<PAGE>

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                   U. S. SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.   20549
                                       
                                 FORM 10-KSB/A
                                       
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITES EXCHANGE
    ACT OF 1934
                                       
                  FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997
                                       
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
                                       
                        COMMISSION FILE NUMBER 1-13009
                                       
                      MEDICAL RESOURCES MANAGEMENT, INC.
          (Name of small business issuer as specified in its charter)
                                       
          NEVADA                                                  95-4607643
    (State or other jurisdiction of                           (I.R.S. Employer
     incorporation or organization)                          Identification No.)

932 GRAND CENTRAL AVENUE GLENDALE, CALIFORNIA                       91201
    (Address of principal executive offices)                      (Zip Code)

                                 (818) 240-8250
             (Registrant's telephone number, including area code)
                                       
   Securities registered under Section 12(b) of the Exchange Act:   None
                                       
Securities registered under                                 Common Stock, 
Section 12(g) of the Exchange Act:                    par value $.001 per share
                                       
Check whether the Registrant (1) filed all reports required to be filed by 
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for 
such shorter period that the Registrant was required to file such reports), 
and (2) has been subject to such filing requirements for the past 90 days.
Yes  X       No 
    ---          ---

Check if there is no disclosure of delinquent filers in response to Item 405 
of Regulation S-B contained in this form, and no disclosure will be 
contained, to the best of the Registrant's knowledge, in definitive proxy or 
information statements incorporated by reference in Part III of this Form 
10-KSB or any amendment to this Form 10-KSB.   [ ]
                                       
The Registrant's revenues for the fiscal year ended October 31, 1997 were 
$8,105,140.
                                       
As of January 30, 1998, the aggregate market value of the voting stock held 
by non-affiliates of the Registrant (based upon the average of the closing 
bid and asked prices on such date) was approximately $2,096,000.

Documents incorporated by reference: Certain responses to Part III are
incorporated herein by reference to information contained in the Registrant's
definitive proxy statement for its 1998 Annual Meeting of Stockholders as filed
with the Securities and Exchange Commission on March 2, 1998.
                                       
Exhibits index page number:  19


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<PAGE>

                                    PART I


FORWARD-LOOKING STATEMENTS

   This Report on Form 10-KSB/A includes certain statements that may be deemed 
to be "forward-looking statements" within the meaning of the Private 
Securities Litigation Reform Act of 1995.  The sections of this Report on 
Form 10-KSB/A containing such forward-looking statements include "Description
of Business," "Historical Background," "Growth," "Acquisitions," "Products 
and Services," "Marketing and Sales," "Markets" and "Competition" under Item 
1 below, and "Management's Discussion and Analysis of Financial Condition and 
Results of Operations" under Item 2 below.  Statements in this Form 10-KSB/A 
which address activities, events or developments that the registrant expects 
or anticipates will or may occur in the future, including such topics as 
future issuances of shares, future capital expenditures (including the amount 
and nature thereof), expansion and other development and technological trends 
of industry segments in which the registrant is active, business strategy, 
expansion and growth of the registrant's and its competitors' business and 
operations and other such matters are forward-looking statements.  Although 
the registrant believes the expectations expressed in such forward-looking 
statements are based on reasonable assumptions within the bounds of its 
knowledge of its business, a number of factors could cause actual results to 
differ materially from those expressed in any forward-looking statements, 
whether oral or written, made by or on behalf of the registrant.

   The registrant's operations are subject to factors outside its control.  
Any one, or a combination, of these factors could materially affect the 
results of the registrant's operations.  These factors include:  (a) changes 
in levels of competition from current competitors and potential new 
competition; (b) loss of a significant customer; and (c) changes in 
availability or terms of working capital financing from vendors and lending 
institutions.  The foregoing should not be construed as an exhaustive list of 
all factors that could cause actual results to differ materially from those 
expressed in forward-looking statements made by the registrant.  
Forward-looking statements made by or on behalf of the registrant are based 
on a knowledge of its business and the environment in which it operates, but 
because of the factors listed above, actual results may differ from those 
anticipated results described in these forward-looking statements.  
Consequently, all of the forward-looking statements made are qualified by 
these cautionary statements and there can be no assurance that the actual 
results or developments anticipated by the registrant will be realized or, 
even if substantially realized, that they will have the expected consequences 
to or effects on the registrant or its business or operations.


ITEM 1.  DESCRIPTION OF BUSINESS

   Medical Resources Management, Inc. ("MRM" or the "Company") makes mobile 
laser/surgical services available to its customers by providing this 
equipment on a per procedure basis to hospitals, out patient surgery centers, 
and physicians' offices.  MRM provides these mobile lasers with technical 
support to ensure the lasers are working correctly for the physicians. The 
Company also provides other medical equipment on a rental basis to hospitals 
and surgery centers.  This equipment is used throughout such facilities to 
supplement their requirement for certain medical equipment.  The combination 
of mobile laser/surgical services and medical equipment rental illustrates 
the overall strategy and focus on diversification of the Company.


                                      2

<PAGE>

   MRM's laser/surgical services have appeal for two of the most rapidly 
growing areas of the health care industry: managed care and cosmetic surgery. 
For managed care, minimally invasive procedures can be performed by 
physicians at hospitals that find the investment in the latest laser surgery 
equipment and trained technicians to be uneconomical.  For cosmetic surgery, 
the physicians benefit from having a multitude of different laser 
technologies available to offer to their patients without the burden of 
investing a significant amount of money.  In both instances, physicians and 
hospitals receive technical support and expertise which is provided with the 
equipment, which allows the staff to focus on their duties without the 
additional tasks of running a laser.

   The Company believes it enjoys an advantage that the small competitor 
cannot match due to the quantity and variety of its laser equipment, its 
highly trained technicians, and the training courses it provides for 
technicians and health care professionals.  The Company has approximately 600 
active accounts in California, Arizona, Utah, Colorado and Nevada and 
experiences a higher than 90% rate of repeat business from the hospitals, 
surgery centers and doctors that it serves.  The market encompasses many 
disciplines including plastic/cosmetic surgery, dermatology, orthopedic 
surgery, otolaryngology, urology, obstetrics, gynecology, ophthalmology, 
general surgery, podiatry and dentistry.  Equipment is becoming more 
specialized to the medical procedures involved, and technical training of the 
physician, regarding the use of equipment, is a significant part of MRM's 
business.

   MRM is the successor entity pursuant to a reorganization which occurred on 
July 31, 1996 between Physiologic Reps, Inc. ("PRI"), which has been active 
in this business since 1973, and Kendall Management Corporation, a public 
company which previously was inactive.  PRI continues as a wholly owned 
subsidiary of MRM.  THROUGHOUT THIS DOCUMENT "MRM" IS USED TO REFER TO MRM 
AND ITS WHOLLY OWNED SUBSIDIARIES, INCLUDING PRI, EVEN IN HISTORICAL CONTEXT. 
The Company is headquartered at 932 Grand Central Ave., Glendale, 
California.  See "Reorganization" and "Acquisitions."


HISTORICAL BACKGROUND

   MRM's largest wholly owned operating subsidiary, PRI, was incorporated in 
California in 1973 and moved to its present headquarters building in 1994, 
located in Glendale, California.  The Company also has sales and service 
offices in Stockton, CA, Dublin, CA and Phoenix, AZ.  PRI produced 
approximately 83% of the consolidated revenues of MRM during the year ended 
October 31, 1997.

   MRM entered the hospital equipment rental market in 1974, the mobile 
laser/surgical services market in 1987, cosmetic skin resurfacing in 1994 and 
leg vein treatment and tattoo removal in 1997.  The Company began to expand 
its mobile laser/surgical services to the doctors' offices and their clinics 
in 1995.  This business is complementary to the existing laser/surgical 
services MRM has provided to hospitals.  In 1997, the Company made the 
decision to expand its cosmetic services to include specialized lasers for 
treatment of vascular lesions, pigmented lesions and tattoo removal.  
Additionally, the Company has acquired new laser technology to assist in the 
removal of leg veins and continues to evaluate lasers for the removal of 
unwanted hair.


                                      3

<PAGE>

   During the past few years, revenue from the Company's mobile 
laser/surgical services business has greatly exceeded the medical equipment 
rental business. However, MRM has a large array of general medical equipment 
which it rents, primarily to hospitals, and has acquired substantial 
additional general medical equipment during fiscal 1997.  The Company's 
inventory of medical equipment includes an extensive variety of medical 
devices, serving a broad range of hospital departments or needs.  This wide 
array of medical rental equipment, delivered to customers on very short 
notice, was the Company's primary business until about 1987, when the Company 
developed the mobile surgical laser business.  During fiscal 1997, the 
Company began to renew its emphasis on the rental of general medical 
equipment.

GROWTH

   Since its inception, MRM has focused on providing rental and other 
services to its clients on an as needed basis.  As a result, the Company has 
established long-term relationships with a number of physicians, hospitals 
and other medical care providers.  The Company's management believes that 
such relationships provide an opportunity to introduce additional products to 
these customers by expanding MRM's product lines beyond laser/surgical 
services and medical equipment rentals.  This strategy could also have a 
beneficial effect when coupled with the growth strategy of MRM through 
acquisition of similar companies.  See "Acquisitions."

