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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB/A
                                   (MARK ONE)

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

               FOR THE TWELVE MONTH PERIOD ENDED DECEMBER 31, 2000

   [ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

                             COMMISSION FILE NUMBER

                                     0-28456

                       METROPOLITAN HEALTH NETWORKS, INC.
                 (Name of small business issuer in its charter)

         FLORIDA                                         65-0635748
(State or other jurisdiction of             (I.R.S. Employer Identification No)
incorporation or organization)

      500 Australian Avenue                                 33401
        West Palm Beach, FL.
(Address of principal executive offices)                  (Zip Code)

                    Issuer's telephone number: (561) 805-8500

       Securities registered under Section 12(b) of the Exchange Act: none

         Securities registered under Section 12(g) of the Exchange Act:

                               TITLE OF EACH CLASS

                          Common Stock, $.001 par value

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



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

State issuer's revenues for its most recent fiscal year:  $119,129,854

The aggregate market value of the Registrant's voting Common Stock held by
non-affiliates of the registrant was approximately $12,350,000 (computed using
the closing price of $0.8438 per share of Common Stock on December 29, 2000, as
reported by OTCBB, based on the assumption that directors and officers and more
than 5% stockholders are affiliates).

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

There were 22,553,910 shares of the registrant's Common Stock, par value $.001
per share, and 3,277,625 of the registrant's Class A Redeemable Common Stock
Purchase Warrants outstanding on February 28, 2001.

                       DOCUMENTS INCORPORATED BY REFERENCE

None.

Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]



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PART I

ITEM 1. DESCRIPTION OF BUSINESS

INTRODUCTION

         Metropolitan Health Networks, Inc. (the "Company" or "METCARE") was
incorporated in the State of Florida in January 1996 to develop a vertically and
horizontally integrated healthcare delivery network (the "Network"). The Network
initially was intended to provide primary and subspecialty physician care, while
capturing diagnostic and therapeutic services. METCARE pursued this business
plan through 1999 with the acquisition, expansion and integration of physician
care practices (the "Physician Practices") and diagnostic and rehabilitation
centers ("Ancillary Services") in Dade, Broward and Palm Beach County, Florida.
This business model proved unsuccessful and the Company incurred substantial
losses through 1999.

         The new millennium brought many changes for METCARE. In 2000, the
Company replaced senior management and implemented its new strategic plan,
operating as a Provider Service Network (PSN), specializing in managed care risk
contracting. The Company's ability to control its Network, incorporating leading
edge technology, has produced favorable medical loss ratios, allowing the
Company to successfully tap into the trillion dollar healthcare market. Through
its current contracts the Company manages the risk and provides care to over
45,000 patients through its Network. For the twelve months ended December 31,
2000, METCARE generated revenues of $119.1 million with a profit of $4.9
million, inclusive of one-time gains of $4.0 million. Additionally, as of
December 31, 2000 the Company improved shareholder value by increasing its net
worth to a positive $841,000 from a negative $9.5 million as of December 31,
1999. Working capital increased $12.0 million and earnings before interest,
penalties, taxes, depreciation and amortization (EBITDA) increased $11.1
million.

         The Company changed its financial reporting year-end to December 31
from a fiscal year-end of June 30. The audited financial information reported
herein is for the twelve months ended December 31, 2000. Management felt the
change of the financial reporting year was consistent with its change in
direction and restructuring of the Company, and provides its shareholders with
reporting that will more appropriately reflect METCARE's strategies, goals and
objectives.

INDUSTRY

         A recent Healthcare Financing Administration ("HCFA") study projects
spending for healthcare in the United States will increase from $1.2 trillion in
1999 or to over $2 trillion by 2006, or 15.9% of the Gross Domestic Product.
Healthcare costs per person are expected to jump from $3,759 to $7,100.
Americans are expected to spend $171 billion on prescription drugs in 2007, up
from $99.6 billion in 1999. A number of factors are at work affecting the
patient, healthcare provider and payor relationship. Healthcare spending has
been fairly stable in recent years, as consumers and employers have switched to
managed care plans, holding down costs. Today, with 85% of working Americans now
covered by managed care, the opportunity for additional savings is becoming
harder to find. Managed care plans that have traditionally competed on price are
beginning to increase premiums to improve their profit margins. Medical costs
are increasing due to inflation and the relative high cost of new medical
technologies. The Balanced Budget Act of 1997 constrained healthcare spending in
both Medicare and Medicaid reducing payments to hospitals, physicians and
managed care organizations. In December 2000, portions of the Balanced Budget
Act of 1997 were revised in response to major surpluses created by previous
cuts. New minimum payment criteria were established for the Medicare+ Choice
program enhancing payments to Managed Care Organizations (MCO) more than $5
billion over the next several years.

         The United States Congress and many state legislatures routinely
consider proposals to reform or modify the healthcare system, including measures
that would control healthcare spending, convert all or a portion of government
reimbursement programs to managed care arrangements and reduce spending for
Medicare, Medicaid and state health programs. These measures can affect a
healthcare company's cost of doing business and contractual relationships. While
the Company does not foresee nor does it know of any pending legislation, there
can be no assurance that such legislation, programs or other regulatory changes
will not have a material adverse effect on the Company. The profitability of the
Company may also be adversely affected by cost containment decisions of third
party payors and other payment factors over which the Company has no control.




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BUSINESS

         As of December 31, 2000, the Company had HMO agreements to manage
patient risk in South and Central Florida and was responsible for providing
healthcare services approximately 45,000 patient lives. METCARE provides its
services through its Network of primary care physicians, specialists, hospitals
and ancillary facilities. These providers have contracted to provide services to
the Company's patients agreeing to certain fee schedules and care requirements.

         METCARE has developed an infrastructure of management expertise in the
fields of:

         o        Disease Management - a method to manage the costs and care of
                  high risk patients and produce better patient care.
         o        Quality Management - a review of overall patient care measured
                  against best medical practice patterns.
         o        Utilization Management - a daily review of statistical data
                  created by encounters, referrals, hospital admissions and
                  nursing home information.
         o        Claims Adjudication and Payment

         This expertise allows the Company to provide a service and manage the
risk that health insurance companies cannot provide on an efficient and economic
level. Health insurance companies are typically structured as marketing entities
to sell their products on a broad scale. Due to mounting pressures from the
industry, MCO's have altered their strategy, returning to the traditional model
of selling insurance and transferring the risk to the PSN's. Under such
arrangements, MCO's receive premiums from the Healthcare Financing
Administration (HCFA) and commercial groups and pass a significant percentage of
the premium on to a third party such as METCARE, to provide covered benefits to
patients, including pharmacy and other enhanced services. After all medical
expenses are paid, any surplus or deficit remains with the PSN. When managed
properly, accepting this risk can create significant surpluses. Under METCARE's
model, the physicians maintain their independence but are aligned with a
professional staff to assist in providing cost effective medicine, which in turn
helps maximize profits for the Company and the physicians. Furthermore, to limit
its exposure, the Company has secured reinsurance (stop-loss coverage).

         We also use the Internet to help process referral claims between
Network primary care physicians and specialists. This process helps reduce
paperwork in the physician's office as well as provide a more efficient method
for the patient in our Network. Our utilization management team communicates
with the physicians on a daily basis to provide overall management of the
patient.

         MANAGED CARE AGREEMENTS

         Effective December 1, 1998, the Company entered into a percent of
premium Global Risk Agreement for renewable one year terms with Humana Medical
Plan, Inc., Humana Health Insurance Company and Employers Health Insurance
Company ("Humana") to provide covered healthcare services to members in certain
healthcare networks established or managed by Humana. The original contract was
renewed with better terms and conditions to the Company and provided for
coverage in Dade, Broward and Palm Beach Counties. A new contract for Volusia
and Flagler counties (Daytona Market) was implemented on January 1, 2000.

         Under these HMO agreements, the Company, through its affiliated
providers, is responsible for the provision of all covered benefits. If revenue
is insufficient to cover costs, the Company's operating results could be
adversely affected. The Company's contracts have a provision for stop-loss
coverage, which caps the Company's cost for Medicare recipients at $40,000 per
patient, and for commercial insurance at $20,000 per patient. A change in
healthcare legislation, inflation, major epidemics, natural disasters and other
factors affecting the delivery and cost of healthcare are beyond the control of
the Company and may adversely affect its operating results.

         For the twelve months ended December 31, 2000, approximately 96.4% of
the Company's revenues were from risk contracts with MCO's. In conjunction with
its new business strategy, the Company is pursuing opportunities to add
additional payor sources while continuing to expand its existing business
relationships to provide additional services through the Network.




