers pay a fixed dollar
amount per patient visit or procedure performed to be paid as a direct fee. As CRO revenue is recognized, the direct fees are recognized as costs and amounts to be paid to the Sites or third party service providers are recorded as accrued fees.
Advances on contracts by sponsors are classified as deferred revenue until services are performed. The related advance payments to Sites or third party service providers are classified as prepaid expenses until services are performed.



Patient recruitment revenue is also generated from contracts with sponsors.
Revenue on each contract is recognized as the Company provides recruitment related services such as designing and contracting media ads specific to our sponsor studies. The Company negotiates with partner and third party service providers for
related media and other direct fees. As patient recruitment revenue is recognized, the direct fees are recognized as costs and amounts to be paid to the service providers are recorded as accrued fees. Advances on contracts by sponsors are classified
as deferred revenue until services are performed. The related advance payments to partner or third party service providers are classified as prepaid expenses until services are performed.



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##### Table of Contents

In accordance with EITF 99-19 and Staff Accounting Bulletin SAB 101, we recognize our study revenue on a
gross basis as we act as a principal in such transactions, can influence price, are involved in the product specifications and have credit risk.



Allowance for Doubtful Accounts



We determine our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss
history, the customers current ability to pay its obligation and the condition of the general economy and the industry as a whole. We make judgments as to our ability to collect outstanding receivables based on these factors and provide
allowances for these receivables when collections become doubtful. Provisions are made based on specific review of all significant outstanding balances.



Impairment of Long-lived Assets



Long-lived assets are reviewed for impairment whenever events such as service discontinuance, contract terminations, economic or other changes in
circumstances indicate that the carrying amount may not be recoverable. When these events occur, we compare the carrying amount of the assets to undiscounted expected future cash flows. If this comparison indicates that there is impairment, the
amount of the impairment is typically calculated using discounted expected future cash flows.



Accounting for Income Taxes



We account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Under the asset and liability method of SFAS No. 109, deferred income taxes
are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax bases of existing assets and liabilities using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled.



We have incurred historical net operating losses, or NOLs, for federal income tax purposes. Accordingly, no federal income tax provision has been recorded to date and there are no taxes payable. In assessing the
realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation of
future taxable income during the periods in which those temporary differences become deductible. Based upon the level of historical losses that may limit utilization of NOL carry forwards in future periods, management is unable to predict whether
these net deferred tax assets will be utilized prior to expiration. The unused NOL carry forwards expire in years 2008 through 2024. As such, we have recorded a full valuation allowance against net deferred tax assets. Although we believe that our
estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different than that which is reflected in our historical income tax provisions. Such differences could have a material effect on our income tax
provision and net income in the period in which such determination is made.



Valuation of Class B common shares



The fair value of the Class B common shares are determined periodically by an independent third party valuation firm. The valuation is based upon financial and other information supplied by us along with public market
information directly accessed by the valuation firm.



Results of Operations



Year Ended December 31, 2004 Compared to Year Ended
December 31, 2003 (Restated)



For the year 2004,
revenues decreased to $48.0 million compared to $59.5 million in 2003, a decrease of $11.5 million, or 19.3%. This decrease was the result of the reduction in therapeutic offerings related to study and patient recruitment services as discussed above
and an anticipated change in the duration of studies for the remaining therapeutic categories.



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Direct study costs (investigator fees and other study costs such as laboratory fees and patient stipends)
were $36.2 million in 2004 compared to $44.1 million in 2003, a decrease of $7.9 million, or 17.9%. The decrease in direct study costs resulted from the decrease in revenues discussed above. Direct study costs as a percentage of revenue were 75.5%
in 2004 compared to 74.2% in 2003. The increase was attributable to the therapeutic revenue mix and associated levels of outsourced study costs.



Selling, general and administrative costs were $13.7 million in 2004 compared to $17.8 million in 2003, a decrease of $3.9 million, or 21.7%. As a result
of the reduced therapeutic offerings as discussed above, we realized cost reductions in the areas of research operations ($3.6 million), patient recruitment ($1.3 million) and shared services ($1.0 million) offset by $0.2 million in expenses related
to the termination of the CapitalSource Credit Agreement and an additional $1.6 million of development costs related to our expansion of CRO services.



In 2004 and 2003, the valuation of each share of Class B common stock depreciated due to our financial performance. An independent valuation concluded
that during 2004, the Class B common stock depreciated $0.17 per share to a value of $0.27 per share for a value adjustment of $0.1 million. In 2003, the valuation of each share depreciated by $0.26 per share to a value of $0.44 per share for a
total value adjustment of $0.2 million. Such valuation is highly judgmental and a change in valuation assumptions could have a material impact on our financial statements.



Depreciation and amortization expenses decreased to $0.4 million in 2004 compared to $0.5 million in 2003, a decrease of
$0.1 million, or 28.2%. This decrease resulted from certain fixed assets becoming fully depreciated.



Operating loss decreased to $2.2 million in 2004 compared to $2.8 million in 2003. As discussed above, the $0.6 million decrease was driven by the $6.9
million decrease in revenues, which was offset by reductions of $3.2 million in direct study costs, $4.1 million reduction in selling, general and administrative costs, $0.1 million in Class B common stock depreciation and $0.1 million in
depreciation and amortization.



Other expenses were $0.2
million for 2004 compared to $0.0 million of 2003. This increase was the result of interest paid on the line of credit established and utilized in 2004.



Year Ended December 31, 2003 (Restated) Compared to Year Ended December 31, 2002 (Restated)



For the year 2003, revenues decreased to $59.5 million compared to $66.6
million in 2002, a decrease of $7.1 million, or 10.7%. The economic slow down and a downturn in research and development spending by pharmaceutical companies had a negative impact on revenues during 2003. Additionally, customers, at their
discretion, delayed a number of new contract start-ups until late in the second quarter 2003 and beyond due primarily to formulation issues and increased mergers and acquisitions in the industry.



Direct study costs were $44.1 million in 2003 compared to $48.5 million in
2002, a decrease of $4.4 million, or 9.1%. The decrease in direct study costs resulted from the decrease in revenues discussed above. Direct study costs as a percentage of revenue were 74.2% in 2003 compared to 72.8% in 2002. The increase is
attributable to the therapeutic revenue mix and associated levels of outsourced study costs.



Selling, general and administrative costs were $17.8 million in 2003 compared to $18.6 million in 2002, a decrease of $0.8 million, or 4.5%. The majority of the decrease was attributable to cost reductions in the
areas of research services ($0.6 million - primarily staff reductions due to structural changes), corporate administration ($0.1 million) and information technology ($0.1 million).



In 2003, the valuation of each share of Class B common stock depreciated due to our financial performance. An independent
valuation concluded that during 2003, the Class B common stock depreciated $0.26 per share. In 2002, an independent valuation concluded that there was no change to the Class B common stock value.



Depreciation and amortization expenses decreased to $0.6 million in 2003
compared to $1.0 million in 2002, a decrease of $0.4 million, or 43.6%. This decrease resulted from certain fixed assets becoming fully depreciated.



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Operating loss increased to $2.8 million in 2003 compared to $1.5 million in 2002. As discussed above,
the $1.3 million increase was driven by the $4.0 decrease in revenues, which was offset by reductions of $1.3 million in direct study costs, $0.8 million reduction in selling, general and administrative costs, $0.2 million in Class B common stock
depreciation and $0.4 million in depreciation and amortization.



Other income was $0.0 million for 2003 compared to $0.1 million of 2002. This reduction was the result of lower levels of interest-bearing cash balances due to continued operating losses.



Liquidity and Capital Resources



Net cash used in operating activities was approximately $1.2 million, $0.7
million and $2.5 million for the years ended December 31, 2004, 2003 and 2002, respectively. Cash used in operating activities increased in 2004 from 2003 due to an increase in net loss resulting from the expansion of CRO services. Cash used in
operating activities decreased substantially in 2003 from 2002 due to an increase in net loss offset by changes in working capital accounts.



Working capital was approximately $(3.6) million as of December 31, 2004 and ($1.3) million as of December 31, 2003. The decrease from December 31, 2003
to December 31, 2004 of $2.3 million, or 177%, was primarily the result of the decrease in cash from funding operations and the expansion of services as a CRO.



We have generated negative cash flows since our inception. As a result, we have financed our operations to date through the sale of equity securities.
To date, we have raised approximately $53.6 million in net proceeds from the sale of common stock, redeemable convertible preferred stock, and preferred stock. Cash and cash equivalents and short-term marketable securities were approximately $1.3
million and $2.0 million as of December 31, 2004 and December 31, 2003, respectively.



On September 27, 2004, we and our subsidiary, AmericasDoctor.com Coordinator Services, Inc., entered into a secured revolving credit agreement with Silicon Valley Bank (the Credit Facility). The Credit
Facility permits a maximum borrowing capacity of $6.0 million and has a termination date of September 27, 2006.



Amounts available under the Credit Facility are calculated as a percentage of our eligible receivables and were capped at $2.5 million through December
31, 2004. As of December 31, 2004, we would have had availability under the Credit Facility of $3.6 million but for the $2.5 million cap. As of December 31, 2004, we had $0.7 million of borrowings outstanding.



The Credit Facility requires that we pay minimum monthly interest of $3,500,
even if no borrowings are outstanding. Borrowings under the Credit Facility are secured by substantially all of our assets. Among other restrictions, the Credit Facility includes certain restrictive covenants, including covenants related to
indebtedness and asset acquisitions and dispositions and requires us to comply with a number of affirmative covenants related to the operation of our business, including financial covenants regarding a minimum ratio of assets to liabilities, a
minimum tangible net worth and a requirement that holders of over one-third of our Series A-2 through A-6 preferred stock waive their rights to, or otherwise agree not to, redeem such stock until at least October 27, 2006. Under the Credit Facility,
borrowings bear interest at prime plus 1.0%, subject to a minimum interest rate of 5.5% and the previously described minimum monthly interest requirement. As of December 31, 2004, we were in compliance with the debt covenants. At December 31, 2004,
the prevailing interest rate under the Credit Facility was 6.25%.



On September 27, 2004, in connection with our entry into the Credit Facility described above, we terminated our existing secured revolving credit agreement with CapitalSource Finance LLC (the CapitalSource Credit Agreement). The
Credit Facility described above provides us with an increased borrowing capacity due to a more favorable definition and calculation of eligible receivables, more flexible financial covenants and a lower cost of borrowing.



The Capital Source Credit Agreement permitted a maximum borrowing capacity of
$6.0 million and was scheduled to terminate on February 20, 2007. Amounts available under the CapitalSource Credit Agreement depended on the amount of our eligible receivables. The amount available for borrowing under the CapitalSource agreement at
the time of termination was approximately $1.8 million. The CapitalSource Credit Agreement required



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us to pay an unused line fee of 0.5% per annum on the average daily-unused portion of the revolving loan. Borrowings under this agreement were secured by
substantially all of our assets. Among other restrictions, the CapitalSource Credit Agreement included certain restrictive covenants, including covenants related to indebtedness, related party transactions and investment limitations and required us
to comply with a number of affirmative covenants related to the operation of our business, including covenants related to minimum liquidity, EBITDA (as defined in the CapitalSource Credit Agreement) and fixed charge coverage ratio requirements, a
limit on fixed charges, and a requirement that, by January 1, 2005, holders of over one-third of our Series A-2 through A-6 preferred stock shall have waived their rights to, or otherwise agreed not to, redeem such stock until at least May 20, 2007.
Under the CapitalSource Credit Agreement, borrowings bore interest at prime plus 2.0%, subject to a minimum interest rate of 7.5%.



As a result of the termination of the CapitalSource Credit Agreement, we were required to pay CapitalSource Finance LLC a termination fee of $150,000 plus
related interest and other expenses of $18,889. These payments are reflected in the December 31, 2004 financial statements contained herein.



On March 28, 2005, Silicon Valley Bank and the Company agreed to amend the minimum ratio of assets to liabilities (Quick Ratio) financial
covenant set forth in the Credit Facility described above. Under the terms of the amended agreement, we are still required to maintain a Quick Ratio of not less than 0.75 to 1.00 but if the Quick Ratio does fall below 0.75 to 1.00 but is at least
0.65 to 1.00 at any time through March 31, 2006, such violation will not constitute an event of default. The amendment extends the date for which failure to maintain a Quick Ratio of not less than 0.75 to 1.00 would not constitute an event of
default if such ratio was at least 0.65 to 1.00 from June 30, 2005 to March 31, 2006. Advance rate and interest rate adjustments under the amended agreement for Quick Ratios of less than 0.75 to 1.00 but not less than 0.65 to 1.00 remain unchanged
under the terms of the amendment.



Management believes that the
funds available under the credit facility and our cash on hand will be sufficient to meet our liquidity needs and fund operations through the next twelve months. However, any projections of future cash inflows and outflows are subject to substantial
uncertainty, including risks and uncertainties relating to our business plan to expand our CRO business, which may require additional capital. In addition, we may, from time to time, consider acquisitions of or investments in complementary
businesses, products, services and technologies, which may impact our liquidity requirements or cause us to seek additional equity or debt financing alternatives. Beyond 2005, we may need to raise additional capital to meet our long-term liquidity
needs. If we determine that we need additional capital, we may seek to issue equity or obtain debt financing from third party sources. The sale of additional equity or convertible debt securities could result in dilution to our stockholders. Any
additional debt financing, if available, could involve further restrictive covenants, which could adversely affect our operations. There can be no assurance that any of these financing alternatives will be available in amounts or on terms acceptable
to us, if at all. If we are unable to raise any needed additional capital, we may be required to significantly alter our operating plan, which could have a material adverse effect on our business, financial condition and results of operations.