   MRM's strategic plan is to acquire other companies in the medical services 
and equipment rental business to take advantage of current opportunities in 
the market place.  Opportunities for growth are created because a wider range 
of new surgical laser equipment is coming to market with features oriented 
toward a wider variety of medical specialties.  Surgical laser procedures are 
also becoming more popular with the public.  This increased popularity is 
increasing the number of surgical laser procedures performed.  Another factor 
favoring growth of surgical laser rentals by hospitals is the effort by 
managed care to reduce costs through less invasive procedures.  The managed 
care effort has also reduced funds available for investment in new equipment 
and training. Part of MRM's business strategy is to take advantage of 
hospitals' decreased ability to invest in capital equipment, as well as the 
synergy between mobile laser/surgical services and medical equipment rental, 
to increase revenue and reduce costs.

ACQUISITIONS

   On March 31 1997, the Company acquired 100% of the issued and outstanding 
capital stock of Pulse Medical Products, Inc. ("Pulse"), headquartered in 
Boise, ID, in exchange for 325,000 shares of its own common stock.  As a 
result, Pulse became a wholly owned subsidiary of MRM.

   Pulse rents medical equipment and sells related equipment and supplies. 
Pulse conducts its business in Idaho, Montana, Utah, Colorado, Minnesota and 
Wyoming.  Pulse will continue to operate as a wholly owned subsidiary of MRM, 
and its headquarters will remain in Boise, ID.

   On June 30 1997, MRM acquired 100% of the issued and outstanding capital 
stock of Laser Medical, Inc. ("Laser Medical"), headquartered in Murray, UT, 
in exchange for 190,000 shares of its own common stock.  As a result, Laser 
Medical became a wholly owned subsidiary of MRM.  In addition, the Company 
obtained a non-compete agreement from the principal former shareholder of 
Laser Medical in consideration of the payment of $80,000 in cash.

   Laser Medical provides mobile laser/surgical services to hospitals, out 
patient surgery centers, and physicians' offices.  Laser Medical operates its 
business in Utah and Colorado.  Since the date of its acquisition by MRM, 
Laser Medical has operated as a wholly owned subsidiary of MRM, and will 
continue to do so.


                                      4

<PAGE>

   Also on June 30, 1997, the Company acquired 100% of the issued and 
outstanding capital stock of Med Surg Specialties, Inc. ("Med Surg"), located 
in Brea, CA,  in exchange for 214,667 shares of its common stock.  As a 
result, Med Surg became a wholly owned subsidiary of MRM.  In addition, the 
Company obtained a non-compete agreement from the principal former 
shareholder of Med Surg in consideration of the payment of $138,000 in cash 
($50,000 in July, 1997 with the balance payable $50,000 in 1998 and $38,000 
in 1999).

   Med Surg makes mobile laser/surgical services available to hospitals, out 
patient surgery centers, and physician's offices.  Med Surg's operations, 
which were conducted primarily in the Southern California area, were absorbed 
into PRI at the time of the acquisition.

   MRM intends to continue the pursuit of its strategic plan of acquiring 
other companies in the medical services and equipment rental business to take 
advantage of current opportunities in the market place. The Company intends 
to establish a nationwide presence through acquisitions and thus position 
itself to service chains of hospitals and clinics which are currently only 
served inefficiently on a fractionated basis.


PRODUCTS AND SERVICES

   MRM's technicians deliver equipment and provide technical support to 
physicians and operating room ("O.R.") personnel as needed.  Once the 
technician is at the customer site, he posts required warning notices outside 
the O.R., issues safety equipment to the O.R. staff, provides any disposable 
materials needed, and supplies equipment certifications or documentation 
required for hospital record-keeping.  The MRM technician sets the 
physician's requested power settings and maintains a laser safe environment 
during the surgical procedure.  Hospitals and surgery facilities, especially 
those with fluctuating occupancy levels, find this outsourcing of trained 
technicians, on an as-needed basis, a cost effective alternative to training 
and staffing their own personnel.  More than 60% of the Company's revenue was 
generated from the rental of technician supported equipment during each of 
the last two fiscal years.

   The Company's lasers encompass the latest technology in CO2, Nd:YAG, Pulse 
Dye, KTP/YAG, and Holmium YAG models.  MRM has established an excellent 
working relationship with the leading laser manufacturers and is often the 
first service company to receive new laser technology in its markets.  The 
Company is constantly reviewing developments in the medical laser field to 
stay abreast of the latest technology available.

   MRM also provides its customers with disposable products and/or 
attachments that are needed for a given procedure.  This applies primarily to 
laser related rentals requiring laser drapes, masks, fibers, tubing, etc.  
The customers benefit from this added service since they save the added costs 
that would be incurred if they had to purchase a large inventory of these 
disposable products.

   Additionally, MRM offers a broad spectrum of general medical equipment to 
the medical market that it serves.  The Company's inventory of equipment 
includes an extensive variety of devices, serving a broad range of hospital 
departments and needs, such as CO2 monitors, defibrillators, feeding pumps, 
PCA pumps, ECG monitors, infusion pumps, neo-natal monitors, and pulse 
oximeters.

   Due in part to its varied inventory of equipment, MRM is usually capable 
of offering delivery and support of rental items with only a few hours' 
notice. Mobile laser/surgical services are ordered in advance and 
re-confirmed with the customer the day before the procedure by the scheduling 
department.


                                      5

<PAGE>

MARKETING AND SALES

   The principal focus of the business is providing mobile laser/surgical 
services.   Commencing in the latter part of the fiscal year ended October 
31, 1997, the Company began to offer new lasers designed for a variety of 
medical procedures including cosmetic and dermatological treatments, such as 
(i) treatment of leg veins, (ii) removal of unwanted hair, and (iii) skin 
rejuvenation.

   Additionally, the Company is expanding its business of renting medical 
equipment to hospitals, surgery centers and physicians in their offices.  The 
Company also plans on selectively adding to its disposable products.  MRM 
believes that it will be able to take advantage of the excellent working 
relationship it enjoys with its customers as an avenue for new product sales. 
Management believes that this approach will add to the revenue of the Company 
and will complement the services currently being provided to customers.

   The Company's sales efforts are supported by a direct sales force which 
focuses on providing timely service and products to MRM's customers.  In 
addition, the Company sponsors educational seminars on new laser technology, 
which are attended by physicians.  This allows the direct sales force to 
introduce new laser technology and procedures to the Company's customer base 
as soon as new lasers are offered by manufacturers.  This method has proven 
to be successful in developing new business from physicians.  The Company 
benefits from the physician training which occurs at these educational 
seminars because the physicians can immediately implement the new laser 
technology offered by MRM.

   MRM's sales representatives attend national and regional physician medical 
seminars and trade shows to present the Company's services and products.    
MRM also creates markets for its products and services through direct mailing 
of marketing literature and promotional materials regarding its complete 
range of laser/surgical services to hospitals, surgery centers and physicians.

MARKETS

   The Company's principal markets, and percent of revenue from each, during
fiscal years ended October 31, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>

                                                FISCAL 1997    FISCAL 1996

     <S>                                           <C>            <C>
     Mobile Laser/Surgical Services                45%            61%
     Cosmetic Mobile Laser/Surgical Services
       (Primarily Physician Office Based)          17%            12%
     Medical Equipment Rentals                     23%            13%
     Equipment and Disposable Sales                15%            14%
</TABLE>

Medical Data International, Inc. defined the total market for surgical 
procedures (in and out of hospital), market growth and segmentation in a 
report issued in 1996.  This report indicates that there were 29 million 
total surgical procedures performed in the U.S. in 1994, which was an 
increase of 12.4% over the 25.8 million procedures in 1990.  Outpatient 
procedures increased 70.8% from 11 million to 18.9 million, while the 
percentage of total procedures performed on an outpatient basis grew to 65% 
from 43%.  The percentage of surgical procedures performed in physicians' 
offices grew to 12% from 6% during the same time.


                                      6

<PAGE>

HOSPITAL MOBILE LASER/SURGICAL SERVICES

   MRM was one of the first companies to provide mobile laser/surgical 
services to hospitals and surgery centers.  Because of MRM's long tenure of 
providing laser surgical services in the Southern California market and the 
emergence of fragmented competition, this has become a mature market place 
with growth dependent on new procedures and products.  This situation does 
not exist in most other parts of the country, providing the Company with a 
growth opportunity in other geographic markets.

   The mobile laser/surgical services, both hospital/surgery center based and 
physician office based, provide a quick entry into new geographic markets 
with multiple strategies.  Once a facility is established in a new geographic 
market, the opportunity exists to use that facility as a dispatch point for 
equipment rentals and new products.

COSMETIC MOBILE LASER/SURGICAL SERVICES

   The cosmetic laser business is primarily physician office based.  This 
market did not emerge for the Company until early 1995, and has been 
characterized by rapid changes in specific techniques as new technology 
emerges.

   In recent years, skin resurfacing cosmetic laser surgery has shown 
significant growth.  However, price competition is emerging in this market 
from smaller start up companies.  Recent legislation in California and some 
other states restricting anesthesia in doctors' offices may redirect much of 
this cosmetic surgery to hospitals and surgery centers where MRM has a strong 
base. As the skin rejuvenation market matures, new markets will be emerging 
for the treatment of leg veins and the removal of unwanted hair.  Because of 
customer inquiries, the Company believes that recently developed laser 
technology for collapsing veins so that they are no longer visible will 
produce a significant increase in the number of doctors using mobile lasers.  
In addition, the anticipated introduction to the market of new lasers for 
unwanted hair removal will add a companion procedure to the vein procedure.