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         As part of its Network, the Company owns several practices that have
been fully integrated into its PSN model.

         PHARMACY

         Responding to rapid increases in prescription drug spending, the
Company formed METCARE RX, Inc., a wholly owned subsidiary, to capitalize on
prescription drug expenditures that are forecast to increase over the next
decade. An increasing number of health plans with low-cost co-pays for drug
coverage, direct-to-consumer advertising, and newer, better therapies requiring
high-cost branded products all drive up the cost of pharmacy benefits. In an
effort to reduce these costs, the Company has negotiated an agreement allowing
the Company to directly negotiate contracts for the purchase, filling and
delivery of prescriptions. Assuming that it can successfully implement this
agreement throughout its Network, METCARE believes it can achieve better
management and control to provide significant cost savings and incremental
revenues. As part of this program, the Company is providing its physicians with
handheld wireless units that allow the physician to immediately process new
prescriptions and refills, with delivery direct to the patient. In addition,
with the use of the software technology included in this system, the physician
is provided with a preferred formulary resulting in reduced costs to both the
patient and Company.


         To assist in the implementation of this agreement, METCARE has
contracted with an outside company to provide the necessary software and
consulting services. The consulting agreement provides for an initial term of
three years with a renewal option for a similar period. The terms of the
agreement provide performance standards with a minimum savings over current
costs. The consultant receives a fee plus incentives based upon specific
performance criteria. The Company has received $500,000 and, upon achieving
certain performance criteria, will receive an additional $500,000. The agreement
provides, under certain circumstances, for termination by METCARE that would
require the Company to return the initial $500,000.

STRATEGIC ALLIANCES

         PREFERRED PROVIDER AGREEMENT

         As part of its strategy to improve patient care, METCARE entered into a
10-year strategic alliance with a technology provider that will allow METCARE to
provide multiple software applications for the physicians in the Company's
Network. As part of this agreement, METCARE received $500,000 as consideration
for entering into this contract. The agreement includes termination provisions
whereby the Company may be required to repay all or part of the consideration.

         TELEMEDICINE AGREEMENT

         The Company has identified telemedicine as a potential resource to
further manage cost in providing efficient patient care through disease
management. Disease management is the practice of treating high-risk, high-cost
patients that have diagnosed conditions for which there are broad variations of
treatments. The telemedicine approach attempts to standardize the care and
treatment of such patients to achieve a positive impact on healthcare outcomes
and healthcare utilizations costs. The state-of-the-art technology utilized by
telemedicine units enables the physician or nurse to have direct contact over
the Internet with patients on a daily or more frequent basis as may be required,
often reducing the need for costly ER visits or overnight hospital stays.

         METCARE has entered into an agreement with Cyber-Care, Inc. a supplier
of telemedicine units and, based upon the initial pilot program, the Company has
decided to extend this service to a larger group of chronically ill patients.
The initial agreement calls for a 50-50 risk sharing formula to be determined
upon completion of the pilot program.

ACQUISITIONS

         METLABS, INC. (FORMERLY ALPHA CLINICAL LABORATORY, INC.)

         In October 1999, the Company entered into a management agreement with
Alpha Clinical Laboratory, Inc. ("Alpha"). This Agreement provided for a fee
based upon 10% of collections. In addition, the Company acquired an



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irrevocable option to purchase Alpha any time prior to October 31, 2000. Alpha
is a full service clinical laboratory. As of October 1, 2000 the Company
exercised its purchase option that resulted in the purchase of the outstanding
stock of Alpha. As total consideration for the purchase, the Company issued
50,000 shares of restricted stock to the prior owners. The Company changed the
name to Metlabs, Inc. and in January 2001 the lab was relocated to West Palm
Beach. The Company is providing service through its Network and is actively
marketing its services in Southern Florida to all providers of healthcare.

DISPOSITIONS

         In late 1999, the Company identified certain ancillary services that
were not performing or made the determination that services could be provided on
a more economical and efficient basis by adopting its new model for providing
healthcare services. The Company negotiated arrangements to dispose of these
services as described below.

         SALE OF MAGNETIC IMAGING SYSTEMS (MIS)

         Effective December 18, 1999, MIS was sold to its former owner in
exchange for the settlement of all outstanding litigation and obligations with
the former owner, the termination of Executive Employment Agreements, the
discharge of a note payable of approximately $185,000 and other amounts due the
former owner, and the assumption by the former owner of certain liabilities of
MIS. In connection with this disposal, the Company recognized a loss of
approximately $968,000 during the six months ended December 31, 1999. (See Legal
Proceedings: MRI Scan Center, Inc. and Dr. Kagan).

         SALE OF DATASCAN

         Effective December 31, 1999, Datascan was sold to its former owner. The
Agreement called for the settlement of all outstanding litigation and the
termination of Executive Employment Agreements and stock options held by the
former owner. The Buyer also assumed certain third party obligations of METCARE.
Also, as part of the agreement the former owner assumed all the employment
obligations of a former employee, who was also an officer and director.
Furthermore, the former owner had previously been an officer and director of the
Company. In connection with this disposal, the Company recognized a loss of
approximately $1,163,000 during the six months ended December 31, 1999.

COMPETITION

         The healthcare industry is highly competitive and is subject to
continuing changes in the provision of services and the selection and
compensation of providers. Previously, many businesses were expanding their
presence in the physician management market. The PPM industry failed and
hospitals and insurance companies began to divest their interests in physician
practices. As a result, METCARE has not encountered new entries into the market.
The Company competes with national, regional and local companies in providing
its services. Excluding individual physicians and small medical groups, many of
the Company's competitors are larger and better capitalized and may have greater
experience in providing healthcare management services and may have longer
established relationships with buyers of such services.

EMPLOYEES

           As of December 31, 2000, the Company had approximately 70 full-time
employees. Of the total, 17 were employed at the Company's executive offices. No
employee of the Company is covered by a collective bargaining agreement or is
represented by a labor union. The Company considers its employee relations to be
good.

ITEM 2. DESCRIPTION OF PROPERTY

         Since April 15, 2000, the Company's Executive offices have been located
at 500 Australian Avenue South, Suite 1000, West Palm Beach, Florida where it
occupies 10,936 square feet at a current monthly rental of approximately
$12,000, pursuant to a sublease expiring December 31, 2002.



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         The Company has a satellite office in Daytona Beach of 2,980 square
feet with a monthly rental of $2,206. The lease expires August 31, 2003.

         The Skylake Practice and GMA practice occupy approximately 4,800 square
feet in North Miami Beach, Florida at a monthly rental of $14,400. This lease
expires on June 30, 2005.

         The Company leases space for its medical offices in Wellington of
approximately 2,500 square feet at a current monthly rental of $6,870. It also
has two leases for medical offices in Port St. Lucie totaling 2,338 and 4,200
square feet with monthly rents of $3,325 and $2,533, respectively. One lease
expires December 31, 2008 while the other expires November 1, 2004.

         As of October 5, 2000, the Company entered into a lease for its
laboratory operations in West Palm Beach for 2,080 square feet with a monthly
rental of $2,980. The lease expires October 4, 2005.

         None of the Company's properties are leased from affiliates.



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ITEM 3. LEGAL PROCEEDINGS

MRI SCAN CENTER, INC. AND DR. KAGAN

         On December 15, 1999 the Company entered into a Global Settlement
Agreement and First Amendment Addendum to the Global Settlement Agreement
(Agreements) dated January 17, 2000 with Dr. Kagan and other parties. The
Agreements provide for a negotiated settlement of any and all disputes and
differences, cancellation of any and all existing agreements, promissory notes,
employment agreements, leases and contracts, including but not limited to the
Acquisition Documents of August 20, 1996. As part of the agreement, all parties
have exchanged general releases in favor of each other.

         Also, as a condition of the settlement, the Company agreed to retain
Dr. Kagan to undertake and interpret not less than ten (10) scans per month for
forty-eight (48) months commencing January 1, 2000 and pay Kagan $5,000 per
month for this service.

PRIMEDICA HEALTHCARE, INC.

         The Company entered into litigation with regard to the Primedica
acquisition agreement. This litigation was subsequently settled whereby the
parties entered into a settlement agreement that reduced the amount outstanding
on a judgment from $4,745,370 to $1,513,235. The settlement agreement provided
for payments of $25,000 per week. A change in anticipated payments under a full
risk contract caused the Company to default on the agreement. As a result of
this change, the Company and Primedica then entered into a forbearance
agreement, which increased the amount of the debt to $2,000,000 while
maintaining the weekly payments of $25,000. At June 30, 1999 the Company was in
default of the Forbearance Agreement and, accordingly, the amount owed to
Primedica was adjusted to $4,745,370. The recorded liability at December 31,
1999 was $4,524,462. This liability was settled in full in September 2000
through a negotiation and a subsequent final payment of $350,000 for a total
payment of $1.25 million. As a result, a gain of approximately $3.4 million was
recognized in 2000 in connection with this settlement.