Lease Arrangements, Rent Expense and Other Contractual Obligations



We have entered into operating lease agreements for
office space and office equipment. The following is a schedule of the future minimum lease commitments relating to all leases as of December 31, 2004 (in thousands):



|                            |  |                       |  |                 |  |           |  |           |  |                 
|--------------------------- |  | --------------------- |  | --------------- |  | --------- |  | --------- |  | ----------------
|                            |  | Payment due by period
|Contractual Obligations     |  | Total                 |  | Less than1 year |  | 1-3 years |  | 3-5 years |  | More than5 years
|Capital Lease Obligations   |  |                      |  |                |  |          |  |          |  |                
|Operating Lease Obligations |  | 3,303                 |  | 632             |  | 1,301     |  | 1,370     |  |                



See also note 12 to
the notes to our consolidated financial statements for the year ended December 31, 2004.



In addition, under the terms of our Series A preferred stock, at any time after March 27, 2005, the holders representing at least 662/3% of our Series A-2, A-3, A-4, A-5 and A-6 preferred stock may require us to redeem all outstanding shares of our Series A preferred stock at a price equal to the liquidation
value at the time of redemption, plus an amount equal to the cumulative amount of unpaid dividends as if such dividends had accrued at a rate of 8% per annum on the liquidation value.



Impact of New Accounting Pronouncements



In June 2002, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 146, Accounting for Costs Associated with Exit or Disposal Activities. The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to
an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance



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costs that are associated with a restructuring, discontinued operation, plant closing or other exit or disposal activities. SFAS No. 146 replaces EITF 94-3
and applies to exit or disposal activities initiated after December 31, 2002. We adopted SFAS No. 146 in 2003. The standard resulted in the recording of employee severance costs of approximately $112,000, which were paid during 2004.



SFAS No. 148, Accounting for Stock-Based Compensation  Transition
and Disclosure, provides alternative transition methods for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, it amends the disclosure and certain transition provisions of SFAS
No. 123, Accounting for Stock-Based Compensation, to require prominent disclosures in annual financial statements about the method of accounting for stock-based employee compensation and the pro forma effect on reported results of
applying the fair value based method for entities that use the intrinsic value method of accounting. The pro forma effect disclosures are also required to be prominently disclosed in interim period financial statements. We do not plan to change to
the fair value based method of accounting for stock-based employee compensation provided for in SFAS No. 148 and have adopted the disclosure provisions of this standard.



At December 31, 2004, we had stock-based employee incentive plans and stock-based director, consultants and network founders
plans. We account for the employee plans under the recognition and measurement principals of Accounting Principals Board Opinion 25, Accounting for Stock Issued to Employees, and related interpretations. No stock-based employee incentive
cost is reflected in net loss, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock at the date of grant. The following table illustrates the effect on net loss and earnings per
share if we had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee incentives (in thousands, except per share data):



|                                                                                                                                            |  |                         |        |   |      |   |         |      |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                                                                                                            |  | Year Ended December 31, |       
|                                                                                                                                            |  | 2004                    |        |   | 2003 |   |         | 2002 | 
|Net loss, as reported                                                                                                                       |  | $                       | (9,238 | ) |      | $ | (9,017  | )    |  | $ | (6,932 | )
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                         | (578   | ) |      |   | (1,289  | )    |  |   | (441   | )
|                                                                                                                                            |  |                         |        |   |      |   |         |      |  |   |        |  
|Pro forma net loss                                                                                                                          |  | $                       | (9,816 | ) |      | $ | (10,306 | )    |  | $ | (7,373 | )
|                                                                                                                                            |  |                         |        |   |      |   |         |      |  |   |        |  
|Loss per share:                                                                                                                             |  |                         |        |   |      |   |         |      |  |   |        |  
|Basic and diluted  as reported                                                                                                             |  | $                       | (2.24  | ) |      | $ | (2.19   | )    |  | $ | (1.68  | )
|                                                                                                                                            |  |                         |        |   |      |   |         |      |  |   |        |  
|Basic and diluted  pro forma                                                                                                               |  | $                       | (2.39  | ) |      | $ | (2.50   | )    |  | $ | (1.79  | )
|                                                                                                                                            |  |                         |        |   |      |   |         |      |  |   |        |  



The pro forma
disclosure is not likely to be indicative of pro forma results which may be expected in future years because of the fact that options vest over several years, pro forma compensation expense is recognized as the options vest and additional awards may
also be granted.



For purposes of determining the effect of
these options, the fair value of each option is estimated on the date of grant based on the Black-Scholes single-option pricing model assuming the following for the years ended December 31, 2004, 2003 and 2002:



|                        |  |      |   |  |                 |  |      |  
|----------------------- |  | ---- | - |  | --------------- |  | ---- | -
|                        |  | 2004 |   |  | 2003            |  | 2002 |  
|Dividend yield          |  | 0.0  | % |  | 0.0%            |  | 0.0  | %
|Risk-free interest rate |  | 4.1  | % |  | 3.6% to 4.3%    |  | 4.8  | %
|Volatility factor       |  | 77.0 | % |  | 66.0% to 77.0%  |  | 66.0 | %
|Expected life in years  |  | 10   |   |  | 10              |  | 10   |  
|                        |  |      |   |  |                 |  |      |  
|Volatility factor       |  | 77.0 | % |  | 66.0 % to 77.0% |  | 66.0 | %



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On May 15, 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS No. 150 changes the classification in the statement of financial position of certain common financial instruments from either equity or mezzanine presentation to liabilities and requires an
issuer of those financial statements to recognize changes in fair value or redemption amount, as applicable, in earnings. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and is effective at the
beginning for the first interim period beginning after June 15, 2003. SFAS No. 150 had no impact upon adoption on July 1, 2003.



In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment (SFAS No. 123(R)). This statement requires that the compensation cost
relating to share based payment transactions be recognized in the financial statements. Compensation cost is to be measured based on the estimated fair value of the equity-based compensation awards issued as of the grant date. The related
compensation expense will be based on the estimated number of awards expected to vest and will be recognized over the requisite service period (often the vesting period) for each grant. The statement requires the use of assumptions and judgments
about future events and some of the inputs to the valuation models will require considerable judgment by management. SFAS No. 123(R) replaces SFAS No. 123, Accounting for Stock Based Compensation, and supersedes Accounting Principles
Bulletin No. 25 (APB 25) Accounting for Stock Issued to Employees. The provisions of SFAS No. 123(R) are required to be applied by public companies as of the first interim or annual reporting period that begins after June 15, 2005, which
is third quarter 2005 for Essential. Essential intends to continue applying APB 25 to equity-based compensation awards until the effective date of SFAS No. 123(R). At the effective date of SFAS No. 123(R), Essential expects to use the modified
prospective application transition method without restatement of prior interim periods in the year of adoption. This will result in Essential recognizing compensation cost based on the requirements of SFAS No. 123(R) for all equity-based
compensation awards issued after July 1, 2005. For all equity-based compensation awards that are unvested as of July 1, 2005, compensation cost will be recognized for the unamortized portion of compensation cost not previously included in the SFAS
No. 123 pro forma footnote disclosure. Essential is currently evaluating the impact that adoption of SFAS No. 123(R) may have on its results of operations depending on the level and form of future equity-based compensation awards issued.



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



We maintain a portfolio of highly liquid investments in various bank
accounts, which are classified as cash equivalents. In addition, we are party to a secured revolving credit agreement that permits a maximum borrowing capacity of $6.0 million. Amounts available under the Credit Facility are calculated as a
percentage of our eligible receivables and were capped at $2.5 million through December 31, 2004. As of December 31, 2004, we would have had availability under the Credit Facility of $3.6 million but for the $2.5 million cap. As of December 31,
2004, we had $0.7 million of borrowings outstanding under the Credit Facility. We do not expect changes in interest rates to have a material effect on our income or cash flows.



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



See Index to Consolidated Financial Statements on page F-1.



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



During the fiscal year 2004, there were no changes in, or disagreements
with, accountants on accounting and financial disclosure matters.



ITEM 9A.
CONTROLS AND PROCEDURES



We maintain a set of disclosure
controls and procedures designed to ensure that information required to be disclosed by Essential Group in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms. As of the end of the period covered by this annual report reported on Form 10-K, an evaluation of the effectiveness of Essential Groups disclosure controls and procedures
was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded
that Essential Groups disclosure controls and procedures are effective.



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Subsequent to the date of their evaluation, there have been no significant changes in Essential
Groups internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Essential Groups internal control over financial reporting.



ITEM 9B. OTHER INFORMATION



On March 28, 2005, Silicon Valley Bank and the Company agreed to amend the
minimum ratio of assets to liabilities (Quick Ratio) financial covenant set forth in the Credit Facility described in Item 7 above. Under the terms of the amended agreement, we are still required to maintain a Quick Ratio of not less
than 0.75 to 1.00 but if the Quick Ratio does fall below 0.75 to 1.00 but is at least 0.65 to 1.00 at any time through March 31, 2006, such violation will not constitute an event of default. The amendment extends the date for which failure to
maintain a Quick Ratio of not less than 0.75 to 1.00 would not constitute an event of default if such ratio was at least 0.65 to 1.00 from June 30, 2005 to March 31, 2006. Advance rate and interest rate adjustments under the amended agreement for
Quick Ratios of less than 0.75 to 1.00 but not less than 0.65 to 1.00 remain unchanged under the terms of the amendment.



PART III



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



Information concerning this Item is incorporated herein by reference to Essential Groups definitive information statement to be delivered to
stockholders in connection with the taking of corporate action by Essential Groups stockholders to elect directors without a meeting, which information statement will be filed with the Securities and Exchange Commission on or prior to April
30, 2005.



ITEM 11. EXECUTIVE COMPENSATION



Information concerning this Item is incorporated herein by reference to
Essential Groups definitive information statement to be delivered to stockholders in connection with the taking of corporate action by Essential Groups stockholders to elect directors without a meeting, which information statement will
be filed with the Securities and Exchange Commission on or prior to April 30, 2005.



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS



Equity Compensation Plan Information



The following table provides information as of December 31, 2004 with respect to compensation plans under which our Class A common stock is authorized for
issuance under compensation plans previously approved and not previously approved by our stockholders.



|                                                           |  |                                                                                          |  |                                                                          |      |                                                                                                                                        |          
|---------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------ | ---- | -------------------------------------------------------------------------------------------------------------------------------------- | ---------
|Plan category                                              |  | Number of securities tobe issued upon exerciseof outstanding options,warrants and rights |  | Weighted-averageexercise price ofoutstanding options,warrants and rights |      | Number of securitiesremaining available forfuture issuance underequity compensation plans(excluding
securitiesreflected in column (a))
|                                                           |  | (a)                                                                                      |  | (b)                                                                      |      | (c)                                                                                                                                   
|Equity compensation plans approved by security holders     |  | 2,881,190                                                                                |  | $                                                                        | 5.24 |                                                                                                                                        | 1,614,859
|                                                           |  |                                                                                          | 
|Equity compensation plans not approved by security holders |  |                                                                                         |  |                                                                          |     |                                                                                                                                        |         
|                                                           |  |                                                                                          |  |                                                                          |      |                                                                                                                                        |          
|Total                                                      |  | 2,881,190                                                                                |  | $                                                                        | 5.24 |                                                                                                                                        | 1,614,859



Additional information
concerning this Item is incorporated herein by reference to Essential Groups definitive information statement to be delivered to stockholders in connection with the taking of corporate action by Essential Groups stockholders to elect
directors without a meeting, which information statement will be filed with the Securities and Exchange Commission on or prior to April 30, 2005.



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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



Information concerning this Item is incorporated herein by reference to
Essential Groups definitive information statement to be delivered to stockholders in connection with the taking of corporate action by Essential Groups stockholders to elect directors without a meeting, which information statement will
be filed with the Securities and Exchange Commission on or prior to April 30, 2005.



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES



Information concerning this Item is incorporated herein by reference to Essential Groups definitive information statement to be delivered to stockholders in connection with the taking of corporate action by Essential Groups
stockholders to elect directors without a meeting, which information statement will be filed with the Securities and Exchange Commission on or prior to April 30, 2005.



PART IV



ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



See Index to Consolidated Financial Statements on page F-1.



See Exhibit Index on page E-1.





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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 on the 30th day of March, 2005.



ESSENTIAL GROUP, INC.By:

/s/ Dennis N. CavenderDennis N. CavenderExecutive Vice President, Chief Financial Officer and Secretary




Pursuant to the
requirements of the Securities Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated below on the 30th day of March, 2005.



|                                                        |  |                                                                                              
|------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------
|Signature                                               |  | Title                                                                                        
|/s/ C. Lee JonesC. Lee Jones                            |  | President and Chief Executive Officer (Principal Executive Officer)                          
|                                                        | 
|/s/ Dennis N. CavenderDennis N. Cavender                |  | Executive Vice President, Chief Financial Officer and Secretary (Principal Financial Officer)
|                                                        | 
|/s/ Paul M. PalzPaul M. Palz                            |  | Controller (Principal Accounting Officer)                                                    
|                                                        | 
|/s/ Pradip K. Banerjee, Ph.D.*Pradip K. Banerjee, Ph.D. |  | Chairman                                                                                     
|                                                        | 
|/s/ Ira Klimberg, M.D.*Ira Klimberg, M.D.               |  | Director                                                                                     
|                                                        | 
|/s/ Joan Neuscheler*Joan Neuscheler                     |  | Director                                                                                     
|                                                        | 
|/s/ Zubeen Shroff*Zubeen Shroff                         |  | Director                                                                                     
|                                                        | 
|/s/ Christopher Steidle, M.D.*Christopher Steidle, M.D. |  | Director                                                                                     



---

|       |  |                       
|------ |  | ----------------------
|*  By: |  | /s/ Dennis N. Cavender
|       |  | Dennis N. Cavender    
|       |  | As Attorney-in-Fact   





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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                   |  |     
|-------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                   |  | Page
|Financial Statements                                                                               |  |     
|                                                                                                   | 
|Report of Grant Thornton LLP                                                                       |  | F-2 
|                                                                                                   | 
|Consolidated Balance Sheets as of December 31, 2004 and 2003                                       |  | F-3 
|                                                                                                   | 
|Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002         |  | F-4 
|                                                                                                   | 
|Consolidated Statements of Stockholders Deficit for the years ended December 31, 2004, 2003, 2002 |  | F-5 
|                                                                                                   | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002         |  | F-6 
|                                                                                                   | 
|Notes to Consolidated Financial Statements                                                         |  | F-7 







---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Stockholders of

Essential Group, Inc. and Subsidiary:



We have audited the accompanying consolidated balance sheet of Essential Group, Inc. and subsidiary (the Company, formerly known
as AmericasDoctor, Inc.) as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders equity and cash flows for the years then ended. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.



