<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

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

[X]  QUARTERLY REPORT PURSUANT SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE 
     ACT OF 1934

For the quarter ended September 30, 1996

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES 
     EXCHANGE ACT OF 1934.

    For the transition period from____________________to_____________________

                           Commission File No. 1-13392

                               US DIAGNOSTIC INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)

         Delaware                                     11-3164389
(State or Other Jurisdiction              (IRS Employer Identification number)
of Incorporation or Organization)         

                              777 S. Flagler Drive
                         West Palm Beach, Florida 33401
                    (Address of Principal Executive Offices)

                                 (561) 832-0006
                (Issuer's Telephone Number, Including Area Code)

                            U.S. Diagnostic Labs Inc.
              (Former Name, Former Address and Former Fiscal Year,
                          if changed Since Last Report)

     Check whether the issuer (I) filed all reports required to be filed by
section 13 or 15 (d) of the Securities Exchange Act of 1934 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  
                                     ---     ---

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.

      Class                          Outstanding at October 31, 1996:
      -----                          --------------------------------

   Common Stock, $.01 par value 23,440,201 shares

                  Traditional Small Business Disclosure Format

                                 Yes  X   No  
                                     ---     ---

<PAGE>

                               US DIAGNOSTIC INC.

                              INDEX TO FORM 10-QSB


PART I. FINANCIAL INFORMATION                                               PAGE

Item 1. Financial Statements

Consolidated Condensed Balance Sheets as of September 30, 1996
and December 31, 1995......................................................... 3

Consolidated Condensed Statements of Operations for the Three  and Nine
Months ended September 30, 1996 and 1995...................................... 5

Consolidated Condensed Statements of Shareholders' Equity
as of September 30, 1996 and December 31, 1995................................ 6

Consolidated Condensed Statements of Cash Flows for the Nine Months
ended September 30, 1996 and 1995............................................. 8

Notes to Consolidated Condensed Financial Statements.......................... 9

Pro Forma Condensed Balance Sheet as of September 30, 1996....................12

Pro Forma Condensed Statements of Operations for the
Three and Nine Months ended September 30, 1996................................13

Notes to Pro Forma Consolidated Condensed Financial Statements................15

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................................16

Part II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders...................22

Item 5. Other Information.....................................................22

Item 6. Exhibits and Reports on Form 8-K......................................24

SIGNATURES....................................................................26


                                       2

<PAGE>

US DIAGNOSTIC INC. AND SUBSIDIARIES
================================================================================
CONSOLIDATED CONDENSED BALANCE SHEETS
================================================================================

<TABLE>
<CAPTION>
                                                          September 30,  December 31,
                                                          -------------  ------------
                                                                   1996          1995
                                                                   ----          ----
<S>                                                        <C>           <C>        
Assets:
Current Assets:
Cash and Cash Equivalents                                  $ 81,863,494  $ 3,889,934
Restricted Cash and Cash Equivalents                               --        483,942
Accounts Receivable[Net of Estimated Uncollectibles
of $24,269,460 and $5,871,683 Respectively]                  28,007,847   10,818,919
Prepaid Expenses                                              6,338,830      900,619
Other Current Assets                                            930,076      270,796
                                                           ------------  -----------

Total Current Assets                                        117,140,247   16,364,210
                                                           ------------  -----------

Property, Plant and Equipment - Net                          51,481,641   22,550,884
                                                           ------------  -----------

Other Assets:
Other Assets                                                  7,835,221      371,196
Investment In and Advances to Unconsolidated Subsidiaries     4,358,640         --
Deferred Charges - Net                                        3,363,286         --
Goodwill - Net                                               80,842,671   12,941,462
Other Intangibles - Net                                       6,893,916    5,051,472
                                                           ------------  -----------

Total Other Assets                                          103,293,734   18,364,130
                                                           ------------  -----------

Total Assets                                               $271,915,622  $57,279,224
                                                           ============  ===========
</TABLE>

See Notes to Consolidated Condensed Financial Statements.


                                       3

<PAGE>


US DIAGNOSTIC INC. AND SUBSIDIARIES
================================================================================
CONSOLIDATED CONDENSED BALANCE SHEETS
================================================================================

<TABLE>
<CAPTION>
                                                            September 30,   December 31,
                                                            -------------   ------------
                                                                     1996           1995
                                                                     ----           ----
<S>                                                         <C>             <C>         
Liabilities and Shareholders' Equity:
Current Liabilities:
Trade Accounts Payable                                      $   3,177,420   $  1,509,958
Accrued Expenses and Other Current Liabilities                  3,528,038      1,889,200
Income Taxes Payable                                            3,817,833           --
Short-Term Borrowings                                                --          667,286
Current Portion of Long-Term Debt                               9,963,610      3,831,975
Obligations Under Capital Leases - Current Portion              4,054,795      2,519,982
                                                            -------------   ------------

Total Current Liabilities                                      24,541,696     10,418,401
                                                            -------------   ------------

Long-Term Liabilities:
Long-Term Debt (Net of Current Portion)                        21,849,504     15,992,617
Obligations Under Capital Leases (Net of Current Portion)      11,470,556      5,072,018
Convertible Debentures                                         69,021,888           --
Deferred Revenue                                                  350,599        423,500
Deferred Income Taxes                                             164,452        164,452
                                                            -------------   ------------

Total Long-Term Liabilities                                   102,856,999     21,652,587
                                                            -------------   ------------

Total Liabilities                                             127,398,695     32,070,988
                                                            -------------   ------------

Minority Interests                                              2,572,888        715,543
                                                            -------------   ------------

Commitments                                                          --             --

Shareholders' Equity:
Preferred Stock, $.01 Par Value; Authorized
5,000,000 Shares, None Issued                                        --             --

Common Stock, $.01 Par Value; 50,000,000 Shares Authorized
and 23,128,352 and 7,032,622 Shares Issued and Outstanding
at September 30, 1996 and December 31, 1995, respectively         231,283         70,326


Additional Paid in Capital                                    132,507,716     22,953,590

Retained Earnings                                               9,856,011      2,495,678
                                                            -------------   ------------
                                                              142,595,010     25,519,594

Less: Deferred Charges                                           (650,971)    (1,026,901)
                                                            -------------   ------------

Total Shareholders' Equity                                    141,944,039     24,492,693
                                                            -------------   ------------

Total Liabilities and Shareholders' Equity                  $ 271,915,622   $ 57,279,224
                                                            =============   ============
</TABLE>

See Notes to Consolidated Condensed Financial Statements.


                                       4

<PAGE>

US DIAGNOSTIC INC. AND SUBSIDIARIES
================================================================================
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - UNAUDITED
================================================================================

<TABLE>
<CAPTION>
                                                  Three Months Ended September 30,     Nine Months Ended September 30,
                                                  --------------------------------     -------------------------------
                                                         1996           1995                 1996           1995          
                                                         ----           ----                 ----           ----      
<S>                                                  <C>            <C>                  <C>            <C>           
Revenue [Net of Allowances]                          $ 29,906,569   $ 7,139,415          $ 66,269,015   $ 17,874,791  
                                                     ------------   -----------          ------------   ------------  
                                                                                                                      
Operating Expenses:                                                                                                   
     Selling, General and Administrative Expense       20,073,527     4,999,080            42,519,653     12,650,504  
     Depreciation and Amortization Expense              3,133,383       696,013             7,230,731      1,685,726  
                                                     ------------   -----------          ------------   ------------  
                                                                                                                      
      Total Operating Expenses                         23,206,910     5,695,093            49,750,384     14,336,230  
                                                     ------------   -----------          ------------   ------------  
                                                                                                                      
Income from Operations                                  6,699,659     1,444,322            16,518,631      3,538,561  
                                                     ------------   -----------          ------------   ------------  
                                                                                                                      
Other Income [Expense]:                                                                                               
       Interest Expense                                (2,386,988)     (337,360)           (5,241,349)      (732,565) 
       Interest and Other Income                          393,800       270,243               999,665        315,098  
       Non-Cash Finance Charge - Bridge Notes                   0      (414,375)                    0       (414,375) 
                                                     ------------   -----------          ------------   ------------  
       Total Other Income [Expense]                    (1,993,188)     (481,492)           (4,241,684)      (831,842) 
                                                     ------------   -----------          ------------   ------------  
                                                                                                                      
Income Before Taxes and Minority Interest               4,706,471       962,830            12,276,947      2,706,719  
                                                     ------------   -----------          ------------   ------------  
                                                                                                                      