   An American Academy of Cosmetic Surgery survey reported that approximately 
2.7 million cosmetic surgery procedures were performed in the U.S. in 1994.  
A survey by the American Society of Plastic and Reconstructive Surgeons 
reported that patients between the ages of 35 and 50 represented 41% of the 
cosmetic surgery procedures performed in the U.S. in 1994. The survey also 
reported that approximately 36% of the cosmetic procedures performed in the 
U.S. in 1994 were performed in physicians' offices.  The market for specific 
cosmetic laser surgery procedures, as documented in various medical journals, 
has been estimated as follows:

<TABLE>
<CAPTION>
   PROCEDURE              PERCENT OF          PROCEDURE          PERCENT OF
                          POPULATION                             POPULATION

   <S>                       <C>              <C>                   <C>
   Red Lesions               8%               Brown Lesions         10%
   Tattoo Removal            8%               Stretch Marks         25%
   Balding                   30%              Wrinkles              38%
   Varicose Veins            25%              Warts                 20%
   Hair Removal              30%
</TABLE>

                                      7

<PAGE>

HOSPITAL MEDICAL EQUIPMENT RENTALS

   MRM entered the hospital equipment rental market in 1974, and maintained 
that business as its primary source of revenue until the mobile 
laser/surgical services became predominate in 1987.  That transition took 
place because of competition from national medical rental companies and high 
demand for the newly developed mobile laser/surgical services.

   The hospital equipment rental market has been reduced to two dominant 
national companies.  The older and smaller of these companies is Universal 
Hospital Services ("UHS"), which provides medical equipment within the 
hospital on a fee for use basis.  Management believes that UHS does not focus 
on the larger portion of that market which is supplemental equipment rentals. 
 The larger company is Mediq PRN ("Mediq"), which is dominant in the 
supplemental rental business through contracts with large hospital management 
companies. MRM has identified an excellent opportunity to service Mediq's 
customers on a second call basis (as an alternative supplier to these 
customers) at reasonable prices.

   MRM believes that it has a competitive advantage in the market, since it 
is one of the few companies that provide both mobile laser/surgical services 
and medical equipment rental.  There are a number of synergies among the 
mobile laser/surgical services and the medical equipment rental business, 
including:

          -  Shared facilities
          -  Shared warehouse and delivery employees
          -  Shared delivery vehicles
          -  Complimentary scheduling and booking staff
          -  Common management
          -  Shared sales staff at start up


EQUIPMENT AND DISPOSABLE SALES

   MRM continues to evaluate several lines of disposable medical products to 
introduce to its customers.  As the medical rental market continues to be 
challenged by smaller competitors, the Company intends to respond by offering 
new products, as well as remaining competitive on current market pricing.  
This is a natural progression for MRM, since it has a large customer base 
typified by repeat business and ongoing personal contact between the 
Company's sales representatives and the customers.

   Another source of revenue is the re-marketing of used equipment.  As a 
result of its practice of updating laser and medical rental equipment, the 
Company on occasion does sell used equipment.  This used equipment is an 
excellent choice for surgery centers or physicians that are looking for low 
cost equipment that still meets the expectations of physicians and the 
standards of regulatory agencies, while avoiding the high cost of new 
equipment.


                                      8

<PAGE>

GOVERNMENT REGULATIONS

The healthcare industry is subject to extensive federal and state regulation. 
Promulgation of new laws and regulations, or changes in or re-interpretations 
of existing laws or regulations, may significantly affect the Company's 
business, operating results or financial condition.  There can be no 
assurance that a review of the Company's operations by courts or regulatory 
authorities will not result in a determination that could adversely affect 
the operations of the Company.  In addition, there can be no assurance that 
the regulatory environment in which the Company operates will not change 
significantly in the future, which change could adversely affect the 
Company's operations, financial condition, business opportunities or future 
expansion.  Furthermore, the manufacturers of medical equipment utilized by 
the Company are subject to extensive regulation by the Food and Drug 
Administration ("FDA").  Failure of such manufacturers to comply with FDA 
regulations could result in the loss of approval by the FDA of such medical 
equipment, which could adversely affect the Company's operating results or 
financial condition.  As consolidation among physician groups continues and 
provider networks continue to be created, purchasing decisions may shift to 
persons with whom the Company has not had prior contact.  There can be no 
assurance that the Company will be able to maintain its physician, payor or 
manufacturer relationships under such circumstances.

POTENTIAL EXPOSURE TO LIABILITY

Physicians, hospitals and other providers in the healthcare industry are 
subject to lawsuits which may allege medical malpractice or other claims.  
Many of these lawsuits result in substantial defense costs and judgments or 
settlements.  The Company does not engage in the practice of medicine, nor 
does it control the practice of medicine by physicians utilizing its services 
or their compliance with regulatory requirements directly applicable to such 
physicians or physician groups.  However, the services provided by the 
Company to physicians, including actions by the Company's technicians, its 
establishment of protocols and its training programs, could give rise to 
liability claims.  Although the Company has not recently been a party to any 
material litigation, including litigation relating to the practice of 
medicine, there can be no assurance that the Company will not become involved 
in such litigation in the future, or that any claim or claims arising from 
such litigation will not exceed the Company's insurance coverage or that such 
coverage will continue to be available.

COMPETITION

   The market for MRM's services is highly competitive.  Companies, 
particularly in the laser surgery industry, are competing by cutting prices, 
and therefore profit margins.  In spite of such competition, the management 
of MRM believes that it can compete successfully.  MRM is one of the few 
companies that provide surgical laser equipment to hospitals, ambulatory 
surgery centers and doctors' offices.  MRM is able to build its business on 
the interrelation of these market segments.

   MRM's competition for mobile laser surgery equipment rental is primarily 
from a number of small companies with only a few surgical lasers each.  In 
most cases, these competing companies are founded by technicians who have 
left doctors' offices or hospitals and sell their services to a limited 
number of customers.

   Management believes that the largest company currently in the surgical 
laser rental business is Medical Alliance, Inc. ("MAI"), of Irving, TX, a 
publicly traded company with current revenues of about $20 million.  MAI has 
recently concentrated its efforts on renting equipment mainly in physician 
offices. This approach is limited to procedures done without general 
anesthesia.  MRM services the same physicians' office market, plus the larger 
market of hospitals, which provides a more consistent business base.


                                      9

<PAGE>

   Major competitors in the hospital medical equipment rental market include 
Universal Hospital Services and Mediq PRN. The Company believes that, as a 
specialist, it can better satisfy the hospitals' needs for medical rental 
equipment at satisfactory profit margins.  Even though management believes it 
will continue to be able to compete, there can be no assurance that the 
Company will be successful in doing so.

REORGANIZATION

   On July 31, 1996, PRI entered into a Plan and Agreement of Reorganization 
("Plan") with Kendall Management Corporation ("Kendall").  Pursuant to the 
Plan, Kendall acquired all of PRI's common stock in exchange for 5,100,720 
shares of Kendall common stock representing approximately 83.6% of the 
outstanding common stock of Kendall.  In addition, Kendall issued its options 
exercisable into 81,804 shares of Kendall common stock in exchange for PRI 
options.  Subsequent to the reorganization, Kendall changed its name to 
Medical Resources Management, Inc.  As a result, PRI became a subsidiary of 
Kendall.

   The tax-free exchange was pursuant to the provisions of Sections 351 and 
368(a)(1)(B) of the Internal Revenue Code.  For financial statement purposes, 
the transaction has been accounted for as a reverse acquisition as if PRI 
issued its common stock for the net assets of Kendall. Kendall was not an 
operating company.

YEAR 2000 ISSUES

   The Company believes that entering into the year 2000 will have little or 
no impact on its systems.

EMPLOYEES

   As of October 31, 1997, the Company employed 91 full time persons, 44 of 
which were involved in technical activities (most of these were active as 
field technicians), 22 of which were involved in sales and marketing, and 25 
of which were involved in administration and accounting.  In addition, the 
Company employs 8 part time and occasional employees as technicians to handle 
overload situations.  None of these employees is represented by a union.  The 
Company believes that its relationship with its employees is good.


                                      10

<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTY

   The Company leases approximately 14,500 square feet of space for its 
headquarters in Glendale, California on a lease that expires in 2001, for 
$9,830 per month, with a CPI based rent escalation clause.  The Company also 
leases about 2,000 square feet of space for its field and sales office in 
Dublin, California under a lease that expires in 2001, for $1,907 per month, 
with a CPI based rent escalation clause.

   In addition, it leases field and sales offices in Stockton, CA, Boise, ID, 
Englewood, CO, Phoenix, AZ and Las Vegas, NV.  Total combined square footage 
is 11,200 for approximately $9,900 per month, and each lease is for three 
years or less.

ITEM 3.  LEGAL PROCEEDINGS.

   None.

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

       None.


                                      11

<PAGE>

                                    PART II
                                       
ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

MARKET INFORMATION

   The common stock of the Company is traded under the symbol "MRMC" in the 
over-the-counter market through the NASD's electronic OTC Bulletin Board 
service.  The following table sets forth the range of high and low bid and 
ask prices per share of the common stock for each of the periods indicated.  
These quotations reflect inter-dealer prices, without retail mark-up, 
mark-down or commissions, and may not necessarily represent actual 
transactions.  Quotations for periods prior to July 31, 1996 are for the 
common stock of Kendall Management Corporation prior to the Reorganization.

<TABLE>
<CAPTION>
                                                Bid Prices
                                           -------------------
                                             High        Low
                                             ----       ---
               <S>                         <C>         <C>
               Quarter ended:
               January 31, 1996            $  1.50     $  1.50
               April 30, 1996              $  2.50     $  0.875
               July 31, 1996               $  3.00     $  1.125
               October 31, 1996            $  3.00     $  1.125

               January 31, 1997            $  2.25     $  1.25
               April 30, 1997              $  2.00     $  1.25
               July 31, 1997               $  1.87     $  1.00
               October 31, 1997            $  1.50     $  0.625
               January 30, 1998            $  0.9375   $  0.625
</TABLE>

HOLDERS OF COMMON STOCK

   As of October 31, 1997, the number of holders of record of common stock 
was 411, excluding approximately eight accounts in "nominee" or "street" name.