We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our
audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.



In our report dated February 27, 2004, we expressed an unqualified opinion on the 2003 and
2002 financial statements in conformity with accounting principles generally accepted in the United States of America. As described in Note 5 to the financial statements, the Company has changed its method of accounting for certain revenue items and
has restated its 2003 and 2002 financial statements to conform with accounting principles generally accepted in the United States of America.



In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Essential Group, Inc. as of December 31,
2004 and 2003, and the results of its operations, its changes in stockholders equity, and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.



/s/ GRANT THORNTON LLP



Chicago, Illinois

March 17, 2005





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##### Table of Contents

ESSENTIAL GROUP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

As of December 31, 2004 and 2003

(in
000s)



|                                                                                                                                                  |  |      |          |   |      |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                                                                                                                                  |  | 2004 |          |   | 2003 |  
|ASSETS                                                                                                                                            |  |      |          |   |      |   |          |  
|CURRENT ASSETS:                                                                                                                                   |  |      |          |   |      |   |          |  
|Cash and cash equivalents                                                                                                                         |  | $    | 1,252    |   |      | $ | 1,984    |  
|Accounts receivable, net                                                                                                                          |  |      | 8,381    |   |      |   | 12,222   |  
|Prepaid expenses                                                                                                                                  |  |      | 2,577    |   |      |   | 2,766    |  
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|Total current assets                                                                                                                              |  |      | 12,210   |   |      |   | 16,972   |  
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|FIXED ASSETS:                                                                                                                                     |  |      |          |   |      |   |          |  
|Furniture and fixtures                                                                                                                            |  |      | 1,218    |   |      |   | 1,224    |  
|Equipment                                                                                                                                         |  |      | 535      |   |      |   | 535      |  
|Computers and software                                                                                                                            |  |      | 4,565    |   |      |   | 4,431    |  
|Leasehold improvements                                                                                                                            |  |      | 577      |   |      |   | 580      |  
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|                                                                                                                                                  |  |      | 6,895    |   |      |   | 6,770    |  
|Less-Accumulated depreciation and amortization                                                                                                    |  |      | (6,376   | ) |      |   | (5,996   | )
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|Total fixed assets, net                                                                                                                           |  |      | 519      |   |      |   | 774      |  
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|OTHER ASSETS:                                                                                                                                     |  |      |          |   |      |   |          |  
|Other                                                                                                                                             |  |      | 24       |   |      |   | 27       |  
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|Total other assets                                                                                                                                |  |      | 24       |   |      |   | 27       |  
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|                                                                                                                                                  |  | $    | 12,753   |   |      | $ | 17,773   |  
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                             |  |      |          |   |      |   |          |  
|CURRENT LIABILITIES                                                                                                                               |  |      |          |   |      |   |          |  
|Accounts payable                                                                                                                                  |  | $    | 2,514    |   |      | $ | 2,409    |  
|Line of credit                                                                                                                                    |  |      | 675      |   |      |   |         |  
|Capital leases                                                                                                                                    |  |      |         |   |      |   | 14       |  
|Accrued investigator fees                                                                                                                         |  |      | 6,690    |   |      |   | 9,126    |  
|Accrued wages and other                                                                                                                           |  |      | 2,717    |   |      |   | 2,655    |  
|Deferred revenue                                                                                                                                  |  |      | 3,190    |   |      |   | 4,022    |  
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|Total current liabilities                                                                                                                         |  |      | 15,786   |   |      |   | 18,226   |  
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|LONG-TERM LIABILITIES:                                                                                                                            |  |      |          |   |      |   |          |  
|Other long-term liability                                                                                                                         |  |      |         |   |      |   |         |  
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|Total long-term liabilities                                                                                                                       |  |      |         |   |      |   |         |  
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|REDEEMABLE CONVERTIBLE PREFERRED STOCK:                                                                                                           |  |      |          |   |      |   |          |  
|Series A redeemable convertible preferred stock, par value $0.001 per share; 9,741,400 shares authorized, 4,992,621 shares issued and
outstanding |  |      | 87,443   |   |      |   | 80,673   |  
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|STOCKHOLDERS DEFICIT:                                                                                                                            |  |      |          |   |      |   |          |  
|Series B convertible preferred stock, par value $0.001 per share; 228,436 shares authorized, issued and outstanding                               |  |      |         |   |      |   |         |  
|                                                                                                                                                  |  |     
|Series E convertible preferred stock, par value $0.001 per share; 30,164 shares authorized, issued and outstanding                                |  |      |         |   |      |   |         |  
|                                                                                                                                                  |  |     
|Class A common stock, par value $0.001 per share, 25,000,000 shares authorized; 3,434,626 shares issued and 3,430,043
outstanding                 |  |      | 3        |   |      |   | 3        |  
|                                                                                                                                                  |  |     
|Class B convertible common stock, par value $0.001 per share; 685,324 shares authorized, issued and outstanding                                   |  |      | 1        |   |      |   | 1        |  
|                                                                                                                                                  |  |     
|Warrants to purchase common stock                                                                                                                 |  |      | 79       |   |      |   | 79       |  
|Additional paid-in-capital                                                                                                                        |  |      | 32,976   |   |      |   | 33,088   |  
|Accumulated deficit                                                                                                                               |  |      | (123,489 | ) |      |   | (114,251 | )
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|                                                                                                                                                  |  |      | (90,430  | ) |      |   | (81,081  | )
|Treasury stock, at cost, 4,583 shares                                                                                                             |  |      | (46      | ) |      |   | (46      | )
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|Total stockholders deficit                                                                                                                       |  |      | (90,476  | ) |      |   | (81,127  | )
|                                                                                                                                                  |  |      |          |   |      |   |          |  
|                                                                                                                                                  |  | $    | 12,753   |   |      | $ | 17,773   |  
|                                                                                                                                                  |  |      |          |   |      |   |          |  



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



F-3



---

##### Table of Contents

ESSENTIAL GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2004, 2003 and 2002

(in 000s except share and per share data)



|                                                     |  |      |           |   |          |   |           |          |  |   |           |  
|---------------------------------------------------- |  | ---- | --------- | - | -------- | - | --------- | -------- |  | - | --------- | -
|                                                     |  |      |           |   | RESTATED |   |           | RESTATED | 
|                                                     |  | 2004 |           |   | 2003     |   |           | 2002     | 
|REVENUE                                              |  | $    | 47,985    |   |          | $ | 59,465    |          |  | $ | 66,587    |  
|                                                     |  |      |           |   |          |   |           |          |  |   |           |  
|EXPENSES:                                            |  |      |           |   |          |   |           |          |  |   |           |  
|Direct study costs                                   |  |      | 36,220    |   |          |   | 44,101    |          |  |   | 48,504    |  
|Selling, general and administrative                  |  |      | 13,720    |   |          |   | 17,751    |          |  |   | 18,590    |  
|Class B common stock depreciation                    |  |      | (117      | ) |          |   | (178      | )        |  |   |          |  
|Depreciation and amortization                        |  |      | 407       |   |          |   | 567       |          |  |   | 1,006     |  
|Impairment of goodwill                               |  |      |          |   |          |   |          |          |  |   |          |  
|                                                     |  |      |           |   |          |   |           |          |  |   |           |  
|Total expenses                                       |  |      | 50,230    |   |          |   | 62,241    |          |  |   | 68,100    |  
|                                                     |  |      |           |   |          |   |           |          |  |   |           |  
|OPERATING LOSS                                       |  |      | (2,245    | ) |          |   | (2,776    | )        |  |   | (1,513    | )
|                                                     |  |      |          
|OTHER (EXPENSES) INCOME, net                         |  |      | (223      | ) |          |   | (9        | )        |  |   | 95        |  
|                                                     |  |      |           |   |          |   |           |          |  |   |           |  
|Loss before provision for income taxes               |  |      | (2,468    | ) |          |   | (2,785    | )        |  |   | (1,418    | )
|                                                     |  |      |          
|PROVISION FOR INCOME TAXES                           |  |      |          |   |          |   |          |          |  |   |          |  
|                                                     |  |      |           |   |          |   |           |          |  |   |           |  
|NET LOSS                                             |  |      | (2,468    | ) |          |   | (2,786    | )        |  |   | (1,418    | )
|                                                     |  |      |          
|ACCRETION OF REDEEMABLE CONVERTIBLE PREFERRED STOCK  |  |      | 6,770     |   |          |   | 6,231     |          |  |   | 5,514     |  
|                                                     |  |      |           |   |          |   |           |          |  |   |           |  
|Net loss applicable to common stockholders           |  | $    | (9,238    | ) |          | $ | (9,017    | )        |  | $ | (6,932    | )
|                                                     |  |      |           |   |          |   |           |          |  |   |           |  
|BASIC AND DILUTED NET LOSS PER COMMON SHARE:         |  |      |           |   |          |   |           |          |  |   |           |  
|Loss per common share                                |  |      |           |   |          |   |           |          |  |   |           |  
|Class A                                              |  | $    | (2.24     | ) |          | $ | (2.19     | )        |  | $ | (1.68     | )
|Class B                                              |  | $    | (2.24     | ) |          | $ | (2.19     | )        |  |   | (1.68     | )
|                                                     |  |      |           |   |          |   |           |          |  |   |           |  
|Weighted average number of common shares outstanding |  |      |           |   |          |   |           |          |  |   |           |  
|Class A                                              |  |      | 3,430,043 |   |          |   | 3,430,043 |          |  |   | 3,430,043 |  
|Class B                                              |  |      | 685,324   |   |          |   | 685,324   |          |  |   | 685,324   |  
|                                                     |  |      |           |   |          |   |           |          |  |   |           |  



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





F-4



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##### Table of Contents

ESSENTIAL GROUP, INC. AND SUBSIDIARY



CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT

For the Years Ended December 31, 2004, 2003 and 2002

(in 000s except share data)