         The Company is a party to other various claims arising in the ordinary
course of business. Management believes that the outcome of these matters will
not have a materially adverse effect on the financial position or the results of
operations of the Company.

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

         No matter was submitted to a vote of the security holders, through the
solicitation of proxies or otherwise, during the twelve months ended December
31, 2000.



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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's Common Stock is currently traded on the OTCBB under the
symbol "MDPA". The Company's Warrants traded under the symbol "MDPAW" until
March 15, 2001 when they expired. The following table sets forth the high and
low closing bid prices for the common stock and warrants, as reported by OTCBB:

                                                    High                  Low
                                                    ($)                   ($)
                                                    -----                -----
     COMMON STOCK
     Quarter ended September 30, 1998               3.813                2.500
     Quarter ended December 31, 1998                2.875                1.188
     Quarter ended March 31, 1999                   1.870                0.065
     Quarter ended June 30, 1999                    1.938                0.344
     Quarter ended September 30,1999                0.563                0.203
     Quarter ended December 31, 1999                0.422                0.188
     Quarter ended March 31, 2000                   3.813                0.235
     Quarter ended June 30, 2000                    2.750                1.031
     Quarter ended September 30, 2000               3.313                1.531
     Quarter ended December 31, 2000                2.000                0.750

     WARRANTS
     Quarter ended September 30, 1998               0.470                0.250
     Quarter ended December 31, 1998                0.280                0.090
     Quarter ended March 31, 1999                   0.130                0.030
     Quarter ended June 30, 1999                    0.130                0.010
     Quarter ended September 30, 1999               0.100                0.020
     Quarter ended December 31, 1999                0.100                0.010
     Quarter ended March 31, 2000                   0.250                0.005
     Quarter ended June 30, 2000                    0.375                0.070
     Quarter ended September 30, 2000               0.220                0.072
     Quarter ended December 31, 2000                0.080                0.015

                 The Company has not declared or paid any dividends on its
common stock. The Company presently intends to invest its earnings, if any, in
the development and growth of its operations.



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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
        OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2000

INTRODUCTION

         This year's performance is directly related to the change in the
Company's business strategy in becoming a PSN, assuming the downstream risk from
MCO's, while strongly managing this risk through its Network.

         The current results of operations presented are for a twelve-month
period. Due to a change in the Company's reporting year, there are no
comparative numbers for the prior year. As a result of the change in the
Company's business operations in the current year, comparison to prior years'
operations is not necessarily meaningful.

         The Company had revenues of $119.1 million for the twelve-month period
ended December 31, 2000 compared to $10.0 million for the six months ended
December 31, 1999. Operating expenses for those same periods were $117.5 million
and $13.5 million respectively. The Company had a net income of $4.9 million for
the twelve months ended December 31, 2000 versus a loss of $6.2 million for the
six-month period ended December 31, 1999. Current year period results include a
one-time gain of $3.4 million related to the settlement of litigation. On a
continuing operations basis the Company had a profit for the current twelve
months of $1.7 million compared to a loss $3.5 million for the six months ended
December 31,1999. The increase in revenues and profits for the year ended
December 31, 2000 reflects management's change in the direction of the business
as a PSN and reaffirms its operating model as a downstream risk provider.

         Furthermore, METCARE began 2000 with a deficit net worth of $9.5
million and ended the year with a positive net worth of $841,000, an improvement
of $10.4 million, while working capital improved by $12.0 million and EBITDA
increased by $11.1 million.

REVENUES

         The Company generates substantially all of its revenues from its
managed care contracts. The revenue is based upon a pre-negotiated percentage of
established fees by HCFA based upon the Medicare+ Choice program per member per
month (PMPM). Management has recognized the need to further increase growth by
expanding its current relationships, adding new payor sources and establishing a
direct relationship with HCFA. Strategic alliances in pharmacy, physician
purchasing, telemedicine and other services will also provide future opportunity
for revenue growth through its Network. In addition, the Company has identified
potential new markets in the State of Florida.

OPERATING EXPENSES

         The operating expenses for the twelve months ended December 31, 2000
are reflective of the company's PSN operating model and, as a result, comparison
to the prior year would not be indicative of current operations. However, the
Company has continued to improve its overall performance as reflected in
decreases in a number of operating expense categories. In prior years, the
Company's operations were highly labor and capital intensive whereas the current
PSN model requires fewer employees, consultants, facilities and fixed assets,
but incurs higher medical costs.

         Direct medical costs include all costs associated with providing
services of the PSN operation including direct medical payments to physician
providers, hospitals and ancillary services on capitated and fee for service
basis. For the year ended December 31, 2000, these costs represented 91.7% of
total revenue, or 95.1% of PSN revenues, what is referred to as the medical loss
ratio ("MLR). Management believes as its systems of monitoring utilization
management continue to improve, and through the implementation and management of
its pharmacy, telemedicine and other cost effective services, it can reduce the
MLR, resulting in additional cost savings.

         Payroll, payroll taxes and benefits for the year ended December 31,
2000 was $4.1 million compared to $7.0 million for the twelve months ended June
30, 1999. The decrease in payroll is due to the change in operations. Additional
patient lives in 2001 will require additional personnel. We expect these
increases to be more than offset by the additional revenue these patient lives
will generate.

         Depreciation and amortization totaled $666,000, approximately one-third
the amount it had previously been incurring. The Company`s current operations do
not require significant outlays for capital improvements. The




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Company is availing itself of ASP services through its strategic relationships
to maximize the use of technology without the need to acquire hardware and
software.

         Bad debt expense of $644,000 reflects the adjustment to our reserve for
doubtful accounts based on our best estimates of the collectability of our
accounts receivable. Management expects this amount to decline as a result of a
change in its business model.

         General and administrative expenses for the twelve months ended
December 31, 2000 were $1.9 million or 1.6% of revenue compared to $1.3 million
or 12.9% for the six months ended December 31, 1999.

         In 1999 and 2000 the Company retained consultants to review its
operations. For the twelve months ended December 31, 2000 consulting expense was
$323,000 compared to $1.0 million for the twelve months ended June 30, 1999 and
$300,000 for the six months ended December 31, 1999. The Company believes it is
beneficial and more economical to retain consultants for specific projects where
specific expertise is required rather than hire permanent personnel.

         As of December 31, 1999, the Company closed its deficit operations. In
connection with the closing of these operations the Company had recorded certain
related liabilities. During 2000, management made settlements with certain
equipment lessors that reduced the outstanding liability by $572,000.

         Interest and penalty expense was $768,000 for the twelve months ended
December 31, 2000. The interest costs on a comparable basis reflect a decrease
due to the improved working capital position of the Company and its ability to
reduce its debt.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has experienced ongoing liquidity and cash flow problems,
the result of the Company's prior operating losses and costs associated with
restructuring carried over from the year ended December 31, 1999. In the year
ended December 31, 2000, the Company had EBITDA of $6.4 million, which was used
to fund current operations. In addition, the Company raised $4.6 million in debt
and equity and was able to settle prior obligations at terms favorable to the
Company. As a result, working capital increased by $12.0 million from December
31, 1999 to December 31, 2000 and shareholders' equity improved by $10.4
million.

         In March 2001, the Company secured a two-year equity line of credit in
the amount of $12 million, which the Company has the right, but not the
obligation, to draw upon. The facility allows the Company to draw up to an
aggregate of $750,000 per month based upon certain pricing formulas at the time
of the draw and a floor exclusively to be set by the Company, which will allow
it to limit the amount of shares to be issued in any one month (see Audit Report
Note 15). Management believes that this facility will enable the Company to
pursue future opportunities that would be accretive to its shareholders. The
Company is also pursuing other sources of funding with various potential
investors.

         The primary source of the Company's liquidity is derived from payments
from its full-risk contracts. In connection with its January 2000 contract in
the Daytona market, the Company was required to fund a full year's IBNR (claims
incurred but not reported) and, as a result, the cash flow provided from that
contract was minimal for the year ended December 31, 2000. Beginning early 2001,
this contract began generating substantial cash flows. In addition, recent
revisions to portions of the Balanced Budget Act of 1997 will provide the
Company with additional funding on its existing contracts estimated to be in
excess of $500,000 per month by mid-year 2001.

         The Company has certain accounts receivable, which have been financed
under a line of credit. Such borrowings are available on a formula basis taking
into account the amount and age of eligible receivables and amounted to $811,100
at December 31, 2000. The Company had no additional availability under the
current line. As of the date of this filing the Company has restructured the
debt to an 18-month term loan.