Minority Interest in Consolidated Subsidiaries           (503,420)      (75,075)           (1,048,024)      (180,147) 
                                                                                                                      
Income Tax Expense                                     (1,683,154)      (65,242)           (4,108,155)      (500,635) 
                                                     ------------   -----------          ------------   ------------  
                                                                                                                      
         Net Income                                  $  2,519,897   $   822,513          $  7,120,768   $  2,025,937  
                                                     ============   ===========          ============   ============  
                                                                                                                      
Net Income Per Common Share:                                                                                          
                                                                                                                      
          Primary                                    $        .13           .15                   .53            .43  
                                                     ============   ===========          ============   ============  
                                                                                                                      
                                                                                                                      
          Fully Diluted                              $        .13           .15                   .47            .43  

                                                     ============   ===========          ============   ============  
                                                                                                                      
Weighted Average Number of Common Shares and                                                                          
     Common Share Equivalents Outstanding:                                                                            
                                                                                                                      
             Primary                                   19,587,521     5,579,413            13,321,161      4,662,733  
                                                     ============   ===========          ============   ============  
             Fully Diluted                             26,999,843     5,579,413            18,625,386      4,662,733  
                                                     ============   ===========          ============   ============  
</TABLE>

See Notes to Consolidated Condensed Financial Statements.

                                       5

<PAGE>

US DIAGNOSTIC INC. AND SUBSIDIARIES
================================================================================
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
================================================================================

<TABLE>
<CAPTION>
                               Common Stock             Additional                                 Total
                               ------------             ----------                                 -----
                                  Number                  Paid-in    Deferred      Retained    Shareholders'
                                  ------                  -------    --------      --------    -------------
                                of Shares    Amount       Capital     Charges      Earnings        Equity
                                ---------    ------       -------     -------      --------        ------
<S>                             <C>        <C>         <C>          <C>           <C>           <C>        
Balance - December 31, 1994     4,078,560  $   40,786  $ 9,431,484  $  (599,275)  $  (834,953)  $ 8,038,042

50,000 Warrants at $2.00           50,000         500       99,500         --            --         100,000
                                                               
Issuance of 200,000 Shares -
LDC Acquisition                   200,000       2,000      998,000         --            --       1,000,000
                                                             
Issuance of 87,313 Shares -
CROV Acquisition                   87,313         873      399,127         --            --         400,000
                                                               
Issuance of 50,000 Shares -
Arrow Acquisition                  50,000         500      249,500         --            --         250,000 
                                                               
Issuance of 197,750 Shares -
SIL Acquisition                   197,750       1,977      536,023         --            --         538,000

Issuance of 27,600 Shares to
Unrelated Individuals              27,600         276      137,724     (138,000)         --           --

70,000 Warrants at $2.00           70,000         700      139,300         --            --         140,000

Common Stock Issued in
Connection with
Secondary Offering              1,857,250      18,573    9,077,494         --            --       9,096,067

Issuance of 80,000 Shares -
OPDC Acquisition                   80,000         800      399,200         --            --         400,000

Issuance of 68,817 Shares -
Future Care Acquisition            68,817         688      399,312         --            --         400,000

Issuance of 150,000 Shares to
Individual for Future Services    150,000       1,500      523,500     (525,000)         --            --

Warrants Exercised at Various
Prices                            115,332       1,153      563,426         --            --         564,579


Deferred Charges
Amortization                         --          --           --        235,374          --         235,374

Net Income                           --          --           --           --       3,330,631     3,330,631
                                ---------  ----------  -----------  -----------   -----------   -----------
Balance - December 31,          
       1995 Forward             7,032,622  $   70,326  $22,953,590  $(1,026,901)  $ 2,495,678   $24,492,693 
                                =========  ==========  ===========  ===========   ===========   =========== 
                                   
</TABLE>

See Notes to Consolidated Condensed Financial Statements.


                                       6

<PAGE>

US DIAGNOSTIC INC. AND SUBSIDIARIES
================================================================================
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
================================================================================

<TABLE>
<CAPTION>
                               Common Stock             Additional                                 Total
                               ------------             ----------                                 -----
                                  Number                  Paid-in    Deferred      Retained    Shareholders'
                                  ------                  -------    --------      --------    -------------
                                of Shares    Amount       Capital     Charges      Earnings        Equity
                                ---------    ------       -------     -------      --------        ------
<S>                             <C>        <C>         <C>          <C>           <C>           <C>        
Balance - December 31, 1995      7,032,622  $   70,326  $22,953,590 $(1,026,901)  $ 2,495,678   $24,492,693
Forwarded

Warrants Exercised at           13,116,877    131,168   90,397,491         --            --      90,528,659
Various Prices

Shares Issued in
Connection with
MIC Acquisition                    68,070         681      424,757         --            --         425,438

Shares Issued in
Connection with
Repayment of CMI
Consulting
Agreement                          93,000         930      580,320         --            --         581,250

Shares Issued in
Connection with
SCR Acquisition                   206,000       2,060      822,970         --            --         825,030

Shares Issued in
Connection with
U.S. Imaging Acquisition        1,671,000      16,710    6,990,000         --            --       7,006,710

Shares Issued in
Connection with
Pittsburgh Acquisition            750,000       7,500    8,604,750         --            --       8,612,250

Shares Issued in
Connection with the
Exercise of Stock
Options                             4,000          40        7,960         --            --           8,000

Shares Issued in
Connection with MMD              
Acquisition                       186,783       1,868    1,725,878         --            --       1,727,746

Amortization of

Deferred Charges                     --          --           --        375,930          --         375,930

Other Adjustments                    --          --           --           --         239,565       239,565

Net Income                           --          --           --           --       7,120,768     7,120,768
                               ----------  ---------- ------------  -----------   -----------   ------------

Balance - September 30, 1996   23,128,352  $  231,283 $132,507,716  $  (650,971)  $ 9,856,011   $141,944,039
                               ==========  ========== ============  ===========   ===========   ============
</TABLE>

See Notes to Consolidated Condensed Financial Statements.


                                       7

<PAGE>

US DIAGNOSTIC INC. AND SUBSIDIARIES
================================================================================
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - UNAUDITED
================================================================================

<TABLE>
<CAPTION>
                                                              Nine months ended September 30,
                                                                    1996            1995
                                                                    ----            ----
<S>                                                            <C>             <C>         
Cash flows from operating activities:
Net Income                                                     $   7,120,768   $  2,025,937

Adjustments to reconcile net income to cash provided
  by [used] operating activities:
  Depreciation and amortization                                    7,230,731      1,685,726
  Amortization of non cash financing and other costs                 316,893        414,375
  Minority interest in consolidated partnerships                   1,048,024        443,996
  Equity in unconsolidated subsidiaries                             (131,875)          --
  Deferred income taxes                                                 --          417,109
  Loss on sale of subsidiary                                         536,312           --
  Changes in assets and liabilities:
    [Increase] in accounts receivable                             (3,915,534)    (1,816,236)
    [Increase] in prepaid expenses and other assets               (6,249,917)        (9,158)
    Increase [decrease] in accounts payable, accrued expenses
     and other current liabilities                                    42,968       (837,937)
    Increase in income taxes payable                               3,791,157           --
    [Decrease] in other non-current liabilities                     (735,583)      (729,064)
                                                               -------------   ------------
Net cash provided by operating activities                          9,053,944      1,594,748
                                                               -------------   ------------

Cash flow from investing activities:
Purchase of property and equipment                                (7,949,093)    (5,577,107)
Intangible assets                                                (10,398,838)    (2,461,962)
Investment in pending acquisition                                 (2,912,672)         (--)
Acquisitions[net of cash acquired]                               (61,030,869)    (6,612,632)
                                                               -------------   ------------
Net cash used by investing activities                            (82,291,472)   (14,651,701)
                                                               -------------   ------------

Cash flows from financing activities:
Proceeds from convertible debentures                              69,021,888           --
Common stock issued                                               81,543,347     12,187,067
Payments of long-term debt and capital lease obligations          (5,527,881)    (4,737,046)
Proceeds from long-term debt                                       5,689,792      7,885,090
                                                               -------------   ------------

Net cash provided by financing activities                        150,727,146     15,335,111
                                                               -------------   ------------


Net increase in cash and cash equivalents                         77,489,618      2,278,158
                                                               -------------   ------------

Cash and cash equivalents at beginning of  year                    4,373,876      2,824,440
                                                               -------------   ------------

Cash and cash equivalents - at end of period                   $  81,863,494   $  5,102,598
                                                               =============   ============

Supplemental disclosures of cash flow information:
Cash paid during the periods for:
Interest                                                       $   4,969,838   $    732,565
Income Taxes                                                   $   3,388,463   $       --
</TABLE>

Supplemental schedule of non-cash investing and financing activities:

The Company issued $19,178,000 and $2,588,000 of common stock related to various
acquisitions consummated in the nine months ended September 30, 1996 and 1995,
respectively.