|                                                                              |  |                                                       |  |                                                                |  |                                                     |  |                                                    |  |                  |  |          |   |                  |        |          |   |                |  |                          |    |  |                     |        |   |                 |   |          |          |  |        |                             |  |   |    |   |  |   |         |  
|----------------------------------------------------------------------------- |  | ----------------------------------------------------- |  | -------------------------------------------------------------- |  | --------------------------------------------------- |  | -------------------------------------------------- |  | ---------------- |  | -------- | - | ---------------- | ------ | -------- | - | -------------- |  | ------------------------ | -- |  | ------------------- | ------ | - | --------------- | - | -------- | -------- |  | ------ | --------------------------- |  | - | -- | - |  | - | ------- | -
|                                                                              |  | Common Stock                                          |  | Convertible Preferred Stock                                    |  |                                                     |  |                                                    |  |                  |  |          |   |                  |        |          |   |                |  |                          |   
|                                                                              |  | Class A ($.001Par Value) (25,000,000SharesAuthorized) |  | Class B Convertible($.001 Par Value)(685,324 SharesAuthorized) |  | Series B ($.001Par Value)(228,436 SharesAuthorized) |  | Series E ($.001Par Value)(30,164 SharesAuthorized) |  |                  |  |          |   |                  |        |          |   | Treasury Stock |  |                          |    | 
|                                                                              |  | Number of Shares                                      |  | ParValue                                                       |  | Number of Shares                                    |  | ParValue                                           |  | Number of Shares |  | ParValue |   | Number of Shares |        | ParValue |   | Warrants       |  | AdditionalPaid-InCapital |    |  | Accumulated Deficit |        |   | Number ofShares |   |          | ParValue |  |        | Total Stockholders Deficit | 
|BALANCE, December 31, 2001                                                    |  | 3,434,625                                             |  | $    3                                                         |  | 685,324                                             |  | $    1                                             |  | 228,436          |  | $        |  |                  | 30,164 |          | $ |               |  | $                        | 55 |  | $                   | 33.083 |   |                 | $ | (98,302  | )        |  | (4,583 | )                           |  | $ | ( | ) |  | $ | (65,160 | )
|                                                                              |  |                                                       |  |                                                                |  |                                                     |  |                                                    |  |                  |  |          |   |                 
|Net loss                                                                      |  |                                                      |  |                                                               |  |                                                    |  |                                                   |  |                 |  |          |  |                  |       |          |   |               |  |                          |   |  |                     |       |   |                 |   | (1,418   | )        |  |       |                             |  |   |   |   |  |   | (1,418  | )
|Compensatory stock options                                                    |  |                                                      |  |                                                               |  |                                                    |  |                                                   |  |                 |  |          |  |                  |       |          |   |               |  |                          |   |  |                     | 41     |   |                 |   |         |          |  |       |                             |  |   |   |   |  |   | 41      |  
|                                                                              |  |                                                       |  |                                                                |  |                                                     |  |                                                    |  |                  |  |          |   |                 
|Class B common stock depreciation                                             |  |                                                      |  |                                                               |  |                                                    |  |                                                   |  |                 |  |          |  |                  |       |          |   |               |  |                          |   |  |                     |       |   |                 |   |         |          |  |       |                             |  |   |   |   |  |   |         |  
|Warrants exercised, net                                                       |  | 1                                                     |  |                                                               |  |                                                    |  |                                                   |  |                 |  |          |  |                  |       |          |   |               |  |                          |   |  |                     |       |   |                 |   |         |          |  |       |                             |  |   |   |   |  |   |         |  
|Accretion of redeemable convertible preferred stock redemption value (Note 6) |  |                                                      |  |                                                               |  |                                                    |  |                                                   |  |                 |  |          |  |                  |       |          |   |               |  |                          |   |  |                     |       |   |                 |   | (5,514   | )        |  |       |                             |  |   |   |   |  |   | (5,514  | )
|                                                                              |  |                                                       |  |                                                                |  |                                                     |  |                                                    |  |                  |  |          |   |                  |        |          |   |                |  |                          |    |  |                     |        |   |                 |   |          |          |  |        |                             |  |   |    |   |  |   |         |  
|BALANCE, December 31, 2002                                                    |  | 3,434,626                                             |  | $    3                                                         |  | 685,324                                             |  | $    1                                             |  | 228,436          |  | $        |  |                  | 30,164 |          | $ |               |  | $                        | 55 |  | $                   | 33,124 |   |                 | $ | (105,234 | )        |  | (4,583 | )                           |  | $ | ( | ) |  | $ | (72,051 | )
|                                                                              |  |                                                       |  |                                                                |  |                                                     |  |                                                    |  |                  |  |          |   |                 
|Net loss                                                                      |  |                                                      |  |                                                               |  |                                                    |  |                                                   |  |                 |  |          |  |                  |       |          |   |               |  |                          |   |  |                     |       |   |                 |   | (2,786   | )        |  |       |                             |  |   |   |   |  |   | (2,786  | )
|Compensatory stock options                                                    |  |                                                      |  |                                                               |  |                                                    |  |                                                   |  |                 |  |          |  |                  |       |          |   |               |  |                          |   |  |                     | 96     |   |                 |   |         |          |  |       |                             |  |   |   |   |  |   | 96      |  
|Class B common stock depreciation                                             |  |                                                      |  |                                                               |  |                                                    |  |                                                   |  |                 |  |          |  |                  |       |          |   |               |  |                          |   |  |                     | (178   | ) |                 |   |         |          |  |       |                             |  |   |   |   |  |   | (178    | )
|Warrants issued, net                                                          |  |                                                      |  |                                                               |  |                                                    |  |                                                   |  |                 |  |          |  |                  |       |          |   |               |  |                          | 24 |  |                     |       |   |                 |   |         |          |  |       |                             |  |   |   |   |  |   | 24      |  
|Accretion of preferred stock redemption value (Note 6)                        |  |                                                      |  |                                                               |  |                                                    |  |                                                   |  |                 |  |          |  |                  |       |          |   |               |  |                          |   |  |                     |       |   |                 |   | (6,231   | )        |  |       |                             |  |   |   |   |  |   | (6,231  | )
|                                                                              |  |                                                       |  |                                                                |  |                                                     |  |                                                    |  |                  |  |          |   |                  |        |          |   |                |  |                          |    |  |                     |        |   |                 |   |          |          |  |        |                             |  |   |    |   |  |   |         |  
|BALANCE, December 31, 2003                                                    |  | 3,434,626                                             |  | $    3                                                         |  | 685,324                                             |  | $    1                                             |  | 228,436          |  | $        |  |                  | 30,164 |          | $ |               |  | $                        | 79 |  | $                   | 33,042 |   |                 | $ | (114,251 | )        |  | (4,583 | )                           |  | $ | ( | ) |  | $ | (81,126 | )
|                                                                              |  |                                                       |  |                                                                |  |                                                     |  |                                                    |  |                  |  |          |   |                 
|Net loss                                                                      |  |                                                      |  |                                                               |  |                                                    |  |                                                   |  |                 |  |          |  |                  |       |          |   |               |  |                          |   |  |                     |       |   |                 |   | (2,468   | )        |  |       |                             |  |   |   |   |  |   | (2,468  | )
|Class B common stock depreciation                                             |  |                                                      |  |                                                               |  |                                                    |  |                                                   |  |                 |  |          |  |                  |       |          |   |               |  |                          |   |  |                     | (112   | ) |                 |   |         |          |  |       |                             |  |   |   |   |  |   | (112    | )
|Warrants issued, net                                                          |  |                                                      |  |                                                               |  |                                                    |  |                                                   |  |                 |  |          |  |                  |       |          |   |               |  |                          |   |  |                     |       |   |                 |   |         |          |  |       |                             |  |   |   |   |  |   |        |  
|Accretion of preferred stock redemption value (Note 6)                        |  |                                                      |  |                                                               |  |                                                    |  |                                                   |  |                 |  |          |  |                  |       |          |   |               |  |                          |   |  |                     |       |   |                 |   | (6,770   | )        |  |       |                             |  |   |   |   |  |   | (6,770  | )
|                                                                              |  |                                                       |  |                                                                |  |                                                     |  |                                                    |  |                  |  |          |   |                  |        |          |   |                |  |                          |    |  |                     |        |   |                 |   |          |          |  |        |                             |  |   |    |   |  |   |         |  
|BALANCE, December 31, 2004                                                    |  | 3,434,626                                             |  | $    3                                                         |  | 685,324                                             |  | $    1                                             |  | 228,436          |  | $        |  |                  | 30,164 |          | $ |               |  | $                        | 79 |  | $                   | 32,930 |   |                 | $ | (123,489 | )        |  | (4,583 | )                           |  | $ | ( | ) |  | $ | (90,476 | )
|                                                                              |  |                                                       |  |                                                                |  |                                                     |  |                                                    |  |                  |  |          |   |                  |        |          |   |                |  |                          |    |  |                     |        |   |                 |   |          |          |  |        |                             |  |   |    |   |  |   |         |  



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





F-5



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##### Table of Contents

ESSENTIAL GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2004, 2003 and 2002

(in 000s)



|                                                                                                 |  |      |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------------------------------ |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                 |  | 2004 |        |   | 2003 |   |        | 2002 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                            |  |      |        |   |      |   |        |      |  |   |        |  
|Net loss                                                                                         |  | $    | (2,468 | ) |      | $ | (2,786 | )    |  | $ | (1,418 | )
|Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities- |  |      |        |   |      |   |        |      |  |   |        |  
|Depreciation and amortization                                                                    |  |      | 407    |   |      |   | 567    |      |  |   | 1,006  |  
|Impairment of goodwill                                                                           |  |      |       |   |      |   |       |      |  |   |       |  
|Class B common stock depreciation                                                                |  |      | (117   | ) |      |   | (178   | )    |  |   |       |  
|Compensatory stock options                                                                       |  |      | 5      |   |      |   | 95     |      |  |   | 42     |  
|Warrant compensation for professional services                                                   |  |      |       |   |      |   | 24     |      |  |   |       |  
|Other                                                                                            |  |      | 2      |   |      |   | (15    | )    |  |   | (7     | )
|Changes in assets and liabilities                                                                |  |      |        |   |      |   |        |      |  |   |        |  
|Accounts receivable                                                                              |  |      | 3,841  |   |      |   | 803    |      |  |   | 541    |  
|Prepaid expenses                                                                                 |  |      | 189    |   |      |   | 1,492  |      |  |   | 421    |  
|Other assets                                                                                     |  |      | 4      |   |      |   | (4     | )    |  |   |       |  
|Accounts payable                                                                                 |  |      | 106    |   |      |   | 668    |      |  |   | (1,038 | )
|Accrued investigator fees                                                                        |  |      | (2,437 | ) |      |   | 169    |      |  |   | (632   | )
|Accrued wages and other                                                                          |  |      | 61     |   |      |   | (115   | )    |  |   | (655   | )
|Deferred revenue                                                                                 |  |      | (832   | ) |      |   | (1,431 | )    |  |   | (780   | )
|Other liabilities                                                                                |  |      |       |   |      |   | (25    | )    |  |   | (25    | )
|                                                                                                 |  |      |        |   |      |   |        |      |  |   |        |  
|Net cash and cash and equivalents used in operating activities                                   |  |      | (1,239 | ) |      |   | (734   | )    |  |   | (2,545 | )
|                                                                                                 |  |      |        |   |      |   |        |      |  |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                            |  |      |        |   |      |   |        |      |  |   |        |  
|Purchases of fixed assets, net                                                                   |  |      | (154   | ) |      |   | (67    | )    |  |   | (262   | )
|                                                                                                 |  |      |        |   |      |   |        |      |  |   |        |  
|Net cash and cash equivalents used in investing activities                                       |  |      | (154   | ) |      |   | (67    | )    |  |   | (262   | )
|                                                                                                 |  |      |        |   |      |   |        |      |  |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                            |  |      |        |   |      |   |        |      |  |   |        |  
|Proceeds (payments) on Line of Credit, net                                                       |  |      | 675    |   |      |   |       |      |  |   |       |  
|Proceeds (payments) on capital leases and debt, net                                              |  |      | (14    | ) |      |   | 11     |      |  |   | (19    | )
|                                                                                                 |  |      |        |   |      |   |        |      |  |   |        |  
|Net cash and cash equivalents provided by (used in) financing activities                         |  |      | 661    |   |      |   | 11     |      |  |   | (19    | )
|                                                                                                 |  |      |        |   |      |   |        |      |  |   |        |  
|Net decrease in cash and cash equivalents                                                        |  |      | (732   | ) |      |   | (790   | )    |  |   | (2,827 | )
|                                                                                                 |  |      |       
|CASH AND CASH EQUIVALENTS, beginning of period                                                   |  |      | 1,984  |   |      |   | 2,774  |      |  |   | 5,601  |  
|                                                                                                 |  |      |        |   |      |   |        |      |  |   |        |  
|CASH AND CASH EQUIVALENTS, end of period                                                         |  | $    | 1,252  |   |      | $ | 1,984  |      |  | $ | 2,774  |  
|                                                                                                 |  |      |        |   |      |   |        |      |  |   |        |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                               |  |      |        |   |      |   |        |      |  |   |        |  
|                                                                                                 |  |      |       
|Cash paid for                                                                                    |  |      |        |   |      |   |        |      |  |   |        |  
|Interest on capital leases and debt                                                              |  | $    | 51     |   |      | $ | 22     |      |  | $ | 16     |  
|Taxes                                                                                            |  |      | 4      |   |      |   | 6      |      |  |   | 18     |  
|                                                                                                 |  |      |        |   |      |   |        |      |  |   |        |  



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





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##### Table of Contents

ESSENTIAL GROUP, INC. AND SUBSIDIARY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003 and 2002



1. LINES OF BUSINESS



The Company was founded in 1994 by several physicians as an affiliated site management network. The Company provides pharmaceutical,
biotechnology, nutritional and device companies a single source for managing the conduct of Phase I-IV clinical research in the United States. In March 2004 we expanded our services into three separate operating units under the corporate entity of
Essential Group, Inc. The three units are Essential CRO, Essential Patient Recruitment, and AmericasDoctor. We are considered a pharmaceutical services company providing services across the majority of functions for clinical development including
experienced clinical investigative sites. We offer our complete services across all three business units to clients in the pharmaceutical, biotech, nutritional, device, and governmental research industries.



Our AmericasDoctor operating unit provides clinical research investigative site services
through approximately 107 independently owned investigative sites encompassing approximately 275 principal investigators, with over 900 total physicians, operating in 32 states in the United States and the District of Columbia. Through its network
of investigative sites, the Company provides sponsors of clinical research with study management services, including access to experienced investigators and study coordinators and large numbers of patients and centralized management of clinical
research studies. These capabilities are designed to facilitate study start-up and quality and accuracy of study data. The Companys network of investigative sites provides sponsors with the ability to complete clinical research trials quickly
and efficiently. By integrating a leading community-based physician network and comprehensive site management expertise, the Company provides a broad range of services, including patient recruitment and project management, fundamental to executing
well-controlled clinical trials expeditiously and economically.



The Company
was originally incorporated in the State of California on November 23, 1993 and reincorporated on September 19, 1996 in the State of Delaware as Affiliated Research Centers, Inc., as part of a recapitalization. On January 6, 2000, the
Companys wholly owned subsidiary, ARC Merger Sub-1, Inc., a Delaware corporation, merged with AmericasDoctor.com, Inc., an interactive Internet healthcare information site for consumers based in Maryland. The merger is sometimes referred to as
the Merger and the Maryland-based AmericasDoctor.com, Inc. is sometimes referred to as Old AmDoc. Following the Merger, Old AmDoc became a wholly owned subsidiary and changed its name to AmericasDoctor Internet
Operations, Inc. and the combined Company changed its corporate name to AmericasDoctor.com, Inc. In November 2001, the combined Company changed its corporate name to AmericasDoctor, Inc.



On September 17, 2003, the Companys Board of Directors approved a business transition
plan to position the Company for stronger growth as it enters its second decade of service to the pharmaceutical, biotechnology, nutritional, device and governmental research industries. The new strategy was announced on October 27, 2003 and
requires the Company to tightly focus on more profitable growth through expanded project services, expanded patient recruitment services and a more focused approach to site management. Through this business plan, the Company will focus its resources
in clinical trial site management in four therapeutic areas: urology, womens health, gastroenterology and central nervous system and exit from four other therapeutic areas related to AmericasDoctor site management services. In accordance with
the Companys business plan, the Company changed its name to Essential Group, Inc. on March 24, 2004 and is offering expanded project management services and patient recruitment as a specialty contract research organization, or CRO,
under a business unit named Essential and continues to offer site management services under a business unit named AmericasDoctor.