DIVIDENDS

   To date, the Company has not paid any cash dividends on its common stock 
and does not anticipate paying cash dividends in the foreseeable future.  The 
Company anticipates that all earnings, if any, for the foreseeable future 
will be retained for development of the Company's business.


                                      12

<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

   The following discussion and analysis should be read together with the 
financial statements and notes thereto included elsewhere herein.

RESULTS OF OPERATIONS

   The following table sets forth, for the periods indicated, the percentage 
of net sales represented by certain items included in the Statements of 
Income:

<TABLE>
<CAPTION>
                                                   YEAR ENDED OCTOBER 31,
                                                     1997          1996
                                                   -------       -------
     <S>                                            <C>           <C>
     Net revenues ................................. 100.0%        100.0%
     Cost of revenues .............................  55.7          57.0
                                                   -------       -------
     Gross profit .................................  44.3          43.0
     Selling expenses .............................  18.3          14.7
     General and administrative expenses ..........  19.9          18.3
                                                   -------       -------
     Operating income .............................  6.1           10.0
     Interest expense .............................  6.0            4.6
                                                   -------       -------
     Income before income taxes ...................  0.1            5.4
     Provision for income taxes ...................  0.0            2.3
                                                   -------       -------
     Net income ...................................  0.1%           3.1%
                                                   -------       -------
                                                   -------       -------
</TABLE>

YEAR ENDED OCTOBER 31, 1997 COMPARED TO YEAR ENDED OCTOBER 31, 1996

   Net revenues for the year ended October 31, 1997 were $8.11 million, 
compared to $6.69 million for the prior fiscal year, an increase of $1.41 
million, or 21.1%.  The increase in net revenues for fiscal 1997 over fiscal 
1996 is entirely the result of (1) revenues from the operations of Pulse of 
$1.07 million since the date of its acquisition, (2) revenues from Laser 
Medical of $225,000 since the date of its acquisition and (3) an increase of 
$118,000 in revenues of PRI.

   Cost of revenues for the year ended October 31, 1997 was $4.52 million, or 
55.7% of net revenues, compared to $3.82 million, or 57.0% of net revenues, 
in the prior fiscal year, an increase of $702,000, or 18.4%.  The increase in 
cost of revenues for the most recent fiscal year compared to the prior year 
is attributable to (1) cost of revenues from the operations of Pulse of 
$742,000 since the date of its acquisition and (2) cost of revenues from 
Laser Medical of $131,000 since the date of its acquisition, offset in part 
by a decrease of $171,000 in the cost of revenues of PRI, principally as a 
result of lower depreciation expense. The decrease in depreciation expense 
for PRI is principally due to a lengthening of the estimated useful life of 
certain medical rental equipment in the latter part of fiscal 1997. The 
estimated useful life of certain medical equipment was increased from 7 years 
to 9 years, which decreased depreciation expense by approximately $70,000. 
The decrease in cost of revenues as a percentage of net revenues is primarily 
attributable to increased revenues from medical equipment rentals, which 
generally have lower cost of revenues than mobile laser/surgical services.

   Gross profit for the fiscal year ended October 31, 1997 was $3.59 million, 
or 44.3% of net revenues, compared to $2.88 million, or 43.0% of net 
revenues, in the year ended October 31, 1996, an increase of $709,000, or 
24.6%.  The increase in gross profit for fiscal 1997 compared to fiscal 1996 
is principally due to (1) the addition of $326,000 of gross profit from the 
operations of Pulse since the date of its acquisition, (2) the addition of 
$94,000 of gross profit from the operations of Laser Medical since the date 
of its acquisition, and (3) an increase of $289,000 in the gross profit of 
PRI due to an increase in higher margin equipment rental revenues, as well as 
lower depreciation expense.  The increase in gross profit as a percentage of 
revenues is principally attributable to an increase in overall revenues from 
medical rentals, which generally have higher gross profit margins than 
revenues from mobile laser/surgical services.


                                      13
<PAGE>

   Selling expenses for the year ended October 31, 1997 increased by $501,000,
or 51.1%, from $981,000 during the prior fiscal year.  As a percentage of net
revenues, selling expenses increased to 18.3% in the year ended October 31,
1997, compared to 14.7% in the prior fiscal year.  The increase in selling
expense is primarily the result of (1) the addition of $162,000 of selling
expenses from the operations of Pulse since the date of its acquisition, (2)
the addition of $26,000 of selling expenses from the operations of Laser
Medical since the date of its acquisition, and (3) an increase of $313,000 in
the selling expenses of PRI due to (a) the addition of sales representatives in
the California market, (b) an increase in the compensation levels of existing
sales personnel and (c) the addition of marketing personnel.

   General and administrative ("G&A") expenses increased from $1.22 million 
in the year ended October 31, 1996 to $1.61 million in the year ended October 
31, 1997, an increase of $391,000, or 31.9%.  As a percentage of net 
revenues, such expenses increased from 18.3% in the prior fiscal year to 
20.0% in the current fiscal year.  The increase in G&A expenses is 
principally attributable to (1) the addition of $149,000 of G&A expenses from 
the operations of Pulse since the date of its acquisition, (2) the addition 
of $5,000 of G&A expenses from the operations of Laser Medical since the date 
of its acquisition, and (3) an increase of $237,000 in the G&A expenses of 
PRI due to (a) higher salaries and wages resulting from the hiring of certain 
new employees in the accounting and finance departments of the Company, (b) 
increased costs associated with public relations and the administration of a 
public company and (c) increased amortization expenses relating to goodwill, 
non-compete agreements and customer list.

   In the fourth quarter of fiscal 1997, the Company generated an operating 
loss of $123,000 and a loss before taxes of $268,000, due primarily to 
increases in selling expenses and G&A expenses incurred as a result of the 
acquisitions of Pulse, Laser Medical and Med Surg, including 1) increased 
amortization expenses relating to goodwill and non-compete agreements, 2) 
additions to PRI sales and marketing staff in anticipation of higher revenues 
in fiscal 1998, and 3) increased sales commission expense relating to higher 
revenues. In partial response to these higher expenses, the Company has 
initiated a revised sales commission plan for much of its sales force based 
in part upon gross margins rather than revenues, and has taken other steps to 
reduce selling and G&A expenses.

   Operating income was $490,000 in the year ended October 31, 1997, or 6.1% 
of revenues, compared to $673,000 in the year ended October 31, 1996, or 
10.1% of net revenues.  This decrease in operating income of $183,000 from 
the 1996 fiscal year to the 1997 fiscal year is attributable to the factors 
previously cited above.

   Interest expense for the year ended October 31, 1997 was $487,000, 
compared to $308,000 in the prior fiscal year, an increase of $179,000, or 
58.1%.  The increase in interest expense is the result of (1) the addition of 
$93,000 of interest expense relating to the operations of Pulse since the 
date of its acquisition, (2) the addition of $17,000 of interest expense 
relating to the operations of Laser Medical since the date of its 
acquisition, and (3) an increase of $69,000 in the interest expense of PRI 
due to an increased level of indebtedness relating to the acquisition of 
laser and medical rental equipment during fiscal year 1997.

   Income before income taxes was $2,000 in the year ended October 31, 1997 
compared to income before taxes of $365,000 in the year ended October 31, 
1996, a decrease of $363,000.  Income before income taxes, as a percentage of 
revenues, declined to 0.1% in the year ended October 31, 1997 from 5.5% in 
the year ended October 31, 1996 as a result of the aforementioned factors.

LIQUIDITY AND CAPITAL RESOURCES

   The Company's liquidity requirements arise from the funding of its working 
capital needs, principally accounts receivable and inventories, as well as 
its capital expenditure needs.  The Company's primary source for working 
capital has historically been borrowings under debt facilities, as well as 
the sale of common stock.

   Net cash provided by operating activities during the year ended October 
31, 1997 was $111,000, which resulted primarily from (a) net income of $1,000 
and (b) depreciation and amortization expense of $966,000. These sources of 
cash were offset in part by (a) a net increase of approximately $838,000 in 
working capital items and (b) a decrease in long-term deferred income tax 
liabilities of $18,000.


                                      14
<PAGE>

   Net cash used for investing activities during the fiscal year ended 
October 31, 1997 was $731,000, which consisted of (a) $444,000 in capital 
expenditures, (b) the payment of $130,000 for non-compete agreements and (c) 
an increase in deposits and other assets of $157,000.

   During the year ended October 31, 1997, the Company's cash provided by 
financing activities totaled $673,000, consisting primarily of (a) $1.23 
million in borrowings under term debt facilities, (b) $1.19 million in 
borrowings related to capital leases for existing equipment and (c) $324,000 
in net proceeds from the Company's private offering of units consisting of 
common stock and warrants.  Such cash provided by financing activities was 
offset in part by (a) principal payments on long-term debt of $665,000 and 
(b) principal payments on capital lease obligations of $1.32 million.  
Between November 1, 1996 and April 30, 1997, the Company received $324,000 
(net of related expenses) from the issuance of 291,600 units in a private 
placement.  Each unit consisted of (1) one share of common stock, (2) one 
Class A warrant to purchase one share of common stock, at any time prior to 
November 1, 1999, at a price of $2.50 per share, and (3) one Class B warrant 
to purchase one share of common stock, at any time prior to November 1, 1999, 
at a price of $4.00 per share.