See Notes to Consolidated Condensed Financial Statements.


                                       8

<PAGE>

US DIAGNOSTIC INC. AND SUBSIDIARIES
================================================================================
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
================================================================================

[1] In the opinion of US Diagnostic Inc. [the "Company"], the accompanying
unaudited financial statements contain all adjustments [consisting of only
normal accruals] necessary to present fairly the financial position of the
Company as of September 30, 1996 and the results of its operations for the three
and nine months ended September 30, 1996 and 1995 and changes in cash flows for
the nine months then ended.

The accounting policies followed by the Company are set forth in Note 1 to the
Company's financial statements in the December 31, 1995 US Diagnostic Inc.
Annual Report on Form 10-KSB which is incorporated by reference.

The year-end condensed balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.

[2] The results of operations for the three and nine months ended September 30,
1996 are not necessarily indicative of the results to be expected for the full
year.

[3] Earnings per common share is computed under the "Modified Treasury Stock
Method" whereby the adjusted net income for the periods is divided by the
weighted average number of common shares and common share equivalents
outstanding. All dilutive stock options and warrants have been included as
common stock equivalents in the computation of primary earnings per share. All
dilutive stock options, warrants and convertible debt conversions have been
included as common stock equivalents in the computation of earnings per common
share on a fully diluted basis.

[4] In April and May 1996, the Company consummated a $57.5 million offering of
9% Subordinated Convertible Debentures Due 2003. The investment banking firm who
acted as the agent in connection with the offering was issued 319,445 five-year
warrants at $9.00. The Company used substantially all of the proceeds during the
quarter ended September 30, 1996 on the acquisitions in note 6 below.

[5] The Company called for redemption on June 28, 1996 all of its outstanding
redeemable Class A Warrants and called for redemption on July 31, 1996 all its
outstanding redeemable Class B Warrants. There were 4,222,902 Class A Warrants
and at an exercise price of $6.25 and 7,991,133 Class B Warrants at an exercise
price of $8.00 exercised. The Company plans to use the proceeds from the
redemption of the warrants to continue to pursue acquisitions.

[6] During the quarter ended September 30, 1996, the Company completed the
acquisitions of the following outpatient diagnostic facilities and marketing
networks:

<TABLE>
<CAPTION>

Name                                  Effective Date       Location                  Business           Purchased Ownership %  
----                                  --------------       --------                  --------           ---------------------  
<S>                                   <C>                  <C>                       <C>                        <C>         
Integrated Health Concepts (Quantum)  August 28, 1996      Houston, Texas            Multi Modality Imaging        70%         
                                                                                                                               
Medical Marketing Development         April 1, 1996        Mineola, New York         Management                   100%         
                                                                                                                               
LINC Imaging                          August 1, 1996       Southern California       MRI                          100%         
                                                                                                                               
MediTek Health Corporation            July 1, 1996         4 States                  Multi-Modality Imaging       100%         
                                                                                                                               
OwnerDiagnostics                      July 1, 1996         Arcadia, California       Marketing Network          67.53%         
                                                                                                                               
Ft. Lauderdale MRI                    July 1, 1996         Ft. Lauderdale, Florida   MRI                          100%         
</TABLE>

     The Company financed these acquisitions with cash, notes, convertibles
notes and common stock of the Company. These acquisitions were accounted for as
asset or stock purchases with the excess purchase price over the value of the
assets attributed to goodwill totaling approximately $36,000,000. The results of
operations are included with that of the Company from the acquisition date
onward.

     The Medical Marketing Development acquisition was retroactive to April 1,
1996 and therefore its operations are included in the entire three months ended
September 30, 1996 and their operations from April 1, 1996 to September 30, 1996
are included in the nine months ended September 30, 1996. The pro forma
information presented below reflects the effect of their operations from January
1, 1996 to June 30, 1996 which was not included in the 10-QSB for the quarter
ended June 30, 1996 since the conditions surrounding the retroactive adjustment
were not known and did not exist at the time the June 30, 1996 10-QSB was filed.

     As of September 30, 1996 the Company had signed agreements to acquire the
following five (5) businesses. Four (4) of these probable acquisitions have
closed as of November 14, 1996.


                                       9
<PAGE>

<TABLE>
<CAPTION>
Name                                Location                  Business                  Purchased Ownership %
----                                --------                  --------                  ---------------------
<S>                                 <C>                       <C>                                <C>
Lee Imaging (16 centers)            New York Area             Multi-Modality Imaging              80%

Sunport Imaging (3 centers)         San Antonio, Texas        MRI                                100%

MMD Centers (4 centers)             New York Area             Multi-Modality Imaging             100%

Medical Imaging Centers of                                    MultiModality Imaging and          100%
    America (22 centers)            10 States                 Fee for Service Contracts


Dayton Medical Imaging              Dayton, Ohio              Multi-Modality Imaging             100%
    (5 centers)
</TABLE>

     These acquisitions will be accounted for as asset or stock purchases with
the excess purchase price over the fair value of assets attributed to goodwill
totaling approximately $49,000,000.

     The following pro forma (unaudited) combined results of operations are
adjusted for the exercise of the outstanding "A" and "B" warrants, amortization
of goodwill, non-compete convenants, and depreciation on assets acquired as
though the acquisitions referred to herein occurred at the beginning of the
periods presented.

                              Nine Months Ended     Three Months Ended
                              September 30, 1996    September 30, 1996
                              ------------------    ------------------

      Net Revenue                $144,217,000           $49,180,000    
                                 ============           ===========    
      Net Income                  $13,584,000            $4,683,000    
                                 ============           ===========    

      Earnings:                                                     
                                                                    
            Primary                      $.93                  $.24    
                                         ====                  ====    

            Fully Diluted                $.77                  $.21    
                                         ====                  ====    
                                                     


                                       10
<PAGE>


US DIAGNOSTIC INC. AND SUBSIDIARIES
================================================================================
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
================================================================================

     The following unaudited pro forma combined condensed balance sheet as of
September 30, 1996 and the unaudited pro forma combined condensed statements of
operations for the three months and nine months ended September 30, 1996 have
been prepared to reflect the probable acquisitions to be consummated during the
fourth quarter of 1996 giving effect to the transaction under the purchase
method of accounting and the assumptions and adjustments in the accompanying
notes to the pro forma financial statements. The unaudited pro forma combined
condensed statements of operations for the three and nine months ended September
30, 1996 were prepared as if all transactions had occurred on July 1, 1996 (for
three months ended September 30, 1996) and January 1, 1996 (for the nine months
ended September 30, 1996). The unaudited pro forma combined condensed balance
sheet as of September 30, 1996 has been prepared as if the probable acquisitions

had occurred as of that date.

     The unaudited pro forma combined condensed financial statements have been
prepared by the Company's management based upon the historical financial
statements of the Company and the aforementioned to be acquired companies. These
pro forma financial statements are not necessarily indicative of the results
that would have occurred if the transactions had occurred on the dates indicated
or which may be realized in the future.