         At December 31, 2000 the Company had a recorded liability for unpaid
payroll taxes and related interest and penalties of approximately $2.5 million.
Effective, April 2001, the Company negotiated an installment plan with the
Internal Revenue Service (IRS) whereby it will make monthly installments ranging
from $50,000 to $100,000 until the liability is retired (see Audit Report Note
13).



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         As of December 31, 2000, the Company had approximately 1,400
shareholders of record and three beneficial holders. In the 4th quarter of 2000,
the Company issued 250,000 shares to accredited investors pursuant to Section
4.2 of the Securities and Exchange Act resulting in proceeds of $300,000 that
were used for working capital. The Company also issued $500,000 in debt
convertible to 550,000 shares of common stock under certain circumstances by the
Company or investor. There were 450,000 Warrants issued in connection with the
above transactions.

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

         Except for historical information contained herein, the matters
discussed in this report are forward-looking statements made pursuant to the
safe harbor provisions of the Securities Litigation Reform Act of 1995. These
forward-looking statements are based largely on the Company's expectation and
are subject to a number of risks and uncertainties, including but not limited to
economic, competitive and other factors affecting the Company's operations,
ability of the Company to obtain competent medical personnel, the cost of
services provided versus payment received for capitated and full risk managed
care contracts, negative effects of prospective healthcare reforms, the
Company's ability to obtain medical malpractice coverage and the cost associated
with malpractice, access to borrowed or equity capital on favorable terms, the
fluctuation of the Company's common stock price, and other factors discussed
elsewhere in this report and in other documents filed by the Company with the
Securities and Exchange Commission from time to time. Many of these factors are
beyond the Company's control. Actual results could differ materially from the
forward-looking statements. In light of these risks and uncertainties, there can
be no assurance that the forward-looking information contained in this report
will, in fact, occur.

ITEM 7. FINANCIAL STATEMENTS

         The financial statements required to be filed hereunder are included
under Item 13 (a) (1) of this report.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

         None.




                                       10
<PAGE>   13
PART III

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

         As of December 31, 2000, the directors, control persons and executive
officers of the Company were as follows:

<TABLE>
<CAPTION>

         Name                               Age               Title
         ----                               ---               -----
         <S>                                <C>               <C>
         Fred Sternberg                     60                Chairman, President, Chief Executive Officer and Director
         Debra A. Finnel                    38                Vice President and Chief Operating Officer
         David S. Gartner, CPA              42                Secretary and Chief Financial Officer
         Michael Cahr                       60                Director
         Marvin Heiman                      55                Director
         Michael Earley                     45                Director
         Karl Sachs                         63                Director
         Mark K. Gerstenfeld                58                Director
         Martin Harrison, MD                47                Director
         Paul Preste, MD                    47                Director

</TABLE>

         FRED STERNBERG, President & Chairman of the Board - Mr. Sternberg has
been Chairman, President and CEO of the Company since January 2000. From 1990 to
December 1999, he was President of Sternco, Inc., providing consulting services
to various healthcare companies in the managed care and related industries, such
as clinical laboratories, pharmacies and diagnostics. Between 1986 and 1990, Mr.
Sternberg was involved in various investments, including real estate development
and rental properties and from 1980 to 1985 he operated several plastic
injection molding facilities in both the toy and healthcare industries. From
1970 to 1980, Mr. Sternberg was actively involved in oceanfront real estate
development and rental properties. From 1968 to 1972, Mr. Sternberg served as
President of The J. Bird Moyer Co., Inc., whose name was later changed to Moyco
Technologies, Inc., a publicly-traded dental manufacturing company. Mr.
Sternberg has also provided consulting services to assisted care living
facilities and skilled nursing homes.

         DEBRA A. FINNEL, Vice President and Chief Operating Officer has been
associated with the Company since January 1999. For the five years prior to
joining the Company, Ms. Finnel was President of Advanced HealthCare
Consultants, Inc., which managed and owned physician practices in multiple
states and provided turnaround consulting to managed care providers, MSOs, IPAs
and hospitals.

         DAVID S. GARTNER, CPA joined the Company in November 1999 as its Chief
Financial Officer. He has 20 years experience in accounting and finance,
including ten years of specialization in the healthcare industry. Most recently,
Mr. Gartner served for two years as Chief Financial Officer of Medical
Specialists of the Palm Beaches, Inc., a large Palm Beach County multi-practice,
multi-specialty group of 40 physicians. Prior to Medical Specialists, he held
the position of Chief Financial Officer at National Consulting Group, Inc., a
treatment center licensed for 140 inpatient beds in New York and Florida, from
1991 to 1998. Mr. Gartner is a member of the American Institute of Certified
Public Accountants.

         MICHAEL CAHR has served as a director of the Company since February
2000. He is currently the Chief Executive Officer of IKEDEGA a video server
technology company. Prior to joining IKEDEGA, he was the Chairman of Allscripts,
Inc. a publicly traded prescription management company from September 1997
through March 1999. At Allscripts he successfully refocused the company to an
Internet-based technology company and raised $20 million, leading to a
successful IPO in 1999. Prior to Allscripts, Mr. Cahr was the Venture Group
Manager for Allstate Venture Capital where he oversaw investments of over $100
million in technology, healthcare services, biotech pharmaceuticals and medical
services. Mr. Cahr received his Bachelor of Arts degree in Economics from
Colgate University and Masters of Business Administration from Farleigh
Dickinson University.

         MARVIN HEIMAN has served as a director of the Company since March 2000.
Since 1986, he has been President and Chairman of the Board of Sussex Financial
Group, Inc. and Sussex Insurance Group, an asset money manager for physicians in
the Chicago area. He also manages group health plans for physician practices.
From




                                       11
<PAGE>   14

1970 to 1981 he was President of Curtom Record Company and Division
Vice-President of Curtom/Warner Bros. Record Company from 1975-1978. Mr. Heiman
is a licensed Broker/Dealer with NASD and licensed with the SEC. He is also a
member of the International Association for Financial Planners, Real Estate
Securities Syndication Association, and a recognized Platinum member of the
International Association for Financial Planners, AIPAC and a member of the
International Platform Association. Mr. Heiman's biography appears in Who's Who
in America, Who's Who in Finance, Who's Who in Emerging Leaders in America, and
Men of Achievement 1990/91 Cambridge, England. He has also been the recipient of
the American Jewish Committee "Humanitarian" award in 1978. Mr. Heiman is also a
partner in the Chicago White Sox baseball team.

         MICHAEL EARLEY has served as a Director of the Company since June 2000.
He is currently President of Collins Associates, an institutional money
management firm. He was previously a principal and owner of Triton Group
Management, Inc., which provided financial and management consulting services to
a variety of clients. From 1986 to 1997, he served in a number of senior
management roles including CEO and CFO of Intermark, Inc. and Triton Group Ltd.;
both publicly traded diversified holding companies. Mr. Earley received
undergraduate degrees in Accounting and Business Administration from the
University of San Diego. From 1978 to 1983, he was an audit and tax staff member
of Ernst & Whinney.

         KARL M. SACHS, CPA has served as a Director of the Company since March
1999. He is a founding partner of the Miami-based public accounting firm of
Sachs & Focaracci, P.A. A certified public accountant for more than 21 years,
Mr. Sachs is a member of the American Institute of Certified Public Accountants,
Personal Financial Planning and Tax Sections; Florida Institute of Certified
Public Accountants; and the National Association of Certified Valuation
Analysts. The firm of Sachs & Focaracci, P.A. serves the financial and tax needs
of its diverse clients in addition to providing litigation support services. Mr.
Sachs is a qualified litigation expert for the U.S. Federal District Court, U.S.
District Court, U.S. Bankruptcy Court and Circuit Courts of Dade and Broward
Counties. He is a graduate of the University of Miami where he received his BS
in Business Administration. He also holds a Series 65 Securities License and a
Life Insurance and Annuity License.

         DR. MARTIN HARRISON was appointed as a Director of the Company in
November 2000. He served as an advisor to the Board for the past year. He has
been practicing medicine in South Florida for the past 19 years and specializes
in preventive and occupational medicine. Dr. Harrison completed his
undergraduate training at the University of Illinois and postgraduate and
residency training at Johns Hopkins University, as well as his Masters in Public
Health. Dr. Harrison has also been on the Faculty of both the University and
Medical School. He is currently the owner of H30, Inc. a privately held Research
& Biomedical Company.