COMMITMENTS

   The Company had no material commitments for capital expenditures at 
October 31, 1997.  However, although it has no present commitments or 
agreements to make such capital expenditures, during the next 12 months the 
Company expects to make substantial capital expenditures, in accordance with 
its historical practice.  The mobile laser/surgical services and medical 
equipment rental businesses are capital intensive.  The Company believes that 
funds generated from operations, together with funds available from capital 
lease facilities that the Company expects to obtain during the year ending 
October 31, 1998, will be sufficient to finance its working capital and 
capital expenditure requirements for the next 12 months.


ITEM 7.  FINANCIAL STATEMENTS.

      See financial statements included herein.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

   Not applicable.


                                      15

<PAGE>

                                   PART III



ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

   The following information concerns the directors and executive officers of 
the Registrant as of October 31, 1997:

   The information contained in the Company's Proxy Statement filed with the 
Securities and Exchange Commission, on March 2, 1998, with respect to 
directors and executive officers of the Company and "Compliance with Section 
16(a) of the Securities Exchange Act of 1934" is hereby incorporated by 
reference in response to this item.

ITEM 10.  EXECUTIVE COMPENSATION

   The information contained in the Company's Proxy Statement filed with the 
Securities and Exchange Commission, on March 2, 1998, with respect to 
executive compensation and transactions, is hereby incorporated by reference 
in response to this item.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The information contained in the Company's Proxy Statement filed with the 
Securities and Exchange Commission, on March 2, 1998, with respect to 
security ownership of certain beneficial owners and management, is hereby 
incorporated by reference in response to this item.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

   The information contained in the Company's Proxy Statement filed with the 
Securities and Exchange Commission, on March 2, 1998, with respect to certain 
relationships and related transactions, is hereby incorporated by reference 
in response to this item.


                                      16

<PAGE>

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Documents filed with Registrant's Form 10-KSB for the fiscal year ended 
October 31, 1997 and incorporated by reference herein:

     1. Financial Statements:                                           

        Report of Independent Auditors                                   

        Consolidated Balance Sheet - October 31, 1997                    

        Consolidated Statements of Income - Years Ended October 31,
          1997 and 1996                                                  

        Consolidated Statements of Changes in Shareholders' Equity - 
          Years Ended October 31, 1997 and 1996                          

        Consolidated Statements of Cash Flows - Years Ended
          October 31, 1997 and 1996                                      

        Notes to Consolidated Financial Statements                       


       2.  Exhibits:
                    See Exhibits Index.  The exhibits listed in the accompanying
           Exhibit Index are filed or incorporated by reference as part of this
           report.

(b)  Reports on Form 8-K:

                    No reports on Form 8-K have been filed during the quarter
           ended October 31, 1997.


                                      17

<PAGE>

                                  SIGNATURES
                                       
   In accordance with the requirements of Section 13 or 15(d) of the 
Securities Exchange Act of 1934, the registrant has duly caused this report 
to be signed on its behalf by the undersigned, thereunto duly authorized in 
the City of Glendale, California on the 18th day of May, 1998.

MEDICAL RESOURCES MANAGEMENT, INC.
                                       
By   /s/  Allen H. Bonnifield
    ----------------------------------------------------
     Allen H. Bonnifield, President and CEO
                                       
Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
registrant and in the capacities indicated on the 18th day of May, 1998.

     SIGNATURE                                      TITLE

By   /s/ ALLEN H. BONNIFIELD
    ----------------------------------
     Allen H. Bonnifield                            President and CEO


By   /s/ DOUG HANSEN
    ----------------------------------
     Doug Hansen                                    Vice President, CFO and
                                                    Principal Accounting Officer
                                       
By   /s/ ROBERT STUCKELMAN
    ----------------------------------
     Robert Stuckelman                              Director


By   /s/ STEPHEN COUGHLIN
    ----------------------------------
     Stephen Coughlin                               Director and President of
                                                    Pulse Medical Products, Inc.

By   /s/ GREGORY BONNIFIELD
    ----------------------------------
     Gregory Bonnifield                             Director and President of
                                                    Physiologic Reps, Inc.


                                      18

<PAGE>

                                EXHIBITS INDEX
                                       
                                       
EXHIBIT        EXHIBIT DESCRIPTION
NUMBER

2.1       Articles of Incorporation and Amendments thereto. (1)

2.2       By-Laws of the Registrant. (1)
 
3.1       Copy of a Warrant Agreement and Warrant issued between November 1996 
          and March 1997 to investors in the Registrant's Private Placement. (1)

6.1       Plan and Agreement of Reorganization between the Registrant and 
          Physiologic Reps, Inc. dated July 31, 1996. (1)

6.2       Registrant's 1996 Stock Incentive Plan. (1)

6.3       Term Loan and Security Agreement dated March 28, 1995 between the 
          Registrant and Merrill Lynch Business Financial Services, Inc. (1)

6.4       Term Loan and Security Agreement dated June 5, 1996 between the 
          Registrant and Merrill Lynch Business Financial Services, Inc. (1)

6.5       WCMA Note, Loan and Security Agreement dated June 5, 1996 between the 
          Registrant and Merrill Lynch Business Financial Services, Inc. (1)

6.6       Plan and Agreement of Reorganization between the Registrant and Pulse 
          Medical Products, Inc. dated March 31, 1997. (1)

6.7       Equipment Note Loan and Security Agreement dated April 24, 1997 
          between the Registrant and LINC Capital Management, a division of LINC
          Capital, Inc. (1)

6.8       Collateral Note No. 1 dated April 28, 1997 between the Registrant and 
          LINC Capital, Inc. (1)

6.9       Lease Modification Agreement dated April 24, 1997 between Pulse 
          Medical Products, Inc. and LINC Capital Management, a division of LINC
          Capital, Inc. (1)

6.10      Warrant Purchase Agreement dated April 24, 1997 between the Registrant
          and LINC Capital Management, a division of LINC Capital, Inc. (1)

6.11      Warrant to Purchase Shares of Common Stock dated April 24, 1997 
          between the Registrant and LINC Capital Management, a division of LINC
          Capital, Inc. (1)

6.12      Term Note and Security Agreement dated July 10, 1997 between the
          Registrant and Merrill Lynch Business Financial Services. (2)


                                       19

<PAGE>

EXHIBIT         EXHIBIT DESCRIPTION
NUMBER

6.13      Plan and Agreement of Reorganization between the Registrant and
          Laser Medical, Inc. dated June 27, 1997. (3)

6.14      Plan and Agreement of Reorganization between the Registrant and
          Med Surg Specialties, Inc. dated June 30, 1997. (3)


(1)  Exhibit filed with Registrant's Form 10-SB on May 16, 1997 and 
     incorporated by reference herein.
(2)  Exhibit filed with Registrant's Form 10-QSB for the quarter ended July 31,
     1997 and incorporated by reference herein.
(3)  Exhibit filed with Registrant's Form 10-KSB for the fiscal year ended 
     October 31, 1997 and incorporated by reference herein.


                                       20

<PAGE>

                        Report of Independent Auditors
                                       
Board of Directors and Shareholders
Medical Resources Management, Inc.

We have audited the accompanying consolidated balance sheet of Medical 
Resources Management, Inc. and subsidiaries as of October 31, 1997, and the 
related consolidated statements of income, shareholders' equity, and cash 
flows for each of the two years in the period ended October 31, 1997.  These 
financial statements are the responsibility of the Company's management.  Our 
responsibility is to express an opinion on these consolidated financial 
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the consolidated financial position 
of Medical Resources Management, Inc. and subsidiaries at October 31, 1997, 
and the results of their operations and their cash flows for each of the two 
years in the period ended October 31, 1997, in conformity with generally 
accepted accounting principles.

                                        Ernst & Young LLP

Los Angeles, California
February 10, 1998


                                                                           F-1

<PAGE>

<TABLE>
<CAPTION>
              Medical Resources Management, Inc. and Subsidiaries
                                       
                          Consolidated Balance Sheet
                                       
                               October 31, 1997
                                       

<S>                                                                    <C>
ASSETS
Current assets:
   Cash and cash equivalents                                           $     64,356
   Accounts receivable, less allowance of $72,000 (NOTE 4)                1,829,695
   Inventories (NOTE 4)                                                     583,149
   Prepaid expenses                                                          94,378
   Income tax receivable                                                     55,113
                                                                       ------------
Total current assets                                                      2,626,691


Property and equipment (NOTES 3 AND 4):
   Rental equipment (NOTE 3)                                             16,216,245
   Transportation equipment                                                 847,492
   Office furniture and equipment                                           311,657
   Leasehold improvements                                                    86,074
                                                                       ------------
                                                                         17,461,468
   Less accumulated depreciation                                          6,670,474
                                                                       ------------
Net property and equipment                                               10,790,994

Other assets:
   Goodwill, net of accumulated amortization of $9,178                      394,983
   Covenants not to compete, net of accumulated amortization of $23,111     106,889
   Customer list, net of accumulated amortization of $9,722                 190,278
   Deposits and other assets                                                175,563
                                                                       ------------
Total other assets                                                          867,713
                                                                       ------------
Total assets                                                           $ 14,285,398
                                                                       ------------
                                                                       ------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                                                            F-2

<PAGE>

              Medical Resources Management, Inc. and Subsidiaries
                                       
                    Consolidated Balance Sheet  (continued)
                                       