                                       11
<PAGE>

US DIAGNOSTIC, INC. AND SUBSIDIARIES
================================================================================
PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF SEPTEMBER 30, 1996 [IN
THOUSANDS] [UNAUDITED]
================================================================================

<TABLE>
<CAPTION>
                                                    Businesses                    Pro Forma
                                                  To Be Acquired    Pro Forma         As
                                         Actual        Total       Adjustments     Adjusted
                                         ------        -----       -----------     --------
<S>                                    <C>         <C>              <C>               <C>      
Assets:
Current Assets:
    Cash and Cash Equivalents          $  81,863   $  6,159         $(55,400)[A]      32,622   
    Accounts Receivable - Net             28,008     18,920             --            46,928   
    Other Current Assets                   7,269      1,272             --             8,541   
                                       ---------   --------         --------       ---------   
    Total Current Assets                 117,140     26,351          (55,400)         88,091   
                                       ---------   --------         --------       ---------   
                                                                                               
Property and Equipment - Net              51,482     28,052            7,256[C]       86,790   
                                       ---------   --------         --------       ---------   
                                                                                               
Other Assets:                                                                                  
    Other Assets                          12,194      1,226             --            13,420   
    Goodwill - Net                        80,843        130           48,805[C]      129,778   
    Covenant Not-to-Compete - Net           --         --                 85[C]          850   
    Other Intangibles - Net               10,257      2,391            1,500[C]       14,148   
                                       ---------   --------         --------       ---------   
                                                                                               
    Total Other Assets                   103,294      3,747           51,155         158,196   
                                       ---------   --------         --------       ---------   
                                                                                               
Total Assets                           $ 271,916   $ 58,150         $  3,011       $ 333,077   
                                       =========   ========         ========       =========   
                                                                                               
Liabilities and Shareholders' Equity:                                                          
Current Liabilities:                                                                           

    Accounts Payable                   $   3,177   $  3,358         $   (750)[B]       5,785   
    Accrued Expenses                       7,346      3,318             (268)[B]      10,396   
    Notes Payable                          9,964      4,658            2,850[E]       17,472   
    Obligations under Capital Leases       4,055      7,911             --            11,966   
                                       ---------   --------         --------       ---------   
                                                                                               
   Total Current Liabilities:             24,542     19,245            1,832          45,619   
                                       ---------   --------         --------       ---------   
                                                                                               
Long-Term Liabilities:                                                                         
    Notes Payable                         21,850      2,901           14,237[E]       38,988   
    Obligations under Capital Leases      11,470     10,908             --            22,378   
    Convertible Debentures                69,022      2,800             --            71,822   
    Deferred Revenue                         351       --               --               351   
    Deferred Income Taxes                    164       --               --               164   
                                       ---------   --------         --------       ---------   
                                                                                               
   Total Long-Term Liabilities           102,857     16,609           14,237         133,703   
                                       ---------   --------         --------       ---------   
                                                                                               
Minority Interests                         2,573      1,090             --             3,663   
                                       ---------   --------         --------       ---------   
                                                                                               
Shareholders' Equity:                                                                          
    Common Stock                             231     55,998          (55,998)[D]         231   
                                                                                               
    Additional Paid-in Capital           132,508      5,343            2,805[C],[D]  140,656   
                                                                                               
    Retained Earnings [Deficit]            9,856    (40,135)          40,135[D]        9,856   
                                       ---------   --------         --------       ---------   
                                                                                               
    Totals                               142,595     21,206          (13,058)        150,743   
    Less:  Deferred Charges                 (651)      --               --              (651)  
                                       ---------   --------         --------       ---------   
                                                                                               
   Total Shareholders' Equity            141,944     21,206          (13,058)        150,092   
                                       ---------   --------         --------       ---------   
                                                                                               
   Total Liabilities and                                                                       
      Shareholders' Equity             $ 271,916   $ 58,150         $  3,011       $ 333,077   
                                       =========   ========         ========       =========   
</TABLE>


                                       12

<PAGE>


US DIAGNOSTIC INC. AND SUBSIDIARIES
================================================================================
UNADUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 1996 [IN THOUSANDS, EXCEPT SHARE DATA]
================================================================================


<TABLE>
<CAPTION>
                                            Businesses                               Businesses to                   Pro Forma
                                             Acquired    Pro Forma      Pro Forma     be Acquired      Pro Forma         As
                                    Actual    Total     Adjustments    as Adjusted       Total          Acquired      Adjusted
                                    ------    -----     -----------    -----------       -----          --------      --------
<S>                                 <C>       <C>        <C>            <C>            <C>              <C>           <C>
Net Revenues                        $29,907   $2,483     $   --         $32,390        16,790               --            49,180 
                                                                                                                                 
General and Administrative           20,074    1,426                     21,500        11,936           (1,011)[H]        32,426 
Expenses                                                                                                                         
                                                                                                                                 
Interest Expense                      2,387       69         40[E]        2,496           687              519[E]          3,702 
                                                                                                                                 
                                                                                                                                 
Depreciation and Amortization         3,133      168         57[F]        3,358         2,324              471[F]          6,153 
                                                                                                                                 
Other [Income] Expense                 (393)      --                       (393)         (120)                              (513)
                                                                                                                                 
Minority Interests                      503       --        187[G]          690            47               85[G]            822 
                                     ------     ----      -----          ------        ------             ----            ------ 
                                                                                                                                 
Income Before Income Taxes            4,203      820       (284)          4,739         1,916              (65)            6,591 
                                                                                                                                 
Income Taxes                          1,683      322       (114)          1,891           209             (192)            1,908 
                                     ------     ----      -----          ------        ------             ----            ------ 
                                                                                                                                 
Net Income                           $2,520     $498      $(170)         $2,848        $1,707             $128            $4,683 
                                     ======     ====      =====          ======        ======             ====            ====== 
                                                                                                                                 
                                                                                                                                 
Earnings Per Common Share:                                                                                                       
  Primary                             $0.13                                                                                $0.24 
                                      =====                                                                                ===== 
  Fully Diluted                       $0.13                                                                                $0.21 
                                      =====                                                                                ===== 
                                                                                                                                 
Weighted Average Number of                                                                                                       
 Shares:                                                                                                                         
    Primary                      19,587,521                                                                           19,735,697 
                                 ==========                                                                           ========== 
    Fully Diluted                26,999,843                                                                           27,148,019 
                                 ==========                                                                           ========== 
</TABLE>

See Notes to Unaudited Pro Forma Combined Condensed Financial Statements.


                                       13
<PAGE>


US DIAGNOSTIC INC. AND SUBSIDIARIES

================================================================================
UNADUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 [IN THOUSANDS, EXCEPT SHARE DATA]
================================================================================

<TABLE>
<CAPTION>
                                         Businesses                            Businesses to               Pro Forma
                                          Acquired      Pro Forma   Pro Forma   be Acquired   Pro Forma       As
                                           Actual         Total    Adjustments  as Adjusted     Total       Acquired   Adjusted
                                           ------         -----    -----------  -----------     -----       --------   --------
<S>                                  <C>            <C>            <C>          <C>            <C>        <C>         <C>
Net Revenues                         $     66,270   $     26,653   $  --        $ 92,923         51,294               144,217     
                                                                                                                                  
General and Administrative                                                                                                        
   Expenses                                42,521         19,553   (1,125)[H]     60,949         36,735   (2,266)[H]   95,418     
                                                                                                                                  
Interest Expense                            5,241            489       708[E]      6,438          2,292    1,556[E]    10,286     
                                                                                                                                  
Depreciation and Amortization               7,230            990     1,698[F]      9,918          7,741    1,413[F]    19,072     
                                                                                                                                  
Other [Income] Expense                       (998)           (41)     --          (1,039)          (454)               (1,493)    
                                                                                                                                  
Minority Interests                          1,047            309      --           1,356            103      254        1,713     
                                     ------------   ------------   -------      --------       --------   ---------   -------     
                                                                                                                                  
Income Before Income Taxes                 11,229          5,353    (1,281)       15,301          4,877     (957)      19,221     
                                                                                                                                  
Income Taxes                                4,108          2,116      (485)        5,739            630     (350)       6,019     
                                     ------------   ------------   -------      --------       --------   ---------   -------     
                                                                                                                                  
Income Before Extraordinary                                                                                                       
   Item                                     7,121          3,237      (796)        9,562          4,247     (607)      13,202     
                                                                                                                                  
Extraordinary Item                                                                                                                
  [Net of Tax Effect]                        --             --                                     (382)                 (382)    
                                     ------------   ------------   -------      --------       --------   ---------   -------     
                                                                                                                                  
Net Income                           $      7,121   $      3,237   $  (796)     $  9,562       $  4,629   $ (607)     $13,584     
                                     ============   ============   =======      ========       ========   =========   =======     
                                                                                                                                  
                                                                                                                                  
Earnings Per Common Share:                                                                                                        
  Primary                               $    0.53                                                                     $  0.93     
                                        =========                                                                     =======     
  Fully Diluted                         $    0.47                                                                     $  0.77     
                                        =========                                                                     =======     
                                                                                                                                  
Weighted Average Number of Shares:                                                                                                
  Primary                              13,321,161                                                                  14,617,549     
                                       ==========                                                                  ==========     
  Fully Diluted                        18,625,386                                                                  19,921,774     
                                       ==========                                                                  ==========     
</TABLE>


See Notes to Unaudited Pro Forma Combined Condensed Financial Statements.      