As part of this plan, the Company has terminated a number of sites, resulting in a reduction in workforce. The plan was completed by December 2004. In accordance with
SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, the Company recognized approximately $716,000 of severance costs between October 2003 and December 2004. The Company recorded $519,000 of these severance
costs in 2003. As of December 31, 2004, there was an accrual balance of $47,000 relating to charges taken in 2004. The Company expects to utilize the balance by the end of March 2005. The following table provides the components of this balance: (in
thousands)



|                |  |            |         |              |   |                                |  |   |       
|--------------- |  | ---------- | ------- | ------------ | - | ------------------------------ |  | - | ------
|                |  | 2004Charge |         | CashPayments |   | Balance as ofDecember 31, 2004
|Severance costs |  | $          | 197,000 |              | $ | 150,000                        |  | $ | 47,000



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2. LIQUIDITY AND FUTURE OPERATIONS



Net cash used in operating activities was approximately $1.2 million, $0.7 million and $2.5 million for the years ended December 31, 2004,
2003 and 2002, respectively. Cash used in operating activities increased in 2004 from 2003 due to changes in working capital accounts offset by a decrease in net loss. Cash used in operating activities decreased substantially in 2003 from 2002 due
to an increase in net loss offset by changes in working capital accounts.



Working capital was approximately $(3.6) million as of December 31, 2004 and ($1.3) million as of December 31, 2003. The decrease from December 31, 2003 to December 31, 2004 of $2.3 million, or 177%, was primarily the result of the decrease
in cash from funding operations and the expansion of services as a CRO.



The
Company has generated negative cash flows since its inception. As a result, it has financed its operations to date through the sale of equity securities. To date, the Company has raised approximately $53.6 million in net proceeds from the sale of
common stock, redeemable convertible preferred stock, and preferred stock. Cash and cash equivalents and short-term marketable securities were approximately $1.3 million and $2.0 million as of December 31, 2004 and December 31, 2003, respectively.



On September 27, 2004, the Company and its subsidiary, AmericasDoctor.com
Coordinator Services, Inc., entered into a secured revolving credit agreement with Silicon Valley Bank (the Credit Facility). The Credit Facility permits a maximum borrowing capacity of $6.0 million and has a termination date of
September 27, 2006.



Amounts available under the Credit Facility are calculated
as a percentage of the Companys eligible receivables and were capped at $2.5 million through December 31, 2004. As of December 31, 2004, the Company would have had availability under the Credit Facility of $3.6 million but for the $2.5 million
cap. As of December 31, 2004, the Company had $0.7 million of borrowings outstanding under the Credit Facility.



The Credit Facility requires the Company to pay minimum monthly interest of $3,500, even if no borrowings are outstanding. Borrowings under the Credit Facility are
secured by substantially all of the Companys assets. Among other restrictions, the Credit Facility includes certain restrictive covenants, including covenants related to indebtedness and asset acquisitions and dispositions and requires the
Company to comply with a number of affirmative covenants related to the operation of its business, including financial covenants regarding a minimum ratio of assets to liabilities, a minimum tangible net worth and a requirement that holders of over
one-third of its Series A-2 through A-6 preferred stock waive their rights to, or otherwise agree not to, redeem such stock until at least October 27, 2006. Under the Credit Facility, borrowings bear interest at prime plus 1.0%, subject to a minimum
interest rate of 5.5% and the previously described minimum monthly interest requirement. As of December 31, 2004, the Company was in compliance with the debt covenants. At December 31, 2004, the prevailing interest rate under the Credit Facility was
6.25%.



On September 27, 2004, in connection with the Companys entry into
the Credit Facility described above, the Company terminated its existing secured revolving credit agreement with CapitalSource Finance LLC (the CapitalSource Credit Agreement). The Credit Facility described above provides the Company
with an increased borrowing capacity due to a more favorable definition and calculation of eligible receivables, more flexible financial covenants and a lower cost of borrowing.



The Capital Source Credit Agreement permitted a maximum borrowing capacity of $6.0 million and was scheduled to terminate on February 20,
2007. Amounts available under the CapitalSource Credit Agreement depended on the amount of the Companys eligible receivables. The amount available for borrowing under the CapitalSource agreement at the time of termination was approximately
$1.8 million. The CapitalSource Credit Agreement required



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the Company to pay an unused line fee of 0.5% per annum on the average daily-unused portion of the revolving loan. Borrowings under this agreement were
secured by substantially all of the Companys assets. Among other restrictions, the CapitalSource Credit Agreement included certain restrictive covenants, including covenants related to indebtedness, related party transactions and investment
limitations and required the Company to comply with a number of affirmative covenants related to the operation of its business, including covenants related to minimum liquidity, EBITDA (as defined in the CapitalSource Credit Agreement) and fixed
charge coverage ratio requirements, a limit on fixed charges, and a requirement that, by January 1, 2005, holders of over one-third of its Series A-2 through A-6 preferred stock shall have waived their rights to, or otherwise agreed not to, redeem
such stock until at least May 20, 2007. Under the CapitalSource Credit Agreement, borrowings bore interest at prime plus 2.0%, subject to a minimum interest rate of 7.5%.



As a result of the termination of the CapitalSource Credit Agreement, the Company was required to pay CapitalSource Finance LLC a
termination fee of $150,000 plus related interest and other expenses of $18,889. These payments are reflected in the December 31, 2004 financial statements.



On March 28, 2005, Silicon Valley Bank and the Company agreed to amend the minimum ratio of assets to liabilities (Quick Ratio) financial covenant set forth
in the Credit Facility described above. Under the terms of the amended agreement, the Company is still required to maintain a Quick Ratio of not less than 0.75 to 1.00 but if the Quick Ratio does fall below 0.75 to 1.00 but is at least 0.65 to 1.00
at any time through March 31, 2006, such violation will not constitute an event of default. The amendment extends the date for which failure to maintain a Quick Ratio of not less than 0.75 to 1.00 would not constitute an event of default if such
ratio was at least 0.65 to 1.00 from June 30, 2005 to March 31, 2006. Advance rate and interest rate adjustments under the amended agreement for Quick Ratios of less than 0.75 to 1.00 but not less than 0.65 to 1.00 remain unchanged under the terms
of the amendment.



Management believes that the funds available under the
credit facility and the Companys cash on hand will be sufficient to meet its liquidity needs and fund operations through the next twelve months. However, any projections of future cash inflows and outflows are subject to substantial
uncertainty, including risks and uncertainties relating to the Companys business plan to expand its CRO business, which may require additional capital. In addition, the Company may, from time to time, consider acquisitions of or investments in
complementary businesses, products, services and technologies, which may impact its liquidity requirements or cause it to seek additional equity or debt financing alternatives. Beyond 2005, the Company may need to raise additional capital to meet
its long-term liquidity needs. If the Company determines that it needs additional capital, it may seek to issue equity or obtain debt financing from third party sources. The sale of additional equity or convertible debt securities could result in
dilution to its stockholders. Any additional debt financing, if available, could involve further restrictive covenants, which could adversely affect the Companys operations. There can be no assurance that any of these financing alternatives
will be available in amounts or on terms acceptable to the Company, if at all. If the Company is unable to raise any needed additional capital, it may be required to significantly alter its operating plan, which could have a material adverse effect
on its business, financial condition and results of operations.



3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES



Principles of Consolidation



The consolidated financial statements include the accounts of Essential
Group, Inc. and its wholly owned subsidiary from the date of acquisition. All significant intercompany accounts and transactions have been eliminated in consolidation.



Use of Estimates



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



Cash and Cash Equivalents



Cash and cash equivalents include cash on hand and all highly liquid investments with an
original maturity of three months or less. Such investments are stated at cost, which approximates fair value.



Fixed Assets



Fixed assets are recorded at
cost. Capital leases are recorded at the present value of the future minimum lease payments at the date of purchase. Assets are depreciated using the straight-line method over their useful lives. The estimated useful lives are as follows:



|                       |  |          
|---------------------- |  | ---------
|Furniture and fixtures |  | 5-7 years
|Equipment              |  | 5 years  
|Computers and software |  | 3-5 years



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Leasehold improvements and fixed assets under capital leases are depreciated over the shorter of the estimated useful
life of the asset or the term of the lease.



Maintenance and repairs are
charged to operations as incurred and major improvements are capitalized. Gains or losses resulting from sales or retirements are recorded as incurred, at which time related costs and accumulated depreciation are removed from the accounts.



Long-lived assets are reviewed for impairment whenever events such as service
discontinuance, contract terminations, economic or other changes in circumstances indicate that the carrying amount may not be recoverable. When such events occur, the Company compares the carrying amount of the assets to undiscounted expected
future cash flows. If this comparison indicates that there is an impairment, the amount of the impairment is calculated using discounted expected future cash flows. No such losses have been recognized to date.



Advertising



All advertising costs are expensed as incurred. Advertising expenses were $208,000, $585,000 and $36,000 in fiscal 2004, 2003 and 2002,
respectively.



Fair Value of Financial Instruments



The carrying amounts of cash, receivables, accounts payable and accrued expenses approximate
fair value because of the short-term nature of the items.



Revenue Recognition



Revenue is generated from contracts with sponsors. Revenue on each contract
(study revenue) is recognized as the qualified patient visits occur or the service is provided. The Companys service agreements with the investigative sites (Sites) provide that a percentage of the contract amount will
be paid to the Sites as investigator fees. The percentage of fees paid to the Sites varies by contract depending on the level of services that the Company provides. As study revenue is recognized, the investigator fees to Sites are recognized as
costs and amounts to be paid to the Sites are recorded as accrued investigator fees. Advances on contracts by sponsors are classified as deferred revenue until services are performed. The related payments to Sites are classified as prepaid expenses
until services are performed.



Revenue from CRO services is generated from
contracts with sponsors. Revenue on each contract is recognized as the Company provides study-related services such as project management, study start-up, therapeutic consulting, clinical and medical monitoring, clinical labs and packaging, data
management, biostatistics, quality assurance, regulatory affairs, training and medical writing, either directly or through our partners. The Companys service agreements with the investigator sites and third party service providers pay a fixed
dollar amount per patient visit or procedure performed to be paid as a direct fee. As CRO revenue is recognized, the direct fees are recognized as costs and amounts to be paid to the Sites or third party service providers are recorded as accrued
fees. Advances on contracts by sponsors are classified as deferred revenue until services are performed. The related advance payments to Sites or third party service providers are classified as prepaid expenses until services are performed.



Patient recruitment revenue is also generated from contracts with sponsors.
Revenue on each contract is recognized as the Company provides recruitment related services such as designing and contracting media ads specific to our sponsor studies. The Company negotiates with partner and third party service providers for
related media and other direct fees. As patient recruitment revenue is recognized, the direct fees are recognized as costs and amounts to be paid to the service providers are recorded as accrued fees. Advances on contracts by sponsors are classified
as deferred revenue until services are performed. The related advance payments to partner or third party service providers are classified as prepaid expenses until services are performed.



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##### Table of Contents

In accordance with EITF 99-19 and SAB 101, the Company recognizes its study revenue on a gross basis as it acts as a
principal in such transactions, can influence price, is involved in the product specifications and has credit risk.



Accounts Receivable



Accounts receivable result from services provided to sponsors and are recorded based upon patient visits or other services provided, as stipulated in the contracts. A portion of the accounts receivable balance
represents earned amounts that per contract payment terms are due from the sponsors once the sponsors complete a verification of the patient visit. Credit is extended based on evaluation of a customers financial condition and collateral is not
required. Amounts received in advance of services being performed are reflected as deferred revenue.



The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Companys previous loss history, the customers current
ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company makes judgments as to its ability to collect outstanding receivables based on these factors and provides allowances for
these receivables when collections become doubtful. Provisions are made based on specific review of all significant outstanding balances. The allowance for doubtful accounts for the years ended December 31, 2004, 2003 and 2002 was as follows:



|            |  |                                |  |                      |  |                        |   |  |                         
|----------- |  | ------------------------------ |  | -------------------- |  | ---------------------- | - |  | ------------------------
|Description |  | Balance at Beginning of Period |  | Additions to Reserve |  | Write-Offs on Accounts |   |  | Balance at End of Period
|2002        |  | 704,890                        |  | 93,965               |  | (393,662               | ) |  | 405,193                 
|2003        |  | 405,193                        |  | 18,555               |  | (40,537                | ) |  | 383,211                 
|2004        |  | 383,211                        |  | 151,952              |  |                       |   |  | 535,163                 



Concentration of credit risk



Financial instruments that are potentially subject to concentrations of
credit risk is limited to trade accounts receivable and is subject to the financial conditions of certain major customers. No one customer accounted for greater than 10% of revenue for the years ended December 31, 2004, 2003 and 2002. The Company
does not require collateral or other security to support customers receivables. The Company conducts periodic reviews of its customers financial conditions and vendor payment practices to minimize collection risks on trade accounts
receivable.



Income Taxes



The Company accounts for income taxes under SFAS No. 109, Accounting for Income
Taxes. Under the asset and liability method of SFAS No. 109, deferred income taxes are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax bases of existing
assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.



Accounting for Stock-Based Compensation



At December 31, 2004, the Company had stock-based employee incentive plans and stock-based director and network founders plans. The Company accounts for the employee
plans under the recognition and measurement principals of APB Opinion 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee incentive cost is reflected in net loss, as all options granted
under those plans had an exercise price equal to the market value of the underlying common stock at the date of grant. The following table illustrates the effect on net loss and earnings per share if the Company had applied the fair value
recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee incentives: (In thousands except per share data.)