                               October 31, 1997

<TABLE>
<CAPTION>
<S>                                                                    <C>
Liabilities and shareholders' equity
Current liabilities:
   Accounts payable                                                    $    882,966
   Accrued expenses                                                         564,300
   Notes payable                                                             56,457
   Current portion of long-term debt (NOTE 4)                               527,771
   Current portion of obligations under capital leases (NOTE 3)           1,495,611
                                                                       ------------
Total current liabilities                                                 3,527,105


Long-term debt, net of current portion (NOTE 4)                           2,090,695

Obligations under capital leases, net of current portion (NOTE 3)         4,728,500

Deferred income taxes (NOTE 5)                                              948,496

Commitments (NOTES 4 AND 9)

Shareholders' equity (NOTE 6):
   Common stock, $.001 par value:
      Authorized shares - 100,000,000
      Issued and outstanding shares - 7,345,927                               7,346
   Additional paid-in capital                                             1,639,366
   Retained earnings                                                      1,343,890
                                                                       ------------
Total shareholders' equity                                                2,990,602
                                                                       ------------
Total liabilities and shareholders' equity                             $ 14,285,398
                                                                       ------------
                                                                       ------------
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                                                            F-3

<PAGE>

              Medical Resources Management, Inc. and Subsidiaries
                                       
                       Consolidated Statements of Income
                                       
<TABLE>
<CAPTION>

                                                                  YEAR ENDED OCTOBER 31
                                                                   1997        1996
                                                               --------------------------
<S>                                                            <C>            <C>
Revenue                                                        $ 8,105,140    $ 6,694,074
Cost of revenue, including depreciation expense of
   $868,975 in 1997 and $690,504 in 1996                         4,517,885      3,815,784
                                                               -----------    -----------
Gross profit                                                     3,587,255      2,878,290

Selling expenses                                                 1,482,244        981,427
General and administrative expenses                              1,615,612      1,223,965
                                                               -----------    -----------
Operating income                                                   489,399        672,898

Interest expense                                                   487,391        307,746
                                                               -----------    -----------
Income before income taxes                                           2,008        365,152
Provision for income taxes (NOTE 5)                                    800        156,098
                                                               -----------    -----------
Net income                                                     $     1,208    $   209,054
                                                               -----------    -----------
                                                               -----------    -----------

Net income per common share                                    $       .00    $       .04
                                                               -----------    -----------
                                                               -----------    -----------
Weighted average common shares                                   6,773,302      5,085,904
                                                               -----------    -----------
                                                               -----------    -----------
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                                                            F-4

<PAGE>

<TABLE>
<CAPTION>

              Medical Resources Management, Inc. and Subsidiaries
                                       
          Consolidated Statements of Changes in Shareholders' Equity


                                                    Common Stock          Additional        Retained
                                                 Shares       Amount    Paid-in Capital     Earnings         Total
                                               ----------------------------------------------------------------------

<S>                                             <C>          <C>          <C>              <C>            <C>
Balance at October 31, 1995                     4,744,632    $ 4,745      $   134,829      $ 1,133,628    $ 1,273,202
   Issuance of stock                            1,356,088      1,356           98,744                -        100,100
   Net income for year                                  -          -                -          209,054        209,054
                                               ----------------------------------------------------------------------
Balance at October 31, 1996                     6,100,720      6,101          233,573        1,342,682      1,582,356
   Issuance of stock (NOTES 2 and 6)            1,245,207      1,245        1,405,793                -      1,407,038
   Net income for year                                  -          -                -            1,208          1,208
                                               ----------------------------------------------------------------------
Balance at October 31, 1997                     7,345,927    $ 7,346      $ 1,639,366      $ 1,343,890    $ 2,990,602
                                               ----------------------------------------------------------------------
                                               ----------------------------------------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                                                            F-5

<PAGE>

              Medical Resources Management, Inc. and Subsidiaries
                                       
                     Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                     YEAR ENDED OCTOBER 31
                                                                     1997            1996
                                                                 ---------------------------

<S>                                                              <C>              <C>
OPERATING ACTIVITIES
Net income                                                       $      1,208     $  209,054
Adjustments to reconcile net income to cash provided
  by operating activities:
     Depreciation and amortization                                    966,436        844,172
     Deferred income taxes                                            (17,752)       194,087
     Changes in operating assets and liabilities:
        Accounts receivable                                          (342,684)       (84,949)
        Inventories                                                  (279,267)         3,378
        Prepaid expenses                                              (39,890)       (53,702)
        Income tax receivable                                         (18,859)       (36,254)
        Accounts payable                                              (96,799)        67,174
        Accrued expenses                                              (61,605)       (50,104)
        Income taxes payable                                                -       (143,500)
                                                                 ---------------------------
Net cash provided by operating activities                             110,788        949,356

INVESTING ACTIVITIES
Purchases of property and equipment                                 (444,150)     (1,249,147)
Payments for non-compete agreements                                 (130,000)              -
Increase in deposits and other assets                               (157,331)         (3,472)
                                                                 ---------------------------
Net cash used for investing activities                              (731,481)     (1,252,619)

FINANCING ACTIVITIES
Issuance of common stock                                             324,480         100,100
Borrowings on notes payable                                           24,185               -
Borrowings on long-term debt                                       1,231,024       1,468,862
Borrowings on capital lease refinancing                            1,185,810               -
Principal payments on notes payable - shareholders                         -         (35,872)
Principal payments on notes payable                                 (111,191)        (40,612)
Principal payments on long-term debt                                (664,872)       (558,868)
Principal payments on capital lease obligations                   (1,316,869)       (644,083)
                                                                 ---------------------------
Net cash provided by financing activities                            672,567         289,527

Net increase (decrease) in cash                                       51,874         (13,736)
Cash and cash equivalents at beginning of period                      12,482          26,218
                                                                 ---------------------------
Cash and cash equivalents at end of period                       $    64,356       $  12,482
                                                                 ---------------------------
                                                                 ---------------------------

SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
   Interest                                                      $   464,253      $  310,662
                                                                 ---------------------------
                                                                 ---------------------------
   Taxes                                                         $    40,050      $  141,765
                                                                 ---------------------------
                                                                 ---------------------------
Capital lease obligations entered into for equipment             $ 3,089,726      $  975,589
                                                                 ---------------------------
                                                                 ---------------------------
Common stock issued for acquired companies                       $   802,634      $        -
                                                                 ---------------------------
                                                                 ---------------------------
Common stock issued in exchange for forgiveness of debt          $   253,550      $        -
                                                                 ---------------------------
                                                                 ---------------------------
Common stock issued for forgiveness of accrued liabilities       $    26,325      $        -
                                                                 ---------------------------
                                                                 ---------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                                                            F-6
<PAGE>

              Medical Resources Management, Inc. and Subsidiaries
                                       
                  Notes to Consolidated Financial Statements
                                       
                               October 31, 1997

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Medical Resources Management, Inc. (MRM or the Company) engages in the 
business of renting medical equipment, providing associated technical 
support, and also selling related supplies.  Customers of the Company are 
located throughout much of the western United States.  The financial 
statements include MRM, the holding company, consolidated with all of its 
wholly owned subsidiaries (see Note 2 for 1997 acquisitions).   All 
significant intercompany accounts and transactions have been eliminated.

CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all highly 
liquid investments with maturities of three months or less when purchased to 
be cash equivalents.

INVENTORIES

Inventories, consisting primarily of supplies, are stated at the lower of 
cost (first-in, first-out) or market basis.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and depreciated using the 
straight-line method over the estimated useful lives of the assets, which 
vary from five to ten years.  Capitalized leases and leasehold improvements 
are being amortized using the straight-line method over the shorter of the 
lease term or estimated useful lives.  Amortization of capital leases is 
included in depreciation expense.

Expenditures for major renewals and betterments that extend the useful lives 
of property and equipment are capitalized.  Expenditures for maintenance and 
repairs are charged as incurred.

INTANGIBLE ASSETS

Goodwill is amortized over a period of 15 years.  Payments for non-compete 
agreements are capitalized and then amortized over the period of the 
non-compete agreement.  Customer lists are amortized over a period of 12 
years.

INCOME TAXES

The Company utilizes Statement of Financial Accounting Standards No. 109, 
"Accounting for Income Taxes," which prescribes the use of the liability 
method to compute the differences between the tax basis of assets and 
liabilities and the related financial reporting amounts using currently 
enacted laws and rates.                         

                              
                                                                           F-7

<PAGE>

             Medical Resources Management, Inc. and Subsidiaries
                                       
            Notes to Consolidated Financial Statements (continued)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION

The Company recognizes revenue at the time that the rental service is 
rendered to the customer, including the providing of technical support.

STOCK-BASED COMPENSATION

The Company accounts for its stock compensation arrangements under the 
provisions of APB 25, "Accounting for Stock Issued to Employees," and intends 
to continue doing so.  In October 1995, the Financial Accounting Standards 
Board issued Statement of Financial Accounting Standards No. 123, "Accounting 
for Stock-Based Compensation" (SFAS 123).  SFAS 123 established a fair 
value-based method of accounting for compensation costs related to stock 
options and other forms of stock-based compensation plans.  However, SFAS 123 
allows an entity to continue to measure compensation costs using the 
principles of APB 25 if certain pro forma disclosures are made.  SFAS 123 is 
effective for fiscal years beginning after December 15, 1995.  The Company 
provides proforma disclosures of net income and earnings per share as if the 
fair value-based method prescribed by SFAS 123 had been applied in measuring 
compensation expense (Note 8).