                                       14
<PAGE>                                                                         

US DIAGNOSTIC INC. AND SUBSIDIARIES
================================================================================
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
================================================================================

[A] To reflect net cash of $55.4 million paid for acquisitions.

[B] To eliminate assets and liabilities not being acquired or assumed.

[C] Assumes the allocation of purchased cost to acquired assets at fair value
and the resulting goodwill from the probable acquisitions.

[D] Adjusts for the elimination of common stock, additional paid-in capital and
retained earnings of the probable acquisitions.

[E] Adjusts interest expense due to the issuance of $17.1 million of notes in
connection with the acquisitions.

[F] Adjusts amortization expense to properly reflect the allocation of the
purchase price as required per purchase accounting for each of the acquisitions.

[G] Adjusts for the minority interest on one of the acquisitions.

[H] Adjusts for the effects of the new employment contracts, radiologists'
agreements, and elimination of management fee agreements pursuant to the
acquisitions plus other identifiable elimination of certain expenses.


                                       15
<PAGE>

Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations

                              Results of Operations

Overview

     The Company did not commence operations until the completion of its first
acquisition in October 1993. The acquisitions completed by the Company to date
are as follows: (i) Havertown Medical Lab in October 1993, (ii) Computerized
Medical Imaging in June 1994, (iii) Columbus Diagnostic Center in August 1994,
(iv) Alpha Laboratory in November 1994, (v) Morton Clinical Laboratory in
December 1994, (vi) Santa Fe Imaging Center in January 1995, (vii) Laborde
Diagnostic Center in February 1995, effective January 2, 1995 (80% owned),
(viii) Community Radiology of Virginia in February 1995, (ix) Arrow Clinical
Laboratories in March 1995, (x) Salisbury Imaging Center effective April 1995

(80% owned), (xi) Orange Park Diagnostic Center effective June 1995, (xii) San
Francisco Magnetic Resonance Center in September 5, 1995, (xiii) Advanced
Medical Imaging Center in October 1995, (xiv) Modesto Imaging Center effective
September 1995, (xv) FutureCare Affiliates, Inc. in November 1995, (xvi)
Radiation Oncology Centers, Inc. effective April 1, 1996, (xvii) Heights Imaging
Center effective June 1, 1996, (xviii) South Coast Radiologists effective
January 1, 1996, (xix) U.S. Imaging effective January 1, 1996, (xx) Allegheny
Imaging effective April 1, 1996, (xxi) MediTek Health Corporation effective July
1, 1996, (xxii) Owner Diagnostics effective June 30, 1996, (xxiii) Ft.
Lauderdale Regional MR Center effective July 1, 1996, (xxiv) LINC Medical
Imaging effective August 1, 1996, (xxv) Medical Marketing Development effective
April 1, 1996, (xxvi) Sunport Medical effective November 1, 1996, (xxvii) Lee
Imaging effective November 1, 1996 and (xxviii) Medical Imaging Centers of
America on November 12, 1996. In addition, the Company divested its clinical
laboratory operations effective August 8, 1996. The Company's ability to meet
its objective to become the leading network provider of imaging services is
dependent to a large extent upon its continuing ability to consummate
acquisitions of imaging centers and to increase revenues after completion of
each acquisition.

     As a result of the acquisitions, the Company will have recorded
approximately $145.0 million of goodwill and other intangibles on its pro forma
balance sheet which will be amortized over varying periods of up to 20 years and
will result in annual charges to income of approximately $7.2 million for 1997.
The Company recognized approximately $834,000 on a historical basis of goodwill
and other intangibles amortization in 1995 and $1,261,000 and $2,755,000 or the
three and nine months ended September 30, 1996. Future acquisitions will likely
result in additional amortization charges.

     Upon acquisition of an imaging center, the Company initiates a process to
improve operating performance through the implementation of marketing programs
and the consolidation of accounting and administrative functions. It generally
requires three to nine months for the benefits from such programs to be
reflected in operating results. As a result, actual and pro forma results of
operations for the three and nine months ended September 30, 1996 do not fully
reflect such benefits with respect to the integration of the recent
acquisitions.

           This Form 10-QSB contains forward-looking statements written in the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements involve a number of risks and uncertainties,
including those related to acquisitions and reimbursement and those described
below under "Other Factors That May Affect Future Operating Results," and in the
Company's Registration Statement on Form S-3 filed June 6, 1996. The actual
results that the Company achieves may differ materially from any forward-looking
statements due to such risks and uncertainties. The Company undertakes no
obligation to revise any forward-looking statements in order to reflect events
or circumstances that may arise after the date of this report. Readers are urged
to carefully review and consider the various disclosures made by the Company in
this report and in the Company's other reports filed with the Securities and
Exchange Commission that attempt to advise interested parties of the risks and
factors that may affect the Company's business.



                                       16
<PAGE>


Results of Operations for the Three and Nine Months Ended September 30, 1996
Compared With the Three and Nine Months Ended September 30, 1995

     Net patient revenue for the three months ended September 30, 1996 increased
$22,767,154 from $7,139,415 to $29,906,569 as compared to the comparable 1995
period. Net income for the three months ended September 30, 1996 increased
$1,697,384 from $822,513 to $2,519,897 as compared to the 1995 period. The
revenue increase reflects primarily (i) the acquisition of 26 imaging centers
during the quarter ended September 30, 1996, which accounted for approximately
$9.1 million of the increase, (ii) the acquisition of 20 imaging centers from
September 30, 1995 to June 30, 1996 which accounted for approximately $13
million of the increase, (iii) new equipment and modalities at many centers,
(iv) enhanced marketing efforts by the Company and (v) recapture of certain
Medicare business which former physician-owners were previously prohibited from
referring to imaging centers until the sale of such imaging centers to the
Company. The net income increase reflects the direct relationship of such
acquisitions, the implementation of internal controls over administrative
functions and the consolidation of administrative and accounting functions.

     Net patient revenue for the nine months ended September 30, 1996 increased
$48,394,224 from $17,874,791 to $66,269,015 as compared to the comparable 1995
period. Net income for the nine months ended September 30, 1996 increased
$5,094,831 from $2,025,937 to $7,120,768. The revenue increase reflects the
acquisition of 41 imaging centers, which accounted for $20.3 million of the
increase. Revenues for centers owned as of January 1, 1995 increased by an
average of 5% on a same center basis for the nine months ended September 30,
1996 compared to the 1995 period.

     The Company's sold its clinical laboratory operations as of August 1, 1996
and recognized a noncash loss of $536,312 in the three and nine months ended
September 30, 1996.

     Selling, general and administrative expenses for the three months ended
September 30, 1996 increased $15,074,447 from $4,999,080 in the 1995 period to
$20,073,527 in the 1996 period, but declined as a percentage of net revenues
from approximately 70.0% to 67.1%. Selling, general and administrative expenses
for the nine months ended September 30, 1996 increased $29,869,149 from
$12,650,504 in the 1995 period to $42,519,653 in the 1996 period, but declined
as a percentage of net revenues from approximately 70.8% to 64.2%. The increases
relate to (i) the increase in operating expenses of the Company as a result of
the acquisitions described above, and (ii) the increase in corporate overhead as
the Company consolidated or commenced consolidation of most administrative
operations at its headquarters.

     The Company expects to realize additional savings and revenue at the
imaging centers it acquired in 1996 as a result of (i) further consolidation of
billing and collections in 1996 and 1997, (ii) obtaining additional managed care
agreements, and (iii) implementing a regional "Open-MRI" marketing program
targeted towards print and television advertising in an effort to enhance
patient referrals.


     Amortization resulting from the goodwill and other intangibles for the
three months ended September 30, 1996 increased approximately $1,194,000 from
$67,000 to $1,261,000 as compared to 1995. Amortization resulting from the
goodwill and other intangibles for the nine months ended September 30, 1996
increased approximately $2,414,000 from $341,000 to $2,755,000 as compared to
1995. The increases were due to the acquisitions.

     Income tax expense for the three months ended September 30, 1996 increased
$1,617,912 from $65,242 to $1,683,154 as compared to 1995 and for the nine
months ended September 30, 1996 increased $3,607,520 from $500,635 to $4,108,155
as compared to 1995. The increases relate to the increase in net income at
applicable tax rates and the use of the Company's remaining net operating loss
carryforwards in 1995. The Company acquired additional carryforwards in
connection with the MICA acquisition, which it expects to utilize in future
years.