         MARK K. GERSTENFELD has served as a Director of the Company since
October 1998. In addition, Mr. Gerstenfeld has served from October of 1996 to
present as an advisor to the Company. Since 1986 Mr. Gerstenfeld has served as
Vice President of Sales at Action West in New York, NY. Mr. Gerstenfeld received
a Bachelor of Arts degree from Michigan State University in East Lansing,
Michigan and a MBA in marketing and marketing research from City College of New
York, Baruch School of Business.

         PAUL PRESTE, M.D. has served as a member of the Board of Directors
since March 1999. He owned and operated a private medical practice from 1981
through 1992. From 1993 to 1994, he was associated with Intermed and returned to
his private practice in 1995. Dr. Preste was owner of a 30-bed retirement
facility from 1983 to 1987 and a 100-bed retirement home from 1987 to 1991. He
is affiliated with Holy Cross Hospital, AMI - North Ridge Medical Center and HTI
- Cleveland Clinic Hospital (Ft. Lauderdale, Florida). Dr. Preste received his
Bachelor of Science degree, summa cum laude, from the University of Florida in
1974, his Doctor of Medicine degree from the University of South Florida in 1978
and completed his residency in Internal Medicine at the University of South
Carolina in 1981.

BOARD OF DIRECTORS

         Each director is elected at the Company's annual meeting of
shareholders and holds office until the next annual meeting of stockholders, or
until the successors are elected and qualified. At present, the Company's bylaws
provide for not less than one director. Currently, there are eight directors in
the Company. The bylaws permit the Board of Directors to fill any vacancy and
such director may serve until the next annual meeting of shareholders or until
his successor is elected and qualified. Officers are elected by the Board of
Directors and their terms of office are, except to the extent governed by
employment contracts, at the discretion of the Board. There are no family
relations



                                       12
<PAGE>   15

among any officers or directors of the Company. The officers of the Company
devote full time to the business of the Company. The Board of Directors held
fifteen meetings and voted fourteen times by Unanimous Written Consent.

         BOARD COMMITTEES

         The Company had two active committees in 2000, the Audit and
Compensation and the Executive. The Audit and Compensation Committee consists of
Messrs. Sachs, Cahr and Heiman. The Audit and Compensation Committee makes
recommendations to the Board of Directors regarding the compensation for
executive officers and consultants of the Company, selects the independent
auditors, reviews the results and scope of the audit and other services provided
by the Company's independent auditors, and reviews and evaluates the Company's
internal control functions.

         The Executive Committee may exercise the power of the Board of
Directors in the management of the business and affairs of the Corporation at
any time when the Board of Directors is not in session. The Executive Committee
shall, however, be subject to the specific directions of the Board of Directors.
It is composed of Messrs. Cahr, Gerstenfeld, and Heiman. All actions of the
Executive Committee require a unanimous vote.

         COMPENSATION OF DIRECTORS

         The Company reimburses all Directors for their expenses in connection
with their activities as Directors of the Company. The Directors make themselves
available to consult with the Company's management. One of the eight Directors
of the Company is also an employee of the Company and did not receive additional
compensation for his services as Director. A compensation and stock option
agreement has been adopted for the Company's outside Directors in the amount of
$18,000 per year. The Directors have elected to receive this compensation for
the present time in stock. All outside directors have received 40,000 options
upon joining the Board, of which 20,000 vest immediately and the remaining
20,000 vest after one year.

         COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
(10%) percent of the outstanding Common Stock, to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership on Form 3 and
reports of changes in ownership of Common Stock on Forms 4 or 5. Such persons
are required by SEC regulation to furnish the Company with copies of all such
reports they file.

         Based solely on its review of the copies of such reports furnished to
the Company or written representations that no other reports were required, the
Company believes that all Section 16(a) filing requirements applicable to its
officers, directors and greater than (10%) percent beneficial owners were
complied with during the twelve months ended December 31, 2000.



                                       13
<PAGE>   16

ITEM 10. EXECUTIVE COMPENSATION.

         The following tables present information concerning the cash
compensation and stock options provided to the Company's Chief Executive Officer
and each additional executive officer whose total annualized compensation
exceeded $100,000 for the year ended December 31, 2000 ("fiscal 2000").

SUMMARY COMPENSATION TABLE

         Annual Compensation

<TABLE>
<CAPTION>

                                                                                        Long-term
                                                                                        Compensation
                                                                                        Awards
                                                                                        Securities
                                                                  Other Annual          Underlying
Name and                     Fiscal     Salary       Bonus        Compensation          /Options SARs           All Other
Principal Position           Year         $            $             ($)                     (#)               Compensation
------------------           ------     ------       -----        ------------          -------------          ------------
<S>                          <C>        <C>           <C>         <C>                   <C>
Fred Sternberg
Chairman of the Board,       2000       150,000       0           9,600                 1,695,000
President, CEO

Debra Finnel
Vice President and Chief     2000       132,000       0
Operating Officer

David S. Gartner, CPA
Secretary and Chief          2000        96,557       0           6,000
Financial Officer

</TABLE>

*        The above were not officers in 1999


Options Granted in the Year Ended December 31, 2000 to Executives

<TABLE>
<CAPTION>

                             Number of             % of Total
                             Securities            Options/
                             Underlying            SARs
                             Options/              Granted to           Exercise or
                             SARs                  Employees in         Base Price             Expiration
Name                         Granted               Fiscal Year          ($/Share)              Date
----                         ----------            -------------        -----------            ----------
<S>                          <C>                   <C>                  <C>                    <C>
Fred Sternberg               300,000               52.04%               $0.30                  01/01/05
Fred Sternberg               360,000                                    $0.50                  01/01/05
Fred Sternberg               125,000                                    $1.00                  12/31/05 - 12/31/09
Fred Sternberg               200,000                                    $2.00                  09/19/05
Fred Sternberg               700,000                                    $0.75                  04/01/06 - 01/01/08

</TABLE>

         Total number of options granted to non-executives for the twelve months
ended December 31, 2000 was 1,543,000 and for the twelve months ended December
31, 1999 was 1,778,000.



                                       14
<PAGE>   17
AGGREGATED FISCAL YEAR-END OPTION VALUE TABLE

         The following table sets forth certain information concerning
unexercised stock options as of December 31, 2000. No stock appreciation rights
were granted or are outstanding.

<TABLE>
<CAPTION>


                                      Number of                                    Value of Unexercised
                                 Unexercised Options                                   In-the-Money
                                  Held at 12/31/00                                  Options at 12/31/00(1)
                          ------------------------------                          ----------------------------
                                         Shares Acquired
Name                      Exercisable      On Exercise          Unexercisable     Exercisable    Unexercisable
----                      -----------      -------------        -------------     -----------    -------------
                          (#)                                   (#)               ($)            ($)
<S>                       <C>              <C>                  <C>               <C>            <C>
Fred Sternberg            885,000          885,000              800,000           300,193        81,280
Debbie Finnel             100,000          100,000              100,000           44,380         34,380
David Gartner             100,000          100,000              50,000            54,380         27,190

</TABLE>

(1)      The closing sale price of the Common Stock on December 29, 2000 as
         reported by OTCBB was $0.8438 per share. Value is calculated by
         multiplying (a) the difference between $0.8438 and the option
         exercisable price by (b) the number of shares of Common Stock
         underlying.

         EMPLOYMENT AGREEMENTS

         FRED STERNBERG

         In January 2000 the Company entered into an employment agreement,
subsequently amended, with Fred Sternberg, the Company's President, Chief
Executive Officer and a director. The term of the agreement is for five years
from the effective date. The annual salary under the Agreement is $150,000.
Effective April 1, 2001 the salary is to be raised to $250,000 per year. Mr.
Sternberg agreed to waive the bonus provisions and is eligible to receive a
discretionary bonus. Additionally, Mr. Sternberg was previously granted options
to purchase 300,000 shares of Common Stock at $0.30 per share and options to
purchase 360,000 shares of Common stock at $0.50 per share upon the signing of
the Agreement. Additional longevity options were granted at the rate of 25,000
options per year of employment at a price of $1.00 per share. The Agreement also
provides for an additional 700,000 options at $0.75 per share vesting on various
dates over the life of the Contract.

         The Agreement also provides, among other things, for (i) participation
in any profit-sharing or retirement plan and in other employee benefits
applicable to employees and executives of the Company; (ii) an automobile
allowance of $800 per month and fringe benefits commensurate with the duties and
responsibilities of Mr. Sternberg and (iii) benefits in the event of death or
disability. The Agreement also contains certain non-disclosure and
non-competition provisions.