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to concentrations 
of credit risk consist principally of temporary cash investments and trade 
receivables.  The Company places its temporary cash investments with banks. 
Concentrations of credit risk with respect to trade receivables are limited 
due to the Company's large number of customers primarily with small balances. 
Management reviews these balances on a monthly basis and maintains reserves 
for potential credit losses, which losses have historically been within 
management's expectations.  The Company generally sells on credit terms of 30 
days and requires no collateral.

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 amounts reported in the financial statements and accompanying 
notes.  Actual results could vary from those estimates.

EARNINGS PER SHARE

Net income per share has been computed based on the weighted average number 
of shares of common stock outstanding.  Stock options have not been 
considered because the effect was either not material or antidilutive.

LONG-LIVED ASSETS

Long-lived assets used in operations are reviewed periodically to determine 
that the carrying values are not impaired.  If indicators of impairment are 
present, or if long-lived assets are expected to be disposed of at a loss, 
impairment losses are recorded.


                                                                            F-8

<PAGE>

              Medical Resources Management, Inc. and Subsidiaries
                                       
            Notes to Consolidated Financial Statements (continued)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of the Company's outstanding balances under its long-term 
debt instruments approximates fair value because the interest rates on 
outstanding borrowings vary according to current market rates or are set to 
approximate market rates.

FINANCIAL STATEMENT PRESENTATION

Certain balances from the October 31, 1996 financial statements have been 
reclassified to conform to the October 31, 1997 presentation.

NEW ACCOUNTING PRINCIPLES

In February 1997, the Financial Accounting Standards Board issued Statement 
of Financial Accounting Standards No. 128, "Accounting for Earnings Per 
Share" (SFAS 128).  This statement establishes standards for computing and 
presenting earnings per share (EPS) and applies to entities with publicly 
held common stock or potential common stock.  SFAS 128 simplifies the 
standards for computing EPS previously found in APB Opinion No. 15, Earnings 
Per Share, and makes them comparable to international EPS.  This statement is 
effective for financial statements issued for periods ending after December 
15, 1997.  The Company will adopt this new standard in fiscal year 1998, and 
has determined that the impact on the financial statements will be 
insignificant.

In June 1997, the Financial Accounting Standards Board issued Statement of 
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" 
(SFAS 130).  This statement establishes standards for reporting and 
displaying comprehensive income and its components (revenue, expenses, gains 
and losses) in financial statements.  SFAS 130 requires that all items that 
are required to be recognized under accounting standards as components of 
comprehensive income be reported in a financial statement that is displayed 
with the same prominence as other financial statements.  It is effective for 
fiscal years beginning after December 15, 1997.  The Company does not believe 
that the current financial statement disclosure will need to be modified 
based upon current operations.

In June 1997, the Financial Accounting Standards Board issued Statement of 
Financial Accounting Standards No. 131, "Disclosures About Segments of an 
Enterprise and Related Information" (SFAS 131).  This statement requires that 
a public business enterprise report financial and descriptive information 
about its reportable operating segments.  Generally, financial information is 
required to be reported on the basis that it is used internally for 
evaluating segment performance and deciding how to allocate resources to 
segments.   SFAS 131 is effective for fiscal years beginning after December 
15, 1997.  The Company is reviewing the standard and does not believe that 
there will be a significant impact on financial disclosures.


                                                                            F-9

<PAGE>

              Medical Resources Management, Inc. and Subsidiaries
                                       
            Notes to Consolidated Financial Statements (continued)

2.   ACQUISITIONS

Effective March 31, 1997, the Company acquired 100% of the common stock of 
Pulse Medical Products, Inc. (Pulse).  Pulse provides medical rental 
equipment in the Rocky Mountain area.  The purchase price was $357,500 
consisting of 325,000 shares of MRM's common stock (valued at $1.10 per 
share).  The transaction was accounted for as a purchase and, accordingly, 
the results of operations of Pulse have been included in the statement of 
income since April 1, 1997.

Effective June 30, 1997, the Company acquired 100% of the common stock of 
Laser Medical, Inc. (Laser Medical).  Laser Medical provides mobile 
laser/surgical services principally in the states of Utah and Colorado.  The 
purchase price was $209,000 consisting of 190,000 shares of MRM's common 
stock (valued at $1.10 per share).  In addition, the Company obtained a 
non-compete agreement from the principal former shareholder of Laser Medical 
in consideration of the payment of $80,000 in cash.  This transaction was 
accounted for as a purchase and, accordingly, the results of operations of 
Laser Medical have been included in the statement of income since July 1, 
1997.

Also effective June 30, 1997, the Company acquired 100% of the common stock 
of Med Surg Specialties, Inc. (Med Surg).  The purchase price was $236,134 
consisting of 214,667 shares of MRM's common stock (valued at $1.10 per 
share). Med Surg provides mobile laser/surgical services in the Southern 
California area.  In addition, the Company obtained a non-compete agreement 
from the principal former shareholder of Med Surg in consideration of the 
payment of $138,000 in cash ($50,000 at closing, with the balance payable 
$50,000 in 1998 and $38,000 in 1999). This transaction was accounted for as a 
purchase and, accordingly, the results of operations of Med Surg have been 
included in the statement of income since July 1, 1997.

The following unaudited proforma summary statements of earnings for the years 
ended October 31, 1997 and 1996 of the Company and the acquisitions discussed 
previously assuming all were effective on November 1, 1995. The proforma 
information gives effect to certain adjustments, including primarily the 
amortization of excess of costs over net assets acquired.  This proforma 
summary does not necessarily reflect the results of operations as they would 
have been if the Company and the acquisitions had been a single entity during 
such periods:

<TABLE>
<CAPTION>
                                                     YEAR ENDED OCTOBER 31
                                                     1997             1996
                                                 -----------------------------
          <S>                                    <C>              <C>
          Total revenues                         $ 9,887,000      $ 10,820,000
          Total expenses                          10,028,000        10,572,000
                                                 -----------------------------
          Net income (loss)                      $  (141,000)     $    248,000
                                                 -----------------------------
                                                 -----------------------------
          Net income (loss) per common share     $      (.02)     $        .04
                                                 -----------------------------
                                                 -----------------------------
</TABLE>

Effective July 16, 1997, the Company acquired a 21.8% interest for $17,500 in 
Santa Barbara Equipment, LLC (SBEL), a limited liability company formed by 
the Company and certain physicians to operate a laser in Santa Barbara, 
California. The Company manages SBEL and provides accounting and other 
services to SBEL. The Company accounts for its interest in SBEL using the 
equity method of accounting.


                                                                           F-10

<PAGE>
              Medical Resources Management, Inc. and Subsidiaries
                                       
            Notes to Consolidated Financial Statements (continued)
                                       

3.   OBLIGATIONS UNDER CAPITAL LEASES

The Company leases certain equipment under capital lease obligations which 
contain purchase options.  Cost and accumulated depreciation of equipment 
under capital leases included in equipment as of October 31, 1997 are as 
follows:

<TABLE>
     <S>                                                               <C>
     Rental equipment                                                  $ 12,146,452
     Less accumulated depreciation                                        4,879,719
                                                                       ------------
     Net book value                                                    $  7,266,733
                                                                       ------------
                                                                       ------------
</TABLE>

The following is a schedule by year of future minimum lease payments required
under the leases, together with their present value as of October 31, 1997:

<TABLE>
     <S>                                                               <C>
     1998                                                              $ 2,217,636
     1999                                                                2,128,647
     2000                                                                1,825,226
     2001                                                                1,304,649
     2002                                                                  623,899
                                                                       -----------
     Total minimum lease payments                                        8,100,057
     Less amount representing interest                                   1,875,946
                                                                       -----------
     Present value of minimum lease payments due under capital leases    6,224,111
     Less current portion                                                1,495,611
                                                                       -----------
     Obligations under capital leases, net of current portion          $ 4,728,500
                                                                       -----------
                                                                       -----------
</TABLE>

                                                                          F-11

<PAGE>

              Medical Resources Management, Inc. and Subsidiaries
                                       
            Notes to Consolidated Financial Statements (continued)
                                       
4.   LONG-TERM DEBT

Long-term debt consists of the following at October 31, 1997:

<TABLE>
   <S>                                                                   <C>
   Note payable to a finance company, payable in 60 monthly
     installments of $33,333 plus interest at the 30-day
     commercial paper rate plus 2.75% (8.2% at October 31, 1997),
     secured by accounts receivable, inventories, equipment and the
     personal guarantee of certain shareholders.                         $ 1,966,667
   Various notes payable in monthly installments totaling $11,206
     including interest varying between  9% and 16% per annum,
     collateralized by trucks, vans and automobiles, maturing
     through March 2002.                                                     336,641
   Notes payable to a finance company for a line of credit of
     $300,206 maturing April 2001, bearing interest at a rate of
     12% per annum, interest payable monthly, secured by the
     accounts receivable and inventories of Pulse.                           300,206
   Other                                                                      14,952
                                                                         -----------
   Total long-term debt                                                    2,618,466
   Less current portion                                                      527,771
                                                                         -----------
   Long-term debt, net of current portion                                $ 2,090,695
                                                                         -----------
                                                                         -----------
</TABLE>

Long-term debt matures as follows during the years ending October 31:

<TABLE>
   <S>                                                                  <C>
   1998                                                                $   527,771
   1999                                                                    498,338
   2000                                                                    488,355
   2001                                                                    734,584
   2002                                                                    369,418
                                                                       -----------
                                                                       $ 2,618,466
                                                                       -----------
                                                                       -----------
</TABLE>