     Earnings before interest, taxes, depreciation and amortization was
$9,329,622 and $22,701,338 respectively, for the three and nine months ended
September 30, 1996. Depreciation and amortization was $3,133,383 and $7,230,731
or $.16 and $.54 per primary share, respectively.

     Primary earnings per share for the three months ended September 30, 1996 as
compared to September 30, 1995 decreased from $0.15 to $.13 on an additional
14,008,108 weighted average number of shares outstanding. Fully diluted earnings
per share were $.13 on 26,999,843 weighted average number of shares outstanding.


                                       17
<PAGE>

     Primary earnings per share for the nine months ended September 30, 1996 as
compared to September 30, 1995 increased from $.43 to $.53 on an additional
8,658,428 weighted average number of shares outstanding. Fully diluted earnings
per share were $.47 on 18,625,386 weighted average number of shares outstanding.

Pro Forma Results of Operations for the Three and Nine Months Ended September
30, 1996.

     Pro forma results for the three and nine months ended September 30, 1996
reflect operations as if all acquisitions had occurred on January 1, 1996.

     Pro forma net patient revenues for the three months ended September 30,
1996 were approximately $49,180,000. Pro forma general and administrative
expenses for the three months ended September 30, 1996 were approximately
$32,426,000, pro forma interest expense was approximately $3,702,000 and pro
forma depreciation and amortization was approximately $6,153,000. Pro forma net
income for the three months ended September 30, 1996 was approximately
$4,683,000 or $.24 per primary share and $.21 per fully diluted share. The
Company believes that had all the acquisitions included in the 1996 pro forma
results actually been consummated prior to January 1, 1996, and the Company had
implemented its marketing programs for the full year, revenue would have been
higher than that set forth in the pro forma statement of operations. The pro
forma net income does not reflect any cost savings from (i) consolidating

administrative and accounting controls, (ii) large purchase discounts, and (iii)
other significant savings from finance, radiology and maintenance contract
renegotiations.

     Pro forma net patient revenues for the nine months ended September 30, 1996
were approximately $144,217,000. Pro forma general and administrative expenses
for the nine months ended September 30, 1996 were approximately $95,418,000, pro
forma interest expense was approximately $10,286,000 and pro forma depreciation
and amortization was approximately $19,072,000. Pro forma net income for the
nine months ended September 30, 1996 was approximately $13,584,000 or $.93 per
primary share and $.77 per fully diluted.

Liquidity and Capital Resources

     As of September 30, 1996, the Company had approximately $81,863,000 in cash
and cash equivalents and working capital of $92,598,551. Through December 31,
1995, the Company raised an aggregate of approximately $21.9 million through
private placements, its initial public offering in October 1994 and a secondary
offering in August 1995, substantially all of which was used for acquisitions
and working capital. In 1996 the Company has raised an aggregate of
approximately $143 million, primarily as a result of the offering of $57.5
million principal amount of 9% Subordinated Convertible Debentures Due 2003 (the
"Debentures") in April and May 1996, which generated net proceeds of $53
million, as well as the exercise of substantially all of the Class A Warrants,
Class B Warrants and other outstanding warrants, which generated net proceeds of
$90 million. Of the cash on hand at September 30, 1996, approximately $11
million was used for the MMD, Sunport and Lee Imaging transactions and $35
million was expected to be used for the MICA transaction. The Company will use
the remaining proceeds for future acquisitions and for working capital and
general corporate purposes. There can be no assurance that the Company will be
able to effectively utilize all of such cash.

     For the nine months ended September 30, 1996, the Company generated
approximately $77.5 million in cash. The Company generated $9,053,944 from
operations primarily due to net income and non-cash amortization and generated
$150,727,146 from financing activities, primarily from the Debentures and
exercise of the warrants, offset by the repayment of notes and capital leases,
and used $82,291,472 in investing activities, which were primarily acquisitions
and equipment purchases. The Company generally collects its receivables within
75 days, although, in accordance with industry practice, it keeps a large
allowance for contractual adjustments and doubtful accounts (approximately
one-third of gross receivables) as many third party payors do not reimburse for
the full amount of bills.

     The Company's facilities are generally cash flow positive from the date of
acquisition, and as such the Company's capital needs primarily relate to the
acquisition of additional facilities. Acquisitions will be funded through cash,
notes, equity securities issued by the Company, or any combinations of the
foregoing.

     The Company has an unused line of credit of $15 million at the prime
interest rate with a bank and is currently 



                                       18
<PAGE>

negotiating for an increased line of credit. The Company is also having
discussions with various institutions with respect to raising additional
capital.

     As of September 30, 1996, the Company had an aggregate of approximately
$31.8 million of notes payable, of which approximately $10.0 million are
classified as current. Substantially all of these amounts relate to notes issued
in connection with acquisitions and equipment purchases. At that date, the
Company also had approximately $15.5 million of capital lease obligations, of
which approximately $4.1 million are current. Substantially all of these
obligations are related to equipment for the Company's imaging centers acquired
pursuant to completed acquisitions. The Company's monthly payments for
capitalized lease obligations now aggregate approximately $386,000. The Company
also pays aggregate annual rent of approximately $5.0 million for its 57
facilities. The Company has employment and consulting agreements with its
executive officers and consultants providing for annual compensation of
approximately $2.5 million in 1996. The Company also has employment agreements
with radiologists at its facilities who generally receive a percentage of net
collected revenues at their center.

Factors That May Affect Future Operating Results

     The Company commenced operations in June 1993 and has grown primarily
through acquisitions, substantially all of which were completed in 1995 and
1996. The Company's financial performance is substantially dependent upon its
ability to identify suitable acquisition candidates, integrate the operations of
acquired centers into the Company's infrastructure, reduce operating expenses of
acquired entities, deliver equivalent service to clients immediately after an
acquisition without significant interruption or inconvenience and various other
risks associated with the acquisition of businesses, including expenses
associated with the integration of the acquired businesses. In order to manage
its planned continuing rapid growth, the Company will be required to hire
additional management and implement new systems. Although to date the acquired
entities have been operated by the Company on a profitable basis and
successfully integrated into the Company, there can be no assurance that the
Company will be able to successfully operate these and other operations that may
be acquired in the future. Several potential acquisitions being considered by
the Company are substantially larger than those acquired in the past, which will
substantially increase revenues but may also pose additional operational issues.
If the Company is unable to manage growth effectively, the Company's operating
results could be materially adversely affected. There can be no assurance that
the Company will be able to sustain its rapid rate of growth.

     Approximately 95% all of the Company's revenues are derived from third
party payors of which approximately two thirds of its revenues are from
non-government payors and approximately 25% from government sponsored healthcare
programs (principally, Medicare and Medicaid). The Company's revenues and
profitability may be materially adversely affected by the current trend in the
healthcare industry toward cost containment as government and private third
party payors seek to impose lower reimbursement and utilization rates and
negotiate reduced payment schedules with services providers. Continuing

budgetary constraints at both the federal and state level and the rapidly
escalating costs of healthcare and reimbursement programs have led in recent
years, and may continue to lead, to significant reductions in government and
other third party reimbursements for certain medical charges and to the
negotiation of reduced contract rates or capitated or other financial
risk-shifting payment systems by third party payors with service providers. In
recent years both the federal government and various states have and continue to
consider imposing limitations on the amount of funding available for various
healthcare services. The Company cannot predict whether or when any such
proposals will be adopted or, if adopted and implemented, what effect, if any,
such proposals would have on the Company. In addition, rates paid by private
third party payors, including those that provide Medicare supplemental
insurance, are generally higher than Medicare payment rates. Changes in the mix
of the Company's patients among the non-government payors and government
sponsored healthcare programs, and among different types of non-government
payors and government sponsored healthcare programs, and among different types
of non-government payor sources, could have a material adverse effect on the
Company. Further reductions in payments to physicians or other changes in
reimbursement for healthcare services could have a material adverse effect on
the Company, unless the Company is otherwise able to offset such payment
reductions through cost reductions, increased volume, introduction of new
procedures or otherwise.

     The Company is highly dependent on referrals from physicians who have no
contractual or economic obligation to refer patients to the Company's
facilities. If a sufficiently large number of physicians elected at any time to
stop referring patients to with the Company, it would have a material adverse
effect on the Company's results of operations. In particular, due to the
potential for disruption of the physician relationship in connection with the
assumption of control of a facility, there can be no assurance that the Company
will retain all of the business conducted by that facility at the time of the
acquisition.