         Under the terms of the Agreement, the Company may terminate the
employment of Mr. Sternberg either with or without cause. If the Company without
good cause terminates the Agreement, the Company would be obligated to continue
to pay Mr. Sternberg's salary and any current and future bonuses that would have
been earned under the agreement. Mr. Sternberg would also be entitled to all
stock options earned or not yet earned through the full term of the Agreement.

         DEBRA FINNEL

         In January 2001 the Company entered into an employment agreement with
Debra Finnel, Chief Operating Officer. The term of the agreement is five years
and calls for an annual salary of $225,000, increasing to $250,000 on July 1,
2001. Ms. Finnel is also eligible to receive a discretionary bonus and has been
granted options to purchase 300,000 shares of Common Stock at $1.00 per share
with vesting over five years.


         The Agreement also calls for an automobile allowance of $1,500 per
month and fringe benefits commensurate with Ms. Finnel's responsibilities as
well as certain non-compete provisions.




                                       15
<PAGE>   18

CONSULTING AGREEMENTS

Effective February 29, 2000 Mr. Guillama resigned as President, CEO and as a
Director of the Company. Mr. Guillama had entered a consulting agreement for one
year. As part of his termination agreement he received 200,000 options at an
average per share price of approximately $1.00, which shall expire within thirty
(30) months from February 29, 2000.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table sets forth certain information regarding the
Company's Common Stock beneficially owned at December 31, 2000 (i) by each
person who is known by the Company to own beneficially 5% or more of the
Company's common stock; (ii) by each of the Company's directors; and (ii) by all
executive officers and directors as a group.

<TABLE>
<CAPTION>
                                                                                  Percentage of
Name/Address of                                 Beneficial Ownership          Beneficial Ownership
Beneficial Owner                                    Common Stock                  Common Stock
----------------                                --------------------          --------------------
<S>                                                  <C>                               <C>
Martin Harrison, M.D. (2)                            5,311,372                         21.28%
P.O.Box 601757
North Miami Bch, FL 33160

*Fred Sternberg (3)                                  1,508,850                          6.04%

Noel J. Guillama (1)                                 1,490,666                          5.97%
460 Business Parkway
Royal Palm Beach, FL  33411

Paul Preste, M.D. (4)                                   63,163                          0.25%
404 Briny Avenue
Pompano Bch, FL  33062

Karl Sachs (5)                                         285,663                          1.14%
3675 SW 24th St
Miami, FL  33145

Mark Gerstenfeld (6)                                   288,329                          1.15%
9 Pimlico Drive
Commack, NY  11725

Michael Cahr (7)                                       342,440                          1.37%
1051 Saxony Drive
Highland Park, IL  60035

Marvin Heiman                                          157,465                          0.63%
1048 Saxony Drive
Highland Park, IL  60035

Michael Earley (8)                                      47,349                          0.19%
500 West Harbor Dr. #508
San Diego, CA  92101

*David Gartner (9)                                     100,000                          0.40%

*Debbie Finnel (10)                                    100,000                          0.40%

Directors and Executive
Officers as a group
(10 persons)                                         8,204,631                         32.86%

</TABLE>



                                       16
<PAGE>   19

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

*Unless  otherwise indicated the address of the beneficial owner is 500
         Australian Avenue South, Suite 1000, West Palm Beach, FL 33401.

(1)      Includes (1) 1,021,000 held by Mr. Guillama, (32) 265,000 shares held
         by Guillama Family Holdings, Inc., a corporation in which Mr. Guillama
         is an officer, (3) 142,000 shares held by Mr. Guillama as trustee for
         his minor son, and (4) 68,666 shares owned by Beacon Consulting Group,
         Inc., a corporation in which Mr. Guillama is a director. Does not
         include 1,500,000 shares currently held as collateral for an existing
         loan or 200,000 shares issuable upon exercise of options at prices
         ranging from $0.50 to $1.25 expiring on July 28, 2002.

(2)      Includes (1) 4,391,372 shares held by Dr. Harrison, (2) 900,000 shares
         held by H3O, Inc., a corporation which Dr. Harrison is a Director and
         (3) 20,000 shares issuable upon exercise of options at a price of $0.91
         until November 2, 2005. Does not include 70,000 shares issuable upon
         exercise of options at prices ranging from $6.938 to $7.938 per share
         with expirations from April 2003 to until April 18, 2003 or 20,000
         shares issuable upon exercise of options at a price of $0.91 per share
         which are not yet vested

(3)      Includes (1) 405,850 shares held by Sternco, Inc., a corporation which
         Mr. Sternberg is President, (2) 18,000 shares held by Mr. Sternberg's
         wife and (3) 1,085,000 shares issuable upon the exercise of options at
         a prices ranging from $0.30 to $2.00 with expirations from May 2004 to
         December 2005. Does not include 800,000 shares issuable upon the
         exercise of options at prices ranging from $0.75 to $1.00, which have
         not yet vested.

(4)      Includes (1) 23,163 shares held by Dr. Preste and (2) 40,000 shares
         issuable upon exercise of options at a price of $0.30 with expirations
         from May 2004 to April 2005.

(5)      Does not include 25,000 shares issuable upon exercise of options at a
         price of $0.30 per share that have not yet vested.

(6)      Includes 93,329 shares held by Mr. Gerstenfeld and 170,000 shares
         issuable upon exercise of options at a price of $0.30 to $0.75 per
         share with expirations from October 2003 to May 7 2005. Does not
         include 50,000 shares issuable upon exercise of options at a price of
         $0.75 that have not yet vested.

(7)      Includes 338,440 shares held by Michael Cahr and 4,000 shares held by
         Michael Cahr as custodian for his son.

(8)      Includes 2,349 shares held by Mike Earley and 45,000 shares issuable
         upon the exercise of options at prices ranging from $0.75 to $2.00 per
         share with expirations from June 2005 to September 2005. Does not
         include 20,000 shares issuable upon the exercise of options at a price
         of $0.75 per share that have not yet vested.

(9)      Does not include 50,000 shares issuable upon the exercise of options at
         a price of $0.30 per share that have not yet vested.

(10)     Includes 100,000 shares issuable upon the exercise of options at prices
         ranging from $0.30 to $0.50 per share with expiration from March 2001
         to October 2005. Does not include 100,000 shares issuable upon the
         exercise of options at a price of $0.50 per share that have not yet
         vested

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The Company previously had a consulting agreement with Sternco, Inc.,
an affiliate of Fred Sternberg that provided for commissions on any acquisition
for which Sternco is or was the introducing party or materially contributed to
such acquisition. The consulting agreement was terminated upon the execution of
Mr. Sternberg's employment agreement.

         In November 2000, the Company loaned Debra Finnel $30,000. The loan has
been recorded as an employee advance and will be repaid in 2001.

         All future transactions between the Company and any officer, director
or 5% shareholder will be on terms no less favorable than could be obtained from
independent third parties and will be approved by a majority of the independent
disinterested directors of the Company. The Company believes that all prior
affiliated transactions except



                                       17
<PAGE>   20

those identified above were made on terms no less favorable to the Company than
available from unaffiliated parties. Loans, if any, made by the Company to any
officer, director or 5% stockholder, will only be made for bona fide business
purposes.

ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.

(a) (1) Financial Statements



                                       18
<PAGE>   21

INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders
Metropolitan Health Networks, Inc. and Subsidiaries
West Palm Beach, Florida

We have audited the accompanying consolidated balance sheet of Metropolitan
Health Networks, Inc. and Subsidiaries as of December 31, 2000, and the related
consolidated statements of operations, changes in stockholders' equity
(deficiency in assets), and cash flows for the year then ended, the six months
ended December 31, 1999, and the year ended June 30, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Metropolitan Health
Networks, Inc. and Subsidiaries as of December 31, 2000, and the results of
their operations and their cash flows for the year then ended, the six months
ended December 31, 1999, and the year ended June 30, 1999, in conformity with
accounting principles generally accepted in the United States.

The consolidated financial statements for the year ended December 31, 2000 and
the six months period ended December 31, 1999 have been restated as described in
Note 16.

                                                     KAUFMAN, ROSSIN & CO., P.A.