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|                                                                                                                                            |  |                         |        |   |      |   |         |      |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                                                                                                            |  | Year Ended December 31, |       
|                                                                                                                                            |  | 2004                    |        |   | 2003 |   |         | 2002 | 
|Net loss, as reported                                                                                                                       |  | $                       | (9,238 | ) |      | $ | (9,017  | )    |  | $ | (6,932 | )
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                         | (578   | ) |      |   | (1,289  | )    |  |   | (441   | )
|                                                                                                                                            |  |                         |        |   |      |   |         |      |  |   |        |  
|Pro forma net loss                                                                                                                          |  | $                       | (9,816 | ) |      | $ | (10,306 | )    |  | $ | (7,373 | )
|                                                                                                                                            |  |                         |        |   |      |   |         |      |  |   |        |  
|Loss per share:                                                                                                                             |  |                         |        |   |      |   |         |      |  |   |        |  
|Basic and diluted  as reported                                                                                                             |  | $                       | (2.24  | ) |      | $ | (2.19   | )    |  | $ | (1.68  | )
|                                                                                                                                            |  |                         |        |   |      |   |         |      |  |   |        |  
|Basic and diluted  pro forma                                                                                                               |  | $                       | (2.39  | ) |      | $ | (2.50   | )    |  | $ | (1.79  | )
|                                                                                                                                            |  |                         |        |   |      |   |         |      |  |   |        |  



The pro forma disclosure is not likely
to be indicative of pro forma results which may be expected in future years because of the fact that options vest over several years, pro forma compensation expense is recognized as the options vest and additional awards may also be granted.



For purposes of determining the effect of these options, the fair value of
each option is estimated on the date of grant based on the Black-Scholes single-option pricing model assuming the following for the years ended December 31, 2004, 2003 and 2002:



|                        |  |      |   |  |                |  |      |  
|----------------------- |  | ---- | - |  | -------------- |  | ---- | -
|                        |  | 2004 |   |  | 2003           |  | 2002 |  
|Dividend yield          |  | 0.0  | % |  | 0.0%           |  | 0.0  | %
|Risk-free interest rate |  | 4.1  |   |  | 3.6% to 4.3%   |  | 4.8  | %
|Volatility factor       |  | 77.0 | % |  | 66.0% to 77.0% |  | 66.0 | %
|Expected life in years  |  | 10   |   |  | 10             |  | 10   |  
|                        |  |      |   |  |                |  |      |  



New Accounting Pronouncements



In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of
costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing or other exit or disposal activities. SFAS No. 146 replaces EITF 94-3
applies to exit or disposal activities initiated after December 31, 2002. The Company adopted SFAS No. 146 in 2003. The statement affected the employee severance costs recognized during 2003.



SFAS No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure, provides alternative transition methods for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, it amends the disclosure and certain transition provisions of SFAS No.
123, Accounting for Stock-Based Compensation, to require prominent disclosures in annual financial statements about the method of accounting for stock-based employee compensation and the pro forma effect on reported results of applying
the fair value based method for entities that use the intrinsic value method of accounting. The pro forma effect disclosures are also required to be prominently disclosed in interim period financial statements. The Company does not plan to change to
the fair value based method of accounting for stock-based employee compensation and has adopted the disclosure provisions of this standard.



On May 15, 2003, the Financial Accounting Standards Board issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities
and Equity. SFAS No. 150 changes the classification in the statement of financial position of certain common financial instruments from either equity or mezzanine presentation to liabilities and requires an issuer of those financial statements
to recognize changes in fair value or redemption amount, as applicable, in earnings. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and is effective at the beginning for the first interim period
beginning after June 15, 2003. SFAS No. 150 had no impact upon adoption on July 1, 2003.



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In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment (SFAS No. 123(R)). This statement
requires that the compensation cost relating to share based payment transactions be recognized in the financial statements. Compensation cost is to be measured based on the estimated fair value of the equity-based compensation awards issued as of
the grant date. The related compensation expense will be based on the estimated number of awards expected to vest and will be recognized over the requisite service period (often the vesting period) for each grant. The statement requires the use of
assumptions and judgments about future events and some of the inputs to the valuation models will require considerable judgment by management. SFAS No. 123(R) replaces SFAS No. 123, Accounting for Stock Based Compensation, and supersedes
Accounting Principles Bulletin No. 25 (APB 25) Accounting for Stock Issued to Employees. The provisions of SFAS No. 123(R) are required to be applied by public companies as of the first interim or annual reporting period that begins
after June 15, 2005, which is third quarter 2005 for Essential. Essential intends to continue applying APB 25 to equity-based compensation awards until the effective date of SFAS No. 123(R). At the effective date of SFAS No. 123(R), Essential
expects to use the modified prospective application transition method without restatement of prior interim periods in the year of adoption. This will result in Essential recognizing compensation cost based on the requirements of SFAS No. 123(R) for
all equity-based compensation awards issued after July 1, 2005. For all equity-based compensation awards that are unvested as of July 1, 2005, compensation cost will be recognized for the unamortized portion of compensation cost not previously
included in the SFAS No. 123 pro forma footnote disclosure. Essential is currently evaluating the impact that adoption of SFAS No. 123(R) may have on its results of operations depending on the level and form of future equity-based compensation
awards issued.



Reclassifications



Certain prior year amounts have been reclassified to conform to the current year
presentation.



4. INCOME TAXES



The Company has incurred net operating losses (NOLs) for federal income tax
purposes of approximately $75.5 million, $73.2 million and $70.2 million for the years ended December 31, 2004, 2003 and 2002, respectively; accordingly, no federal income tax provision has been recorded for the periods and there are no taxes
payable at December 31, 2004. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon generation of future taxable income during the periods in which those temporary differences become deductible. Based upon the level of historical losses that may limit utilization of NOL carry-forwards in future
periods, management is unable to predict whether these net deferred tax assets will be utilized prior to expiration. The unused NOL carry-forwards expire in years 2008 through 2024. As such, the Company has recorded a full valuation allowance
against net deferred tax assets.



At December 31, 2004, deferred income taxes
consisted of the following (in thousands):



|                                     |  |      |         |   |      |   |         |      |  |   |         |  
|------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                     |  | 2004 |         |   | 2003 |   |         | 2002 | 
|Net operating loss carry-forward     |  | $    | 30,194  |   |      | $ | 29,290  |      |  | $ | 29,193  |  
|Accrued expenses                     |  |      | 114     |   |      |   | 328     |      |  |   | 96      |  
|Reserves                             |  |      | 214     |   |      |   | 126     |      |  |   | 78      |  
|Leasehold improvements and equipment |  |      | (28     | ) |      |   | (52     | )    |  |   | 378     |  
|Other                                |  |      | 93      |   |      |   | 75      |      |  |   | 47      |  
|                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Total                                |  |      | 30,587  |   |      |   | 29,767  |      |  |   | 29,792  |  
|                                     |  |      |        
|Less  Valuation allowance           |  |      | (30,587 | ) |      |   | (29,767 | )    |  |   | (29,792 | )
|                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Net deferred tax assets              |  | $    | 0       |   |      | $ | 0       |      |  | $ | 0       |  
|                                     |  |      |         |   |      |   |         |      |  |   |         |  



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##### Table of Contents

A reconciliation between the statutory and federal income tax rate (34%) and the effective rate of income tax expense for
the years ended December 31, 2004, 2003 and 2002 is as follows:



|                                  |  |       |    |  |       |    |  |       |   
|--------------------------------- |  | ----- | -- |  | ----- | -- |  | ----- | --
|                                  |  | 2004  |    |  | 2003  |    |  | 2002  |   
|Statutory federal income tax rate |  | (34.0 | )% |  | (34.0 | )% |  | (34.0 | )%
|State taxes                       |  | (6.0  | )  |  | (6.0  | )  |  | (6.0  | ) 
|Other                             |  | 2.6   |    |  | 1.1   |    |  | 2.6   |   
|Valuation allowance               |  | 37.4  |    |  | 38.9  |    |  | 37.4  |   
|                                  |  |       |    |  |       |    |  |       |   
|Effective income tax rate         |  | 0     | %  |  | 0     | %  |  | 0     | % 
|                                  |  |       |    |  |       |    |  |       |   



5. RESTATEMENT OF 2003 AND 2002
FINANCIAL STATEMENTS



The Companys consolidated statements of
operations for its fiscal years ended December 31, 2003 and 2002 are being restated as discussed below. The consolidated balance sheets, consolidated statements of stockholders deficit and consolidated statements of cash flows for each of
these periods were not impacted by the restatement.



As part of its business,
the Company provides patient recruitment services to its customers. Patient recruitment services include advertising for study participants, call center operations and other related services used in the conduct of Phase I-IV clinical research.
Patient recruitment services can be contracted by the customer independent of or in conjunction with the other services provided by the Company. Upon entering into an agreement to provide these services to a customer, the Company contracts with
third-party vendors to provide various aspects of these services. The Company is responsible for the selection of the vendors and the negotiation of terms such as price. Further, the Company is directly liable for all payments arising under any
third party vendor agreement, regardless of whether the Company receives payment from its customers.



The Company has historically recorded revenues derived from its patient recruitment services business net of any related costs incurred. Although the treatment of these revenues on a net basis was consistent with what
the Companys management understood to be industry practice at the time the revenue recognition policy was adopted, management, in consultation with the Audit Committee of the Board of Directors of the Company and the Companys independent
auditor, Grant Thornton L.L.P., reviewed the above-mentioned facts in light of the multi-factor test set forth in the Financial Accounting Standards Boards Emerging Issues Task Force Issue No. 99-19, Reporting Revenue Gross as a
Principal versus Net as an Agent (EITF 99-19). This review was conducted in order to determine whether revenue derived from the Companys patient recruitment services business should be recorded on a gross basis.



On March 17, 2005, the Audit Committee and management determined that EITF
99-19 requires revenues derived from our patient recruitment services business to be recorded as gross revenue inclusive of any related costs incurred. The Audit Committee and management discussed this change with the Companys independent
auditor, who agreed with this determination. As such, the Company is restating its consolidated statements of operations for the fiscal years ended December 31, 2003 and 2002 to present such revenues on a gross basis in accordance with accounting
principles generally accepted in the United States and EITF 99-19. Operating losses and net losses for the restated periods are not affected by this restatement.



6. COMMON STOCK, REDEEMABLE PREFERRED STOCK, PREFERRED STOCK AND STOCK WARRANTS



Common Stock



The Company has two classes of common stock, Class A common stock (Class A Stock) and Class B common stock (Class B
Stock), as discussed in Note 7.



Preferred Stock



In connection with the Merger, the Company created five sub-series of Series A preferred
stock. Old AmDoc preferred shares were exchanged for 150,884 Series A-1 shares, 149,602 Series A-2 shares and 297,768 Series A-3 shares. Holders of Series A preferred stock of the Company converted their shares for 888,889 Series A-4 shares



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##### Table of Contents

and Series A-5 shares were exchanged in connection with the conversion of the promissory note. The warrants were exercised and converted into 80,000 shares
of the Companys Series A-5 preferred stock. All shares of Series A preferred stock are convertible into Class A common stock at any time at the election of the holder or upon an initial public offering at the liquidation value ($26.51, $50.13,
$8.40, $11.25 and $7.90 per share, all subject to adjustment, for the Series A-1, A-2, A-3, A-4 and A-5, respectively). The conversion is subject to adjustment pursuant to certain anti-dilution provisions. Holders of Series A preferred stock are
entitled to one vote for each share of Class A common stock into which their shares are convertible. At any time after March 27, 2005, with a 66 2/3% vote of Series A-2, A-3, A-4, A-5 and A-6, the holders of Series A preferred stock may require the
Company to redeem the shares at the liquidation value plus an amount equal to the cumulative amount of unpaid dividends as if such dividends had accrued at a rate of 8% per annum on the liquidation value. Series A preferred stock is being accreted
to its redemption value. As these shares are redeemable outside the control of the Company, they are shown separately outside the stockholders deficit section in the accompanying consolidated balance sheet.



In January 2000, the Company issued 5.73% convertible promissory notes in an aggregate
principal amount of $17,508,000 to certain shareholders. The notes matured on March 31, 2000, but were automatically converted into shares of newly created Series A-6 preferred stock. On March 28, 2000, the Company converted the notes and interest
into 1,477,282 shares of its Series A-6 preferred stock at $12 per share. During 2000, the Company incurred related interest expense of $220,000.



On March 28, 2000, the Company authorized the sale and issuance of 1,249,168 shares of its Series A-6 preferred stock and 209,167 shares of its Series A-7 preferred stock
at $12 per share. Total consideration for this transaction was $17,500,000.



For financial advisory services provided to the Company in connection with the 2000 financing, the Company entered into an agreement with a shareholder and issued 23,427 shares of its Series A-5 preferred stock. Additionally, during 2000,
the Company issued 20,000 shares of Class A common stock in lieu of cash for services provided by a vendor. The Company has recorded noncash costs for these services totaling $481,000 during 2000, based upon the fair value of the stock at the date
of grant.



The 228,436 shares of Series B contingent convertible preferred
stock issued in connection with the PC3 merger has a preference of $.01 upon liquidation, has limited voting rights and is convertible into Class A common stock upon the occurrence of a public offering of its securities, a sale, merger or
consolidation with or into another company, or a liquidation (Triggering Event).



On December 30, 1999, the Company issued an aggregate of 30,164 shares of its Series E convertible preferred stock and warrants to purchase up to an aggregate of 10,054 shares of its Class A common stock pursuant to a
private placement memorandum for gross proceeds of $377,000. A total of seven Class A common stock warrants have been exercised  one was exercised in 2001 and six were exercised in 2000.



The following is a summary of the characteristics of the different classes of stock issued:



|                                |   |        |   |           |   |   |   |   |   |  
|------------------------------- | - | ------ | - | --------- | - | - | - | - | - | -
|Rights and Preferences          |   | Common |   | Preferred
|                                | A |        | B |           | A |   | B |   | E
|Voting                          |   | X      |   |           |   | X |   |   |   | X
|Convertible into Class A Common |   |        |   | X         |   | X |   | X |   | X
|Redeemable                      |   |        |   |           |   | X |   |   |   |  
|Liquidation Preference          |   |        |   |           |   | X |   | X |   | X
|Dividend Rights                 |   |        |   |           |   | X |   |   |   |  



Warrants



On February 5, 2004, the Company issued warrants to purchase 12,000 shares of Class A common
stock exercisable at $2.00 per share to Galen Advisors LLC. The warrants were issued in consideration for services rendered by our director, Zubeen Shroff, in 2003 and were exercisable 100% on the date of grant and terminate on the tenth anniversary
of the date of grant.