                                       19
<PAGE>

     Federal and state laws generally restrict physicians from referring their
patients to entities, including diagnostic testing and radiation oncology
therapy facilities, in which the physicians have a financial interest. This
precludes physicians from referring Medicare patients to the Company if the
physician has any financial relationship with the Company. Such self-referral
prohibitions apply in certain states to additional third party payors, including
private insurance companies and workers' compensation programs. Further, the
federal anti-kickback statute prohibits persons or entities from offering or
receiving remuneration for the referral of patients or the inducement of the
purchase of a service covered by Medicare, Medicaid or other state healthcare
programs, including payments for the referral of patients to imaging centers.

     In an effort to control costs, non-governmental healthcare payors have
implemented cost containment programs which could limit the ability of
physicians to refer patients to the Company's facilities. For example, persons
enrolled in prepaid healthcare plans such as HMOs often are not free to choose
where to obtain imaging services. Rather, the health plan provides these

services directly or contracts with providers at favorable rates and requires
its enrollees to obtain such services only from such providers. Some insurance
companies and self-insured employers also limit testing services to contracted
providers. Such "closed" payment systems are now common to combat the rising
cost of healthcare. As a result, the Company actively seeks and has obtained
managed care contracts to provide imaging services. The Company seeks
acquisitions in geographic areas in which in currently has imaging centers in
order to create networks which it believes will make it more attractive to
obtain exclusive contracts with managed care providers. There can be no
assurance that the Company will be able to compete successfully in the managed
care arena against larger companies with greater resources.

     A major element of the Company's business strategy is to acquire additional
imaging centers. The consideration for these acquisitions may involve cash,
notes and a significant number of shares of Common Stock, depending on the size
of the acquisition. In connection with acquisitions, on a pro forma basis at
September 30, 1996 the Company had approximately $145 million of goodwill and
other intangibles on its balance sheet, which will be amortized over varying
periods of up to 20 years, resulted in a charge to earnings for the three months
ended September 30, 1996 of $1,261,000 and will result in annual charges to
income of approximately $7.2 million in 1997 based on the September 30, 1996 pro
forma balance sheet. Future acquisitions will most likely result in additional
amortization charges. There can be no assurance that the value of such goodwill
will ever be realized by the Company.

     The market for imaging services is highly fragmented, with over 2,200
outpatient diagnostic imaging centers nationwide and no dominant national or
regional imaging services provider. Competition varies by market and is
generally higher in larger metropolitan areas where there is likely to be more
facilities and more managed care organizations putting pricing pressure on the
market. The Company competes with larger healthcare providers, such as
hospitals, as well as other private clinics and radiology practices that own
diagnostic imaging equipment. Competition often focuses on physician referrals
at the local market level. Successful competition for referrals is a result of
many factors, including participation in healthcare plans, quality and
timeliness of test results, type and quality of equipment, facility location and
availability of patient appointment times. The Company competes primarily on the
basis of quality of equipment and service. There can be no assurance that
competition in existing or new markets of the Company will not have a material
adverse effect on the Company's results of operations. In addition, changes in
the regulatory environment in which the Company operates and governmental and
private reimbursement policies have increased competition in the industry and
could thereby have a material adverse effect on the Company's results of
operations.

     The Company has indebtedness that is substantial in relation to its
stockholder's equity. The indenture relating to the Debentures imposes
significant operating and financial restrictions on the Company. Such
restrictions affect, and in many respects significantly limit or prohibit, among
other things, the ability of the Company to incur additional indebtedness and
pay dividends. These restrictions, in combination with the leveraged nature of
the Company, could limit the ability of the Company to effect future financings
or otherwise may restrict corporate activities. The indenture permits the
Company to incur additional indebtedness under certain conditions, and the

Company expects to obtain additional indebtedness as so permitted.

     The Company's leverage could have important consequences including the
following: (i) the Company's ability to obtain additional financing for working
capital, capital expenditures, acquisitions, general corporate purposes or other
purposes may be impaired in the future; (ii) a substantial portion of the
Company's cash flow from operations must be dedicated to the payment of
principal and interest on its indebtedness, thereby reducing the funds available
to the Company for other purposes; (iii) the Company's leverage may hinder its
ability to adjust rapidly to changing market conditions; and (iv) the leverage
could make the Company more vulnerable in the event of a downturn in general
economic conditions or its business.


                                       20
<PAGE>

     All of the above factors may be difficult for the Company the forecast, and
these or other factors can materially affect the Company's operating results and
stock price over time. Further, market prices for the Company's securities are
influenced by a number of factors, including quarterly variations in the
financial results of the Company and any competitors, changes in earnings,
estimates by analysts, the health care industry and the overall economy and the
financial markets. This volatility has affected the market prices of securities
issued by many companies for reasons unrelated to their operating performance.

Escrow Shares

     In connection with the initial public offering, stockholders of the Company
deposited the Escrow Shares, which will be released to such stockholders if the
Company attains certain earnings before taxes in 1996. As a result of the
issuance of approximately 12.3 million shares of Common Stock through the
exercise of the Class A and Class B Warrants, the earnings target for the
release of such shares is now over $40 million for 1996. Based on results of
operations for the first nine months of 1996, the Company believes that such
earnings will not be attained. Accordingly, such 1,152,000 shares are likely to
be canceled effective December 31, 1996 and contributed to capital, which will
not have any effect on the Company's earnings.


                                       21
<PAGE>

                                     PART II

Item 4.    Submission of Matters to a Vote of Security Holders

     On September 19, 1996, the Company held its annual meeting of stockholders,
at which eight directors were elected, the Company's name change was approved,
amendments to the Company's 1995 Long Term Incentive Plan were approved and the
appointment of Arthur Andersen LLP as independent accountants was ratified.
Following are the voting results:

          1. Election of each of the following persons as a Director:


                                       FOR                    WITHHOLD

         Amos Almand, III           14,328,980                191,247
         Jeffrey Goffman            14,458,980                 61,247
         Keith Hartley              14,458,980                 61,247
         Charles Jacobson           14,458,980                 61,247
         Michael D. Karsch          14,458,980                 61,247
         Laurans Mendelson          14,328,980                191,247
         Joseph A. Paul             14,458,980                 61,247
         Gordon Rausser             14,458,980                 61,247

          2. Ratification of the proposed amendment to the Certificate of
     Incorporation of the Company changing the Company's name to US Diagnostic
     Inc.:

For: 14,428,990  Against: 46,275  Abstain: 41,217   Broker Nonvotes: 3,745

          3. Approval and ratification of the amendments to the Company's 1995
             Long-Term Incentive Plan:

For: 7,126,354   Against: 64,349  Abstain: 114,257  Broker Nonvotes: 6,636,267

          4. Approval and ratification or Arthur Andersen LLP as the Company's
             independent auditors:

For: 14,428,990  Against: 61,110  Abstain:  30,127  Broker Nonvotes: 0

Item 5.    Other Information

Medical Imaging Centers of America, Inc.

     On November 12, 1996, the Company completed its previously announced merger
(the "Merger") with Medical Imaging Centers of America, Inc. ("MICA"). Pursuant
to the Merger, each outstanding share of MICA's common stock ("MICA Common
Stock"), was converted into a right to receive $11.75 in cash (the "Merger
Consideration"). Each option to purchase MICA Common Stock (each a "MICA
Option") was cancelled and each holder of a MICA Option became entitled to a
cash payment equal to the product of the total number of shares subject to the
MICA Option and the excess of $11.75 over the exercise price per share of the
MICA Common Stock subject to the MICA Option.

     On September 29, 1996, Raytel Medical Corporation ("Raytel"), which owns
51% of the Orlando Diagnostic Center (ODC"), commenced litigation in the
Superior Court of San Diego County seeking to enjoin the Merger and certain
unspecified damages. The complaint alleged that MICA breached a joint venture
agreement and partnership agreement relating to ODC by entering into the merger
agreement with the Company relating to the Merger since the Company operates two
imaging centers in Orlando. The complaint also asserted claims against MICA and
the Company for intentional interference with economic relations and conspiracy
to interfere with economic relations.

     On November 7, 1996, the court denied Raytel's request to enjoin the
Merger. The court ordered the parties to



                                       22
<PAGE>

appoint an independent receiver at USD's and MICA's expense to manage ODC until
the dispute is resolved in order to maintain the status quo. The court also
denied Raytel's request requiring MICA to sell its 49% interest in ODC to Raytel
for the fair market value or at a price no higher than the price offered by MICA
to Raytel for Raytel's interest in ODC.