Miami, Florida

February 21, 2001, except for Note 15, which is March 30, 2001 and Note 16,
which is September 14, 2001



                                       19
<PAGE>   22
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000

ASSETS

CURRENT ASSETS
     Cash                                                           $    44,724
     Accounts receivable, net of allowances of $5,065,000             7,170,480
     Other current assets                                               144,488
                                                                    -----------
         Total current assets                                         7,359,692

PROPERTY AND EQUIPMENT, net of accumulated depreciation
     and amortization of $1,149,163 (Note 3)                          1,099,692

GOODWILL, net of accumulated amortization of $541,480 (Note 1)        3,242,212

OTHER ASSETS                                                             63,656
                                                                    -----------
                                                                    $11,765,252
                                                                    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES
     Accounts payable                                               $ 1,773,027
     Advances from HMO                                                2,552,931
     Due to related parties (Note 9)                                    105,800
     Accrued expenses (Note 13)                                       1,646,865
     Unearned revenue (Note 6)                                          316,667
     Line of credit (Note 5)                                            434,091
     Current maturities of capital lease obligations (Note 7)            35,978
     Current maturities of long-term debt (Note 8)                    1,022,697
                                                                    -----------
         Total current liabilities                                    7,888,056

PAYROLL TAXES PAYABLE (NOTE 13)                                       1,840,000

UNEARNED REVENUE (NOTE 6)                                               590,277

CAPITAL LEASE OBLIGATIONS (NOTE 7)                                       33,647

LINE OF CREDIT (NOTE 5)                                                 377,009

LONG-TERM DEBT (NOTE 8)                                                 195,630

COMMITMENTS AND CONTINGENCIES (NOTE 13)

STOCKHOLDERS' EQUITY (NOTE 11)                                          840,633
                                                                    -----------
                                                                    $11,765,252
                                                                    ===========



                             See accompanying notes.

                                       20
<PAGE>   23
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000, SIX MONTHS ENDED DECEMBER 31, 1999
AND YEAR ENDED JUNE 30, 1999

<TABLE>
<CAPTION>

                                                                Year Ended          Six Months Ended            Year Ended
                                                            December 31, 2000       December 31, 1999         June 30, 1999
                                                            -----------------       -----------------         -------------
<S>                                                           <C>                     <C>                     <C>
REVENUES (NOTE 14)                                            $ 119,129,854           $  10,020,795           $  18,501,497
                                                              -------------           -------------           -------------

EXPENSES
     Direct medical costs                                       109,230,078               6,455,678               7,346,978
     Payroll, payroll taxes and benefits                          4,072,887               3,280,791               7,046,342
     Depreciation and amortization                                  666,330                 918,145               1,870,774
     Bad debt expense                                               643,734                  54,418               1,060,856
     Rent and leases                                                654,408               1,225,910               1,955,352
     Consulting expense                                             323,304                 304,283               1,000,608
     General and administrative                                   1,870,850               1,290,497               5,379,189
                                                              -------------           -------------           -------------
         Total expenses                                         117,461,591              13,529,722              25,660,099
                                                              -------------           -------------           -------------


INCOME (LOSS) BEFORE OTHER INCOME (EXPENSE)                       1,668,263              (3,508,927)             (7,158,602)
                                                              -------------           -------------           -------------
OTHER INCOME (EXPENSE)
     Gain (loss) on Primedica (Note 2)                            3,448,288                      --              (2,206,448)
     Loss on disposal of assets                                      (1,501)             (2,185,537)               (362,003)
     Gain on settlement of capital lease obligations                572,000                      --                      --
     Interest and penalty expense                                  (768,208)               (520,022)               (683,203)
     Other                                                            9,727                      --                  90,440
                                                              -------------           -------------           -------------
         Total other income (expense)                             3,260,306              (2,705,559)             (3,161,214)
                                                              -------------           -------------           -------------

NET INCOME (LOSS)                                             $   4,928,569           $  (6,214,486)          $ (10,319,816)
                                                              =============           =============           =============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING             16,887,402              10,738,757               7,185,142
                                                              =============           =============           =============

NET EARNINGS (LOSS) PER SHARE, basic                          $        0.28           $       (0.58)          $       (1.44)
                                                              =============           =============           =============

NET EARNINGS (LOSS) PER SHARE, diluted                        $        0.24           $       (0.58)          $       (1.44)
                                                              =============           =============           =============

</TABLE>

                             See accompanying notes.




                                       21
<PAGE>   24

METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIENCY IN ASSETS)
YEAR ENDED DECEMBER 31, 2000, SIX MONTHS ENDED DECEMBER 31, 1999
AND YEAR ENDED JUNE 30, 1999

<TABLE>
<CAPTION>

                                                             Common                    Additional
                                Preferred  Preferred         Stock        Common         Paid-in
                                 Shares      Stock           Shares       Stock          Capital        Deficit          Total
                                  -----   ------------      ---------   ------------   ------------   ------------   ------------
<S>                               <C>     <C>               <C>         <C>            <C>            <C>            <C>
BALANCES -
 JUNE 30, 1998                    6,200   $  1,700,000      6,306,569   $      6,307   $ 10,450,452   $ (6,924,318)  $  5,232,441

Conversion of preferred
 shares into common
 shares (Note 11)                  (700)      (700,000)     1,297,305          1,297        698,703             --             --
Returned or retired
 shares (Note 2)                     --             --       (114,354)          (114)      (276,594)            --       (276,708)
Shares issued in lieu
 of compensation                     --             --        426,427            426        428,159             --        428,585
Shares issued for
 consulting services                 --             --        540,500            541        228,509             --        229,050
Shares issued for
 marketing services                  --             --        250,000            250        127,000             --        127,250
Shares issued for
 legal services                      --             --         25,000             25         81,225             --         81,250
Shares issued for
 director's fees                     --             --         18,000             18          6,282             --          6,300
Shares issued for
 non-compete agreement               --             --        125,000            125        218,625             --        218,750
Shares issued as
 contingent consideration
 with acquisition                    --             --        225,000            225           (225)            --             --
Exercise of options
 (Note 12)                           --             --        252,318            252         89,748             --         90,000
Dividends on preferred
 stock (Note 11)                     --             --             --             --             --        (47,503)       (47,503)
Options granted for
 services rendered
 (Note 12)                           --             --             --             --        576,310             --        576,310
Issuance of options
 in lieu of compensation
 (Note 12)                           --             --             --             --        153,292             --        153,292
Net loss                             --             --             --             --             --    (10,319,816)   (10,319,816)
                                  -----   ------------      ---------   ------------   ------------   ------------   ------------
BALANCES -
 JUNE 30, 1999                    5,500      1,000,000      9,351,765          9,352     12,781,486    (17,291,637)    (3,500,799)
Conversion of preferred
 shares into common
 shares (Note 11)                  (500)      (500,000)     2,300,000          2,300        497,700             --             --
Shares issued in lieu
 of compensation                     --             --         62,700             63         19,770             --         19,833
Shares issued for
 consulting services                 --             --         29,000             29          5,686             --          5,715
Shares issued for loans              --             --         70,000             70         34,930             --         35,000
Shares issued for
 director's fees                     --             --         11,500             11          5,681             --          5,692


</TABLE>


                                       22
<PAGE>   25

METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIENCY IN ASSETS) (CONTINUED)
YEAR ENDED DECEMBER 31, 2000, SIX MONTHS ENDED DECEMBER 31, 1999
AND YEAR ENDED JUNE 30, 1999

<TABLE>
<CAPTION>

                                                 Common                   Additional
                      Preferred   Preferred       Stock       Common       Paid-in        Prepaid
                        Shares      Stock        Shares       Stock        Capital        Expenses       Deficit         Total
                      ---------   ---------    ----------  ------------  ------------   ------------   ------------   ------------
<S>                     <C>         <C>        <C>               <C>       <C>            <C>           <C>             <C>
Shares issued for
 interest expense
 and late fees             --            --       130,000           130        46,090             --             --         46,220

Shares issued as
 contingent
 consideration with
 acquisition               --            --       156,923           157          (157)            --             --             --

Dividends on
 preferred stock
 (Note 11)                 --            --            --            --            --             --         (6,986)        (6,986)

Issuance of options
 in lieu of
 compensation
 (Note 12)                 --            --            --            --        97,205             --             --         97,205

Net loss                   --            --            --            --            --             --     (6,214,486)    (6,214,486)
                        -----      --------    ----------  ------------  ------------   ------------   ------------   ------------
BALANCES -
 DECEMBER 31, 1999      5,000       500,000    12,111,888        12,112    13,488,391             --    (23,513,109)    (9,512,606)

Shares issued as
 prepayment for
 consulting services       --            --        82,500            82        88,605        (33,258)            --         55,429

Shares issued in
 lieu of compensation      --            --        55,019            55        48,196             --             --         48,251

Shares issued for
 consulting services       --            --       378,603           379       125,856             --             --        126,235

Shares issued in
 connection with
 private placements        --            --       874,176           874     1,061,968             --             --      1,062,842

Shares issued for
 loans                     --            --     2,773,001         2,773     2,385,961             --             --      2,388,734

Shares issued for
 director's fees           --            --        97,666            98        28,551             --             --         28,649

Shares issued for
 interest expense
 and late fees             --            --       890,951           891       134,193             --             --        135,084

Shares issued in
 connection with
 acquisition               --            --        50,000            50        66,717             --             --         66,767

Shares issued as
 contingent
 consideration
 with acquisition          --            --        14,000            14        26,986             --             --         27,000

Shares issued in
 settlement                --            --     3,660,333         3,660     1,188,822             --             --      1,192,482

Exercise of options
 and warrants              --            --       729,096           729       160,362             --             --        161,091

Issuance of options
 for services
 (Note 12)                 --            --            --            --       132,106             --             --        132,106

Net income                 --            --            --            --            --             --      4,928,569      4,928,569
                        -----     ---------    ----------  ------------  ------------   ------------   ------------   ------------
BALANCES -
 DECEMBER 31, 2000      5,000     $ 500,000    21,717,233  $     21,717  $ 18,936,714   $    (33,258)  ($18,584,540)  $    840,633
                        =====     =========    ==========  ============  ============   ============   ============   ============

</TABLE>




                             See accompanying notes.