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##### Table of Contents

On December 16, 2003, the Company issued warrants to purchase 71,250 shares of Class A common stock to third-party
consultants for various services. The warrants are exercisable at $2.00 per share once vested based on various performance clauses. As of December 31, 2004, 36,562 warrants had vested.



In August 2000, the Company issued warrants to purchase 12,244 shares of Class A common stock to third-part consultants for various
services. The warrants are exercisable at $10.00 per share once vested based on various performance clauses. As of December 31, 2003, all warrants had vested.



7. RELATED PARTIES



The Company maintains an equity structure, which enables the Sites to potentially participate in the equity appreciation of the Company commensurate with their individual contributions to the Companys success.
The Company has two classes of common stock, Class A common stock (Class A Stock) and Class B common stock (Class B Stock). Class B Stock is held by a limited liability company (LLC) established for the benefit of
the Companys Sites.



Until the Company effects a Triggering Event (as
discussed in Note 6), the Class B Stock will have no right to vote. The Class B Stock is held by the LLC and the Sites have no right to receive the shares of Class B Stock until after a Triggering Event. Upon a Triggering Event, the Class B Stock
will convert into 685,324 shares of Class A Stock, which will be available to the LLC for distribution to the Sites.



These shares will be distributed to the Sites according to their ownership interest, which is determined through a formula based on their respective percentage of total
research revenue generated. Because the Sites that have signed a clinical research service agreement continuously earn the shares, the Company accounts for the Class B stock and LLC interests as a variable stock plan and accordingly, re-measures the
value of these interests at each balance sheet date. The value of the Class B stock is highly judgmental and is based upon an independent appraisal. The annual increase or decrease in the value of these interests is reflected in the accompanying
consolidated statements of operations as an expense and in the statements of stockholders deficit as additional paid-in capital.



8. ACCOUNTING FOR STOCK-BASED COMPENSATION



The Company has two stock incentive plans for directors and network founders (the Plans) which provide for the granting of options to purchase Class A Stock
over a period not to exceed 10 years. Under the terms of the Plans, the option price cannot be less than 85% of the fair market value at the date of grant and options granted to participants other than directors generally vest over 4 years. Options
granted to directors under the plan generally vest immediately. There is no established public trading market for the Companys Class A Stock.



The Company has employee stock incentive plans (the Employee Plans) which provide for the granting of options to eligible employees to purchase Class A Stock
over a period not to exceed 10 years. Options are granted at not less than fair value and may be issued under the Employee Plans until 2006.



A total of 4,509,391 shares have been reserved for issuance under the Plans until 2006.



Information regarding these option plans for the years ended December 31, 2004, 2003 and 2002 are as follows:



|                                         |  |           |  |                              |      |        |           |                              |   |        |  |                              |  |   |      
|---------------------------------------- |  | --------- |  | ---------------------------- | ---- | ------ | --------- | ---------------------------- | - | ------ |  | ---------------------------- |  | - | -----
|                                         |  | 2004      |  | 2003                         |      | 2002  
|                                         |  | Shares    |  | WeightedAverageExercisePrice |      | Shares |           | WeightedAverageExercisePrice |   | Shares |  | WeightedAverageExercisePrice
|Options outstanding, beginning of period |  | 2,837,258 |  | $                            | 5.49 |        | 1,169,368 |                              | $ | 10.52  |  | 1,602,682                    |  | $ | 10.87



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##### Table of Contents

|                                                                 |  |        |           |      |                              |      |        |  |   |                              |   |        |   |      |                              |   |           |   |  |   |      
|---------------------------------------------------------------- |  | ------ | --------- | ---- | ---------------------------- | ---- | ------ |  | - | ---------------------------- | - | ------ | - | ---- | ---------------------------- | - | --------- | - |  | - | -----
|                                                                 |  | 2004   |           | 2003 |                              | 2002
|                                                                 |  | Shares |           |      | WeightedAverageExercisePrice |      | Shares |  |   | WeightedAverageExercisePrice |   | Shares |   |      | WeightedAverageExercisePrice
|Options exercised                                                |  |        |          |      |                              |      |       |  |   |                             |   |        |   |     |                              |   |          |   |  |   |     
|Options granted                                                  |  |        | 511,949   |      |                              |      | 1.36   |  |   | 1,814,504                    |   |        |   | 2.07 |                              |   | 146,050   |   |  |   | 2.45 
|Options canceled                                                 |  |        |          |      |                              |      |       |  |   |                             |   |        |   |     |                              |   | (519,445  | ) |  |   | 9.69 
|Options forfeited                                                |  |        | (468,017  | )    |                              |      | 3.17   |  |   | (146,614                     | ) |        |   | 3.17 |                              |   | (59,919   | ) |  |   | 7.45 
|                                                                 |  |        |           |      |                              |      |        |  |   |                              |   |        |   |      |                              |   |           |   |  |   |      
|Options outstanding, end of period                               |  |        | 2,881,190 |      |                              | $    | 5.24   |  |   | 2,837,258                    |   |        | $ | 5.49 |                              |   | 1,169,368 |   |  | $ | 10.52
|                                                                 |  |        |           |      |                              |      |        |  |   |                              |   |        |   |      |                              |   |           |   |  |   |      
|Options exercisable                                              |  |        | 2,025,024 |      |                              | $    | 6.71   |  |   | 1,790,102                    |   |        | $ | 7.36 |                              |   | 1,064,570 |   |  | $ | 10.93
|Weighted average fair value of options granted during the period |  | $      | 1.25      |      |                              |      |        |  | $ | 1.46                         |   |        |   |      |                              | $ | 1.51      |   |  |   |      
|Options available for grant at end of period                     |  |        | 1,614,859 |      |                              |      |        |  |   | 1,658,791                    |   |        |   |      |                              |   | 1,796,736 |   |  |   |      
|                                                                 |  |        |           |      |                              |      |        |  |   |                              |   |        |   |      |                              |   |           |   |  |   |      



The following table summarizes
information about options outstanding at December 31, 2004:



|                         |  |                     |  |                                         |  |                              |        |                  |           |                              |   |       
|------------------------ |  | ------------------- |  | --------------------------------------- |  | ---------------------------- | ------ | ---------------- | --------- | ---------------------------- | - | ------
|                         |  | Options Outstanding |  | Options Exercisable                    
|Range of Exercise Prices |  | Number Of Shares    |  | WeightedAverageRemainingContractualLife |  | WeightedAverageExercisePrice |        | Number Of Shares |           | WeightedAverageExercisePrice
|$1.25 - $5.00            |  | 2,413,749           |  | 7.2                                     |  | $                            | 2.00   |                  | 1,568,213 |                              | $ | 2.20  
|$5.01 - $10.00           |  | 422,745             |  | 4.6                                     |  |                              | 9.41   |                  | 412,115   |                              |   | 9.39  
|$10.01 - $179.87         |  | 44,696              |  | 5.1                                     |  |                              | 140.45 |                  | 44,696    |                              |   | 140.45
|                         |  |                     |  |                                         |  |                              |        |                  |           |                              |   |       
|                         |  | 2,881,190           |  | 6.8                                     |  | $                            | 5.24   |                  | 2,025,024 |                              | $ | 6.71  
|                         |  |                     |  |                                         |  |                              |        |                  |           |                              |   |       



As of December 31, 2004, the
Companys current employees held approximately 2.0 million outstanding options or 17.7% of the Companys fully diluted shares.



9. NET LOSS PER COMMON SHARE



Basic and diluted net loss per common share is based on the weighted average number of Class A and Class B shares of common stock outstanding. Basic net loss per share is
computed by dividing net loss available to Class A and Class B common stockholders for the period by the weighted average number of Class A and Class B common shares outstanding during the period. Diluted net loss per share is computed by dividing
net loss available to Class A and Class B common stockholders for the period by the weighted average number of Class A and Class B common and common equivalent shares outstanding during the period. Stock warrants, preferred stock and stock options
were not included in the diluted net loss per common share calculation since their impact is anti-dilutive. For the period ended December 31, 2004, 5,251,221 outstanding preferred stock shares, 2,881,190 outstanding stock options and 93,541
outstanding Class A common stock warrants were excluded from the calculation of diluted earnings per share because they were anti-dilutive. However, these options could be dilutive in the future.



F-17



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##### Table of Contents

The following is a reconciliation of the Companys basic net loss per share for the periods ended December 31, 2004,
2003 and 2002: (in thousands except share and per share data)



|                     |  |         |       |                 |           |                 |   |          |  |                 |       |                 |           |          |   |                 |  |                 |       |  |           |  |   |     
|-------------------- |  | ------- | ----- | --------------- | --------- | --------------- | - | -------- |  | --------------- | ----- | --------------- | --------- | -------- | - | --------------- |  | --------------- | ----- |  | --------- |  | - | ----
|                     |  | 2004    |       | 2003            |           | 2002           
|                     |  | NetLoss |       | Number ofShares |           | Per ShareAmount |   | Net Loss |  | Number ofShares |       | Per ShareAmount |           | Net Loss |   | Number ofShares |  | Per ShareAmount
|Net loss available   |  |         |       |                 |           |                 |   |          |  |                 |       |                 |           |          |   |                 |  |                 |       |  |           |  |   |     
|                     |  |         |       |                 |           |                 |   |          | 
|Class A Stockholders |  | $       | 7,699 |                 | 3,430,043 |                 | $ | 2.24     |  | $               | 7,515 |                 | 3,430,043 |          | $ | 2.19            |  | $               | 5,778 |  | 3,430,043 |  | $ | 1.68
|                     |  |         |       |                 |           |                 |   |          | 
|Class B Stockholders |  | $       | 1,538 |                 | 685,324   |                 | $ | 2.24     |  | $               | 1,502 |                 | 685,324   |          | $ | 2.19            |  | $               | 1,154 |  | 685,324   |  | $ | 1.68



10. LEGAL MATTERS



In the ordinary course of conducting its business, the Company becomes involved in
various lawsuits related to its business. The Company does not believe that the ultimate resolution of these matters will be material to its business, financial position or result of operations.



11. 401(k) RETIREMENT SAVINGS PLAN AND TRUST



The Company has a Cash Deferral Arrangement under Section 401(k) of the Internal Revenue
Code. Beginning January 1, 1997, and at its discretion, the Company matches a percentage of employee contributions. The Companys contributions to the Cash Deferral Arrangement were $47,000, $160,000 and $236,000 for the years ended December
31, 2004, 2003 and 2002, respectively.



12. LEASE ARRANGEMENTS AND RENT
EXPENSE



The Company has entered into operating lease agreements for
office space and office equipment. The following is a schedule of the future minimum lease commitments relating to all leases as of December 31, 2004: (in thousands)



|                                       |  |                 |      
|-------------------------------------- |  | --------------- | -----
|Year                                   |  | OperatingLeases
|2005                                   |  | $               | 632  
|2006                                   |  |                 | 648  
|2007                                   |  |                 | 653  
|2008                                   |  |                 | 673  
|2009                                   |  |                 | 697  
|                                       |  |                 |      
|Total future minimum lease commitments |  | $               | 3,303
|                                       |  |                 |      



The Company has operating leases
expiring at various dates through December 2009. Certain leases contain escalation clauses based upon inflation. Total rent expense relating to operating leases was $681,000, $799,000 and $1,034,000 for the years ended December 31, 2004, 2003 and
2002, respectively, net of sublease income of approximately $57,000, $117,000 and $90,000, respectively. The sublease expired in September 2004.



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##### Table of Contents

13. EMPLOYMENT CONTRACTS



The Company has entered into employment contracts with certain officers. Such agreements provide for annual base salary, stock options, severance packages and in some
instances, discretionary bonuses and payments in the event of termination without cause.