                                                                           F-12

<PAGE>

              Medical Resources Management, Inc. and Subsidiaries
                                       
            Notes to Consolidated Financial Statements (continued)

5.   PROVISION FOR INCOME TAXES

The provisions for income taxes for the years ended October 31, 1997 and 1996 
consist of the following:

<TABLE>
<CAPTION>
                                            YEAR ENDED OCTOBER 31, 1997
                                     CURRENT       DEFERRED       TOTAL
                                    --------------------------------------
       <S>                          <C>          <C>            <C>
       Federal                      $       -    $  (13,698)    $ (13,698)
       State                              800        13,698         14,498
                                    --------------------------------------
                                    $     800    $        -     $      800
                                    --------------------------------------
                                    --------------------------------------

                                           YEAR ENDED OCTOBER 31, 1996
                                     CURRENT       DEFERRED       TOTAL
                                    --------------------------------------

       Federal                      $ (32,588)     $ 152,092    $  119,504
       State                           (5,401)        41,995        36,594
                                    --------------------------------------
                                    $ (37,989)     $ 194,087    $  156,098
                                    --------------------------------------
                                    --------------------------------------
</TABLE>

Significant components of the Company's deferred tax assets and liabilities 
at October 31, 1997 are as follows:

<TABLE>
    <S>                                            <C>
    Deferred tax assets:
        Net operating loss carryforwards           $   480,330
       Allowance for doubtful accounts                  62,848
       Other                                            43,428
                                                   ------------
    Total deferred assets                              586,606
    
    Deferred tax liabilities:
       Depreciation                                 (1,534,527)
       Other                                              (575)
                                                   ------------
    Total deferred liabilities                      (1,535,102)
                                                   ------------
    Net deferred liabilities                       $  (948,496)
                                                   ------------
                                                   ------------
</TABLE>

A reconciliation of the provision for income taxes with the amounts obtained 
by applying the federal statutory tax rate is as follows:

<TABLE>
<CAPTION>    
                                                         YEAR ENDED OCTOBER 31
                                                           1997          1996
                                                         ---------------------
    <S>                                                   <C>        <C>
    Income tax based on federal statutory rate            $  683     $  124,150
    State tax, net of federal tax benefit                    106         22,316
    Non-deductible expenses and other                         11          9,632
                                                          ------     ----------
                                                          $  800     $  156,098
                                                          ------     ----------
                                                          ------     ----------
</TABLE>


                                                                           F-13
<PAGE>

              Medical Resources Management, Inc. and Subsidiaries
                                       
            Notes to Consolidated Financial Statements (continued)


6.   EQUITY

Between November 1, 1996 and March 31, 1997, the Company sold 291,600 Units 
in a private offering.  These Units consisted of 291,600 shares of common 
stock, as well as 291,600 Class A warrants and 291,600 Class B warrants to 
purchase, in the aggregate, 583,200 shares of common stock.  The Units were 
sold at $1.25 per Unit, resulting in gross proceeds of $364,500 and net 
proceeds of $324,480 after expenses.   The Class A and Class B warrants have 
an exercise price of $2.50 and $4.00, respectively, and expire on November 1, 
1999.  As of October 31, 1997 no such warrants had been exercised.

During March 1997, the Company issued an additional 202,840 Units to certain 
shareholders (including the principal officer of the Company) in exchange for 
$253,550 of indebtedness owed to these shareholders.  These Units consisted 
of 202,840 shares of common stock, as well as 202,840 Class A warrants and 
202,840 Class B warrants to purchase, in the aggregate, 405,680 shares of 
common stock. The Units were issued at a rate of one Unit for each $1.25 of 
shareholder debt forgiven. The Class A and Class B warrants have an exercise 
price of $2.50 and $4.00, respectively, and expire on November 1, 1999.  As 
of October 31, 1997 no such warrants had been exercised.

In April 1997, in connection with a loan from a finance company, warrants 
were granted to the finance company to purchase 100,000 shares of common 
stock at a price of $2.00 per share, exercisable at any time during the six 
years following the date of the loan.

7.   BENEFIT PLAN

In June 1997, the Company adopted a defined contribution retirement plan 
(Plan) which qualifies under Section 401(k) of the Internal Revenue Code.  
The Plan covers substantially all employees with over one year of service.  
The Company makes an annual election to provide matching contributions of up 
to 50% of each participant's deferral up to a maximum of 3% of compensation.  
The amount of matching contributions included in expense for the year ended 
October 31, 1997 was $26,468.


                                                                           F-14

<PAGE>

              Medical Resources Management, Inc. and Subsidiaries
                                       
            Notes to Consolidated Financial Statements (continued)

8.   STOCK OPTIONS

In September 1996, the Company adopted the 1996 Stock Incentive Plan (Plan) 
to allow officers, employees and certain non-employees to receive certain 
options to purchase common stock and to receive grants of common stock 
subject to certain restrictions.  Under the Plan, regular salaried employees, 
including directors, who are full time employees, may be granted options 
exercisable at not less than 100 percent of the fair market value of the 
shares at the date of grant.  The exercise price of any option granted to an 
optionee who owns stock possessing more than ten percent of the voting power 
of all classes of common stock of the Company must be 110 percent of the fair 
market value of the common stock on the date of grant, and the duration may 
not exceed five years. Options generally become exercisable at a rate of 
one-third of the shares subject to option on each of the first, second and 
third anniversary dates of the grant. The duration of options may not exceed 
ten years.  A maximum number of 1,500,000 shares of common stock may be 
issued under the Plan.  The following table summarizes stock option activity:

<TABLE>
<CAPTION>
                                                      YEAR ENDED OCTOBER 31
                                                  1997                    1996
                                        -----------------------    ---------------------
                                                       Weighted                 Weighted
                                                        Average                  Average
                                                       Exercise                 Exercise
                                           Shares       Price       Shares       Price  
                                        -----------------------    ---------------------
<S>                                     <C>            <C>         <C>          <C>
Outstanding at beginning of year          424,804      $  1.31      81,804      $  0.50
Granted                                   874,000      $  1.50     343,000      $  1.50
Exercised                                       -            -           -            -
Forfeited or cancelled                    (52,500)     $  1.50           -            -
                                        -----------------------    ---------------------

Outstanding at end of year              1,246,304      $  1.44     424,804      $  1.31
                                        -----------------------    ---------------------
                                        -----------------------    ---------------------
Options exercisable at year-end           149,856      $  1.14      26,995      $  0.50
                                        -----------------------    ---------------------
                                        -----------------------    ---------------------
</TABLE>

The weighted average fair value of options granted during the years ended 
October 31, 1997 and 1996 was $1.34 and $1.18 at October 31, 1997 and 1996, 
respectively.  The weighted average remaining contractual life of stock 
options was 9.28 years as of October 31, 1997.  The range of prices of 
outstanding options under the Plan at October 31, 1997 was $0.50 to $2.125.


                                                                           F-15

<PAGE>

              Medical Resources Management, Inc. and Subsidiaries
                                       
            Notes to Consolidated Financial Statements (continued)

8. STOCK OPTIONS (CONTINUED)

<TABLE>
<CAPTION>
                                                          YEAR ENDED OCTOBER 31
                                                         1997               1996
                                                    -------------      -----------
     <S>                                              <C>               <C>
     Net income as reported                           $    1,208        $  209,054
                                                    ------------       -----------
                                                    ------------       -----------
     Proforma net income (loss)                       $ (173,220)       $  191,497
                                                    ------------       -----------
                                                    ------------       -----------
     
     Net income per common share as reported          $      .00        $      .03
                                                    ------------       -----------
                                                    ------------       -----------
     Proforma net income (loss) per common share      $     (.02)       $      .03
                                                    ------------       -----------
                                                    ------------       -----------
</TABLE>
                                                 
The Company utilized the Black-Scholes method to estimate the fair value of 
options, which includes the weighted average calculation of the fair value 
using the following assumptions: (i) a risk-free interest rate of 10%;  (ii) 
an expected life of 8 years;  (iii) expected volatility of 1.6; and (iv) no 
expected dividends.

9.   COMMITMENTS AND RELATED PARTY TRANSACTIONS

The Company leases premises under non-cancelable operating leases expiring in 
various years through 2001.  The lease on the corporate headquarters contains 
provisions for cost of living increases and certain options to renew for a 
period of five additional years.  Other facilities are on a month to month 
basis.  Future minimum lease payments are as follows during the years ending 
October 31:

<TABLE>
            <S>                                        <C>
            1998                                       $  219,400
            1999                                          201,174
            2000                                          171,976
            2001                                           81,410
            2002                                                -
                                                       ----------
                                                       $  673,960
                                                       ----------
                                                       ----------
</TABLE>

Rent expense was $218,337 and $141,794 for the years ended October 31, 1997 
and 1996, respectively.

The Company has borrowed money from two principal shareholders, including the 
principal officer of the Company.  The notes payable to shareholders bore 
interest at rates ranging from 10% to 12% and were subordinated to the notes 
payable to a finance company.  In 1997, amounts owed pursuant to such 
borrowings were repaid with common stock of the Company (see Note 6).

The Company paid consulting fees to a member of the Board of Directors in the 
amount of $48,000 during the fiscal year ended October 31, 1997.

10.  EMPLOYEE STOCK OWNERSHIP PLAN

On August 7, 1992, the Company formed an employee stock ownership plan (ESOP) 
for the benefit of all employees meeting certain minimum age and length of 
service requirements.  Contributions are discretionary and are determined 
annually by the Board of Directors.  No contribution was made for either of 
the years ended October 31, 1997 or 1996.                                     


                                                                          F-16