     The Company believes that the dispute will be resolved shortly and will not
have a material effect on the Company as ODC has been marginally profitable in
recent years.

Sale of Clinical Laboratory Business

     In August 1996, the Company completed the sale of its clinical laboratory
business to Medlab Inc. for $3 million of Medlab preferred stock. The Company
recognized a noncash loss on the sale of $536,312 on the sale during the three
months ended September 30, 1996.

Other Transactions

     In August 1996, the Company acquired 70% of the capital stock of Integrated
Health Concepts Inc., which owns eight centers in the Houston, Texas area.

     In September 1996, the Company completed the acquisition of Medical
Marketing Development, Inc. ("MMD"), a company which provides management
services to imaging centers. In October 1996 the Company completed the
acquisition of four imaging centers in the New York area. MMD had provided
management services to all four centers. Alan Winakor, president of MMD, joined
the Company as Senior Vice President-Northeast Region.

     Effective November 1, 1996, the Company acquired 80% of the capital stock
of Lee Imaging Group, Inc., which provides management and administrative
services to physicians practicing cardio-diagnostic medicine, including nuclear
cardiology, in 16 facilities in the New York area. Lawrence Lee, its president,
joined the Company as Vice President responsible for the Company's nuclear
medicine business.

     Since September 30, 1996, the Company also completed the acquisition of
three imaging centers in San Antonio, Texas and divested its partnership
interest in an imaging center in San Luis Obispo, California. As of November 12,
1996 the Company owned 106 centers.


                                       23

<PAGE>

Item 6.    Exhibits and Reports on Form 8-K

   Exhibits:

2.1    Agreement and Plan of Merger, dated as of August 1, 1996, among the
       Company, MICA Acquiring Corporation, a California corporation and Medical
       Imaging Centers of America, Inc., a California Corporation.(10)
10.1   1993 Stock Option Plan(1)
10.2   Asset Purchase Agreement among the Company, Columbus Diagnostic Center
       Inc. and Physicians Diagnostic Associates of Columbus. L.P.(1)
10.3   Amended Employment Agreement with Jeffrey Goffman(1) 
10.5   Employment Agreement with Robert Burke, M.D.(1)
10.6   Form of Consulting Agreement with HPM Inc.(1)
10.7   Consulting Agreement with MED LNC Inc.(1)
10.8   Equipment Lease with Ventura Partners.(1)
10.9   Form of Lease between the Company and Murry Goodman with respect to
       Phillips Point.(1)
10.10  Lease between the Company and United Properties Co.(1)
10.11  Asset purchase Agreement dated as of December 31, 1994 among the Company,
       Santa Fe Imaging Center, Ltd. and Santa Fe Imaging Center Inc., a
       subsidiary of the Company.(2)
10.12  Equipment Lease dated as of December 31, 1994 between Santa Fe Imaging
       Center Ltd.(1) and Santa Fe Imaging Center Inc., a subsidiary of the
       Company and the Company.(2)
10.13  Property lease dated as of December 31, 1994 among Santa Fe Imaging
       Center, Ltd.(1) and Santa Fe Imaging Center Inc., a subsidiary of the
       Company and the Company.(2)
10.14  Asset Purchase Agreement dated as of February 27, 1995 among the Company,
       Open Air MRI, Inc., Community Radiology of Virginia, Inc. and CROV
       Acquisition Corp., a subsidiary of the Company.(3)
10.15  Radiology Agreement dated as of February 27, 1995 between Stephen Raskin,
       M.D., P.C. and CROV Acquisition Corp., a subsidiary of the Company.(3)
10.16  Management Agreement dated as of February 27, 1995 among the Company,
       Open Air MRI, Inc., Community Radiology of Virginia, Inc. and CROV
       Acquisition Corp., a subsidiary of the Company.(3)
10.17  Escrow Agreement dated as of February 27, 1995 among the Company, Open
       Air MRI, Inc., Community Radiology, Inc. and CROV Acquisition Corp., a
       subsidiary of the Company.(3)
10.18  Guaranty dated as of February 27, 1995 of the Company.(3)
10.19  Stock Purchase Agreement dated as of February 15, 1995 among the Company,
       Laborde Diagnostic, Inc. and Jeffrey J. Laborde, M.D.(4)
10.20  Employment Agreement dated as of February 15, 1995 among the Company, the
       Laborde Diagnostics, Inc. and Jeffrey J. Laborde, M.D.(4)
10.21  1995 Long Term Incentive Plan(5)
10.22  Consulting Agreement with Gordon Rausser(5)
10.23  Consulting Agreement with Coyote Consulting(5)
10.24  Consulting Agreement with Sawgrass Consulting(5)
10.25  Asset Purchase Agreement dated as of October 10, 1995 among the Company,
       Central Alabama Medical Enterprises, Inc. and Advanced Medical Imaging
       Center, Inc., a subsidiary of the Company(6)
10.26  Property Lease dated as of October 10, 1995 among the Company, Central
       Alabama Medical Enterprises, Inc. and Advanced Medical Imaging Center,

       Inc., a subsidiary of the Company(6)
10.27  Employment Agreement dated as of August 1, 1995 between the Company and
       David Cohen(6)
10.28  Employment Agreement dated as of January 1, 1996 between the Company and
       Todd Smith(7)
10.29  Amendment to Employment Agreement of Jeffrey Goffman.(7)
10.30  Amendment to Employment Agreement of Robert Burke, M.D.(7)
10.31  Amendment to Coyote Consulting Agreement (7)


                                       24
<PAGE>


10.32  Merger Agreement dated as of February 27, 1996 among the Company, U.S.
       Imaging, Inc. and U.S.I. Acquisition Inc., a subsidiary of the Company.
       (8)
10.33  Escrow Agreement dated as of June 4, 1996 among the Company and the Reese
       General Trust.(8)
10.34  Asset Purchase Agreement dated as of June 28, 1996 among the Company,
       Allegheny Open MRI/CT Group and USDL Pittsburgh Inc., a subsidiary of the
       Company.(9)
10.35  Registration and Sale Rights Agreement dated as of June 28, 1996 among
       the Company and the Allegheny Open MRI/CT Group.(9)
10.36  Employment Agreement dated as of June 18, 1996 between the Company and
       Joseph Paul.(9)
10.37  Employment Agreement dated as of June 1, 1996 between the Company and
       Michael Karsch.(9)
10.38  Employment Agreement dated as of July 1, 1996 between the Company and
       Andrew Shaw.(9)
10.39  Stock Purchase Agreement dated as of June 20, 1996 among the Company,
       MediTek Health Corporation and HEICO Corporation.(10)
10.40  Registration and Sale Rights Agreement dated as of June 20, 1996 between
       the Company and HEICO Corporation(10)
11     Earnings Per Share Calculation
27     Financial Data Schedule


-----------

(1)    Incorporated by reference to the Company's Registration Statement on Form
       SB-2 (file no. 33-73414)
(2)    Incorporated by reference to the Company's Report on Form 8-K dated
       January 11, 1995.
(3)    Incorporated by reference to the Company's Report on Form 8-K dated
       February 27, 1995.
(4)    Incorporated by reference to the Company's Report on Form 8-K dated March
       20, 1994.
(5)    Incorporated by reference to the Company's Registration Statement on Form
       SB-2 (file no. 33-93536)
(6)    Incorporated by reference to the Company's Report on Form 8-K dated
       October 30, 1995.
(7)    Incorporated by reference to the Company's Annual Report on Form 10-KSB
       for the year ended December 31, 1995.

(8)    Incorporated by reference to the Company's Report on Form 8-K dated June
       5, 1996.
(9)    Incorporated by reference to the Company's Report on Form 8-K dated June
       28, 1996.
(10)   Incorporated by reference to the Company's Report on Form 8-K dated July
       24, 1996.
(11)   Incorporated by reference to the Company's Report on Form 10-QSB for the
       three months ended June 30, 1996.
(b)    The Company did file a Report on Form 8-K dated July 24, 1996 reporting
       the acquisition of MeditTek Health Corporation.


                                       25

<PAGE>

                                   SIGNATURES


           In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                   US DIAGNOSTIC INC.


Dated: November 14, 1996           By:  /s/ Jeffrey A. Goffman
                                      ------------------------------------------
                                               Jeffrey A. Goffman
                                      Chairman and Chief Executive Officer


                                   By:  /s/ Paul Andrew Shaw
                                      ------------------------------------------
                                               Paul Andrew Shaw
                                      Vice President and Chief Financial Officer


                                       26