14. QUARTERLY FINANCIAL SUMMARY (AS RESTATED) (UNAUDITED)



As discussed further in Note 5, on March 17, 2005, the Audit Committee and management determined that EITF 99-19 requires revenues derived from the Companys patient recruitment services business to be recorded
as gross revenue inclusive of any related costs incurred. The Audit Committee and management discussed this change with the Companys independent auditor, who agreed with this determination. The amounts below for the first, second and third
quarters of 2004 and for each quarter of 2003 and 2002 have been restated to present revenues on a gross basis in accordance with accounting principles generally accepted in the United States and EITF 99-19.



|                                             |  |                                       |        |   |        |   |        |       |  |   |        |   |  |   |        |  
|-------------------------------------------- |  | ------------------------------------- | ------ | - | ------ | - | ------ | ----- |  | - | ------ | - |  | - | ------ | -
|                                             |  | First                                 |        |   | Second |   |        | Third |  |   | Fourth |  
|                                             |  | (in thousands, except per share data) |       
|2004 Quarters                                |  |                                       |        |   |        |   |        |       |  |   |        |   |  |   |        |  
|Net revenue                                  |  | $                                     | 13,823 |   |        | $ | 12,028 |       |  | $ | 9,830  |   |  | $ | 12,303 |  
|Loss from operations                         |  |                                       | (498   | ) |        |   | (802   | )     |  |   | (726   | ) |  |   | (441   | )
|Net loss                                     |  |                                       | (466   | ) |        |   | (811   | )     |  |   | (738   | ) |  |   | (453   | )
|Basic and diluted net loss per common share: |  |                                       |        |   |        |   |        |       |  |   |        |   |  |   |        |  
|Class A                                      |  | $                                     | (0.51  | ) |        | $ | (0.60  | )     |  | $ | (0.59  | ) |  | $ | (0.53  | )
|Class B                                      |  |                                       | (0.51  | ) |        |   | (0.60  | )     |  |   | (0.59  | ) |  |   | (0.53  | )
|                                             |  |                                       |        |  
|                                             |  | First                                 |        |   | Second |   |        | Third |  |   | Fourth |  
|                                             |  | (in thousands, except per share data) |       
|2003 Quarters                                |  |                                       |        |  
|Net revenue                                  |  | $                                     | 14,937 |   |        | $ | 16,759 |       |  | $ | 13,839 |   |  | $ | 13,930 |  
|Loss from operations                         |  |                                       | (712   | ) |        |   | (676   | )     |  |   | (799   | ) |  |   | (589   | )
|Net loss                                     |  |                                       | (708   | ) |        |   | (671   | )     |  |   | (803   | ) |  |   | (604   | )
|Basic and diluted net loss per common share: |  |                                       |        |   |        |   |        |       |  |   |        |   |  |   |        |  
|Class A                                      |  | $                                     | (0.54  | ) |        | $ | (0.54  | )     |  | $ | (0.58  | ) |  | $ | (0.53  | )
|Class B                                      |  |                                       | (0.54  | ) |        |   | (0.54  | )     |  |   | (0.58  | ) |  |   | (0.53  | )
|                                             |  |                                       |        |  
|                                             |  | First                                 |        |   | Second |   |        | Third |  |   | Fourth |  
|                                             |  | (in thousands, except per share data) |       
|2002 Quarters                                |  |                                       |        |   |        |   |        |       |  |   |        |   |  |   |        |  
|Net revenue                                  |  | $                                     | 20,357 |   |        | $ | 16,809 |       |  | $ | 15,911 |   |  | $ | 13,510 |  
|Loss from operations                         |  |                                       | (186   | ) |        |   | (319   | )     |  |   | (230   | ) |  |   | (778   | )
|Net loss                                     |  |                                       | (148   | ) |        |   | (292   | )     |  |   | (216   | ) |  |   | (762   | )
|Basic and diluted net loss per common share: |  |                                       |        |   |        |   |        |       |  |   |        |   |  |   |        |  
|Class A                                      |  | $                                     | (0.37  | ) |        | $ | (0.41  | )     |  | $ | (0.38  | ) |  | $ | (0.52  | )
|Class B                                      |  |                                       | (0.37  | ) |        |   | (0.41  | )     |  |   | (0.38  | ) |  |   | (0.52  | )





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##### Table of Contents

Exhibit Index



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|3.1         |  | Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Essential Group, Inc.s Registration Statement on Form 10 filed on April 26, 2001 (File No.
0-32601) (the Form 10))                                                                                                                                                                                                                                                                                                                                                                                                                                       
|            | 
|3.2         |  | Amendment to Certificate of Incorporation regarding the name change from AmericasDoctor.com, Inc. to AmericasDoctor, Inc. (incorporated by reference to Exhibit 3.2 to Essential Group,
Inc.s Annual Report on Form 10-K filed on March 28, 2002 (File No. 0-32601))                                                                                                                                                                                                                                                                                                                                                                                      
|            | 
|3.3         |  | Amendment to Certificate of Incorporation regarding the name change from AmericasDoctor, Inc. to Essential Group, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|            | 
|3.4         |  | Certificates of Amendment of Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|            | 
|3.5         |  | Certificate of Designation, Preferences and Rights of Series A-1 Preferred Stock (incorporated by reference to Exhibit 3.3 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|            | 
|3.6         |  | Certificate of Designation, Preferences and Rights of Series A-2 Preferred Stock (incorporated by reference to Exhibit 3.4 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|            | 
|3.7         |  | Certificate of Designation, Preferences and Rights of Series A-3 Preferred Stock (incorporated by reference to Exhibit 3.5 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|            | 
|3.8         |  | Certificate of Designation, Preferences and Rights of Series A-4 Preferred Stock (incorporated by reference to Exhibit 3.6 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|            | 
|3.9         |  | Certificate of Designation, Preferences and Rights of Series A-5 Preferred Stock (incorporated by reference to Exhibit 3.7 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|            | 
|3.10        |  | Amended Certificate of Designation, Preferences and Rights of Series A-6 Preferred Stock (incorporated by reference to Exhibit 3.8 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|            | 
|3.11        |  | Amended Certificate of Designation, Preferences and Rights of Series A-7 Preferred Stock (incorporated by reference to Exhibit 3.9 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|            | 
|3.12        |  | Certificate of Designation, Preferences and Rights of Series B Contingent Convertible Preferred Stock (incorporated by reference to Exhibit 3.10 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|            | 
|3.13        |  | Certificate of Designation, Preferences and Rights of Series C Contingent Convertible Preferred Stock (incorporated by reference to Exhibit 3.11 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|            | 
|3.14        |  | Certificate of Designation, Preferences and Rights of Series E Preferred Stock (incorporated by reference to Exhibit 3.12 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 
|3.15        |  | Amended and Restated Bylaws (incorporated by reference to Exhibit 3.13 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|            | 
|4.1         |  | Amended and Restated Registration Rights Agreement, dated as of January 6, 2000, among Affiliated Research Centers, Inc. and Galen Partners III, L.P., Galen Partners International III, L.P.,
Galen Employee Fund III, L.P., Delphi Ventures III, L.P., Delphi BioInvestments III, L.P., Hambrecht & Quist California, H&Q Affiliated Research Investors, L.P., Hambrecht & Quist Employee Venture Fund, L.P. II, Premier Research
Worldwide, Ltd., Tullis-Dickerson Capital Focus II, L.P., TD Origen Capital Fund, L.P., TD Javelin Capital Fund, L.P. and GE Capital Equity Investments, Inc. (incorporated by reference to Exhibit 4.1 to the Form 10)



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.2         |  | Amendment No. 1 to Registration Rights Agreement and Consent, dated as of March 28, 2000, among AmericasDoctor.com, Inc. and LHC Corporation, Charter Growth Capital, L.P., Charter Growth
Capital Co-Investment Fund, L.P., CGC Investors, L.P., The CIT Group/Equity Investments, Inc., Galen Partners III, L.P., Galen Partners International III, L.P., Galen Employee Fund III, L.P., Delphi Ventures III, L.P., Delphi BioInvestments III,
L.P., Delphi Ventures IV, L.P., Delphi BioInvestments IV, L.P., Premier Research Worldwide, Ltd. and Tullis-Dickerson Capital Focus II, L.P. (incorporated by reference to Exhibit 4.2 to the Form 10)                                                                 
|            | 
|4.3         |  | Investor Rights Agreement, dated as of January 6, 2000, among Affiliated Research Centers, Inc. and Galen Partners III, L.P., Galen Partners International III, L.P., Galen Employee Fund III,
L.P., Delphi Ventures III, L.P., Delphi BioInvestments III, L.P., Hambrecht & Quist California, H&Q Affiliated Research Investors, L.P., Hambrecht & Quist Employee Venture Fund, L.P. II, Premier Research Worldwide, Ltd., Tullis-Dickerson
Capital Focus II, L.P., TD Origen Capital Fund, L.P., TD Javelin Capital Fund, L.P. and GE Capital Equity Investments, Inc. (incorporated by reference to Exhibit 4.3 to the Form 10)                                                                                      
|            | 
|4.4         |  | Amendment No. 1 to Investor Rights Agreement, Waiver and Consent, dated as of March 28, 2000, among AmericasDoctor.com, Inc. and LHC Corporation, Charter Growth Capital, L.P., Charter Growth
Capital Co-Investment Fund, L.P., CGC Investors, L.P., The CIT Group/Equity Investments, Inc., Galen Partners III, L.P., Galen Partners International III, L.P., Galen Employee Fund III, L.P., Delphi Ventures III, L.P., Delphi BioInvestments III,
L.P., Delphi Ventures IV, L.P., Delphi BioInvestments IV, L.P., Tullis-Dickerson Capital Focus II, L.P., TD Origen Capital Fund, L.P., TD Javelin Capital Fund, L.P. and Premier Research Worldwide, Ltd. (incorporated by reference to Exhibit 4.4 to
the Form 10)
|            | 
|4.5         |  | Amended and Restated Limited Liability Company Agreement of Affiliated Research Centers LLC, dated as of November 21, 1997 (incorporated by reference to Exhibit 4.5 to the Form
10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|            | 
|4.6         |  | Form of Class A Common Stock Warrant (incorporated by reference to Exhibit 4.6 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|            | 
|4.7         |  | Form of Clinical Research Services Agreement (incorporated by reference to Exhibit 4.7 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 
|4.8         |  | Amendment No. 2 to Investor Rights Agreement and Consent, dated as of June 1, 2001, among AmericasDoctor.com, Inc. and LHC Corporation, Galen Associates, Galen Partners III, L.P., Galen
Partners International III, L.P., Galen Employee Fund III, L.P., Delphi Ventures III, L.P., Delphi BioInvestments III, L.P., Delphi Ventures IV, L.P., Delphi BioInvestments IV, L.P., Tullis-Dickerson Capital Focus II, L.P., TD Origen Capital Fund,
L.P. and TD Javelin Capital Fund, L.P. (incorporated by reference to Exhibit 4.8 to Essential Group, Inc.s Annual Report on Form 10-K filed on March 28, 2002 (File No. 0-32601))                                                                                    
|            | 
|4.9         |  | Waiver of Redemption Rights dated August 25, 2005 (incorporated by reference to Exhibit 10.4 to Essential Group, Inc.s Quarterly Report on Form 10-Q filed on Nov. 12,
2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|            | 
|10.1*       |  | Amended and Restated 1996 Employee Stock Option Plan (incorporated by reference to Exhibit 10.1 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|            | 
|10.2*       |  | Form of Stock Option Agreement under the Amended and Restated 1996 Employee Stock Option Plan (incorporated by reference to Exhibit 10.2 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|            | 
|10.3*       |  | Amended and Restated 1996 Director Stock Option Plan (incorporated by reference to Exhibit 10.3 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|            | 
|10.4*       |  | Form of Stock Option Agreement under the Amended and Restated 1996 Director Stock Option (incorporated by reference to Exhibit 10.4 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|            | 
|10.5*       |  | 1996 Consultants Warrant Stock Plan (incorporated by reference to Exhibit 10.5 to the Form 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                  
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                      
|10.6*       |  | Form of Stock Option Agreement under the 1996 Consultants Warrant Stock Plan (incorporated by reference to Exhibit 10.6 to the Form 10)                                                                                                                                                          
|            | 
|10.7*       |  | Employment, Confidentiality, Non-Competition and Severance Agreement, dated as of March 1, 2000, between AmericasDoctor.com, Inc. and C. Lee Jones (incorporated by reference to Exhibit 10.13
to the Form 10)                                                                                   
|            | 
|10.8*       |  | Employment, Confidentiality, Non-Competition and Severance Agreement, dated as of October 27, 2003, between AmericasDoctor, Inc. and Dennis Cavender (incorporated by reference to Exhibit 10.8
to Essential Group, Inc.s Annual Report on Form 10-K filed on March 19, 2004 (File No. 0-32601))
|            | 
|10.9*       |  | Employment, Confidentiality, Non-Competition and Severance Agreement, dated as of March 14, 2003, between AmericasDoctor, Inc. and Julie Ross (incorporated by reference to Exhibit 10.1 to
Essential Group, Inc.s Quarterly Report on Form 10-Q filed on August 12, 2003)                      
|            | 
|10.10       |  | Office Lease Agreement, dated April 29, 1997, between Affiliated Research Centers, Inc. and T.R.L.P. (incorporated by reference to Exhibit 10.20 to the Form 10)                                                                                                                                 
|            | 
|10.11       |  | Loan and Security Agreement, dated September 27, 2004, among Essential Group, Inc., AmericasDoctor.com Coordinator Services, Inc. and Silicon Valley Bank (incorporated by reference to Exhibit
10.1 to Essential Group, Inc.s Current Report on Form 8-K filed on Oct. 1, 2004)                
|            | 
|10.12       |  | Amendment No. 1 to Loan Documents, dated September 27, 2004, among Essential Group, Inc., AmericasDoctor.com Coordinator Services, Inc. and Silicon Valley Bank (incorporated by reference to
Exhibit 10.2 to Essential Group, Inc.s Current Report on Form 8-K filed on Oct. 1, 2004)          
|            | 
|10.13       |  | Amendment No. 2 to Loan Documents, dated September 27, 2004, among Essential Group, Inc., AmericasDoctor.com Coordinator Services, Inc. and Silicon Valley Bank (incorporated by reference to
Exhibit 10.3 to Essential Group, Inc.s Current Report on Form 8-K filed on Oct. 1, 2004)          
|            | 
|10.14       |  | Amendment to Loan Documents, dated March 28, 2005, among Essential Group, Inc., AmericasDoctor.com Coordinator Services, Inc. and Silicon Valley Bank                                                                                                                                           
|            | 
|10.15*      |  | Letter Agreement, dated December 10, 2004, between Essential Group, Inc. and Pradip K. Banerjee, Ph.D. (incorporated by reference to Exhibit 10.1 to Essential Group, Inc.s Current
Report on Form 8-K filed on Dec. 13, 2004)                                                                  
|            | 
|21.1        |  | List of Subsidiaries                                                                                                                                                                                                                                                                            
|            | 
|23.1        |  | Consent of Independent Public Accountants                                                                                                                                                                                                                                                       
|            | 
|24.1        |  | Power of Attorney                                                                                                                                                                                                                                                                               
|            | 
|31.1        |  | Principal Executive Officers Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                          
|            | 
|31.2        |  | Principal Financial Officers Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                          
|            | 
|32.1        |  | Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act of 2002)                                                                                                                                                                                                          

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|* | Management Contract or Compensatory Plan
|- | ----------------------------------------

| | Filed herewith
|- | --------------





E-3