                                       23
<PAGE>   26

METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2000, SIX MONTHS ENDED DECEMBER 31, 1999 AND
YEAR ENDED JUNE 30, 1999

<TABLE>
<CAPTION>

                                                                         Year Ended        Six Months Ended        Year Ended
                                                                     December 31, 2000     December 31, 1999     June 30, 1999
                                                                     -----------------     -----------------     -------------
<S>                                                                     <C>                  <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                                  $  4,928,569         $ (6,214,486)        $(10,319,816)
                                                                        ------------         ------------         ------------
     Adjustments to reconcile net income (loss) to net cash
         provided by (used in) operating activities:
         Depreciation and amortization                                       666,330              918,145            1,702,034
         (Gain) loss on Primedica                                         (3,448,288)           2,206,448
         Loss on disposal of assets                                               --            2,185,537              362,003
         Provision for bad debts                                             643,734               54,418            1,060,856
         Realized loss on sales of securities                                     --                   --              131,452
         Change in unrealized gain on trading securities                          --                   --              (85,314)
         Loss on sale of property and equipment                                   --                   --               14,339
         Gain on settlement of capital lease obligations                    (572,000)                  --                   --
         Amortization of discount on note payable                             36,206                   --              168,740
         Stock options granted in lieu of compensation                            --               97,205              153,292
         Stock options granted for professional services                     132,106                   --              576,310
         Stock issued in lieu of compensation                                 76,900               25,525              428,585
         Stock issued for professional services                              126,235                5,715              443,850
         Stock issued for interest and late fees                             135,084               46,220                   --
         Stock issued in connection with settlements                         179,868                   --                   --
         Changes in operating assets and liabilities:
             Accounts receivable                                          (4,704,246)             403,166            1,330,769
             Other current assets                                            168,641             (209,951)             145,865
             Other assets                                                   (249,323)              24,585               85,436
             Due to related parties                                           10,095                   --                   --
             Accounts payable and accrued expenses                          (897,254)           1,350,062            2,044,599
             Unearned revenue                                                781,944              125,000              300,144
             Medical claims payable                                          (98,907)                  --             (487,597)
                                                                        ------------         ------------         ------------
                  Total adjustments                                       (7,012,875)           5,025,627           10,581,811
                                                                        ------------         ------------         ------------
                      Net cash provided by (used in) operating
                           activities                                     (2,084,306)          (1,188,859)             261,995
                                                                        ------------         ------------         ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Deferred acquisition costs                                                   --                   --              171,890
     Repayment (issuance) of notes receivable                                     --                   --              170,000
     Cash consideration paid for companies acquired                         (758,486)            (200,000)                  --
     Capital expenditures                                                   (265,858)            (109,181)            (908,712)
                                                                        ------------         ------------         ------------
                      Net cash used in investing activities               (1,024,344)            (309,181)            (566,822)
                                                                        ------------         ------------         ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from exercise of stock options and warrants                    161,091                   --               90,000
     Net borrowings (repayments) under line of credit facilities            (709,568)           1,388,437           (1,543,694)
     Repayments of notes payable                                          (1,686,805)            (484,267)             (82,044)
     Borrowings on notes payable                                           3,554,867              847,025              420,017
     Net repayments of capital lease obligations                            (185,984)            (360,155)            (584,916)
     Net proceeds from issuance of common stock                            1,062,842                   --                   --
     Advances from HMO                                                       956,931              107,000            1,089,000
                                                                        ------------         ------------         ------------
                      Net cash provided by (used in) financing
                           activities                                      3,153,374            1,498,040             (611,637)
                                                                        ------------         ------------         ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          44,724                   --             (916,464)

CASH AND CASH EQUIVALENTS - BEGINNING                                             --                   --              916,464
                                                                        ------------         ------------         ------------

CASH AND CASH EQUIVALENTS - ENDING                                      $     44,724         $         --         $         --
                                                                        ============         ============         ============

</Table>

                            See accompanying notes.

                                       24
<PAGE>   27


METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
YEAR ENDED DECEMBER 31, 2000, SIX MONTHS ENDED DECEMBER 31, 1999
AND YEAR ENDED JUNE 30, 1999

<TABLE>
<CAPTION>

                                                                         Year Ended        Six Months Ended        Year Ended
                                                                     December 31, 2000     December 31, 1999     June 30, 1999
                                                                     -----------------     -----------------     -------------
<S>                                                                      <C>               <C>               <C>
Supplemental Disclosures:

     Interest paid                                                       $  599,000        $  221,000        $  633,000
                                                                         ----------        ----------        ----------

     Income taxes paid                                                   $       --        $       --        $       --
                                                                         ----------        ----------        ----------

Supplemental Disclosure of Non-cash Investing and Financing
     Activities (Note 2)

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

     Common stock issued in connection with acquisitions                 $   66,767        $       --        $       --
                                                                         ----------        ----------        ----------

     Issuance of notes payable in connection with acquisitions           $       --        $       --        $   37,801
                                                                         ----------        ----------        ----------

     Fair value of assets received in connection with
         acquisitions                                                    $  134,550        $       --        $  581,810
                                                                         ----------        ----------        ----------

     Fair value of liabilities assumed in connection with
         acquisitions                                                    $  198,769        $       --        $  454,054
                                                                         ----------        ----------        ----------

     Capital lease obligations incurred on purchases of equipment        $       --        $       --        $  502,808
                                                                         ----------        ----------        ----------

     Dividends accrued but not paid                                      $       --        $       --        $   47,503
                                                                         ----------        ----------        ----------

     Purchase price in excess of net assets acquired                     $  340,760        $  820,000        $       --
                                                                         ----------        ----------        ----------

     Conversion of preferred shares into common stock                    $       --        $  500,000        $       --
                                                                         ----------        ----------        ----------

     Fair value of assets disposed of in connection with sales           $       --        $4,694,944        $       --
                                                                         ----------        ----------        ----------

     Fair value of liabilities disposed of in connection with
         sales                                                           $       --        $2,509,407        $       --
                                                                         ----------        ----------        ----------

     Common stock issued for non-compete agreement                       $       --        $       --        $  218,750
                                                                         ----------        ----------        ----------

     Conversion of debt into common stock                                $2,388,734        $       --        $       --
                                                                         ----------        ----------        ----------

     Common stock issued as contingent consideration in
         connection with acquisition                                     $   27,000        $       --        $       --
                                                                         ----------        ----------        ----------

     Common stock issued in connection with settlements                  $1,012,614        $       --        $       --
                                                                         ----------        ----------        ----------

</TABLE>




                            See accompanying notes.



                                       25
<PAGE>   28
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of Metropolitan
Health Networks, Inc. and all subsidiaries. The consolidated group is referred
to, collectively, as the Company. All significant intercompany balances and
transactions have been eliminated in consolidation.

ORGANIZATION AND BUSINESS ACTIVITY

The Company was incorporated in January 1996, under the laws of the State of
Florida for the purpose of acquiring and operating health care related
businesses. The Company operates principally in South and Central Florida. The
Company and certain of the wholly owned general medical practices operate under
agreements with a national health maintenance organization (HMO). Commencing in
1999, the Company entered into additional agreements with the HMO in locations
where it did not have owned medical practices and in connection therewith, began
contracting with physicians to provide medical care to certain patients through
non-owned medical practices. (See accounts receivable and revenue recognition.)
The Company also provided medical billing services to third party medical
businesses through December 31, 1999.

SEGMENT REPORTING

The Company applies Financial Accounting Standards Boards ("FASB") statement No.
131, "Disclosure about Segments of an Enterprise and Related Information". The
Company has considered its operations and has determined that it operates in a
single operating segment for purposes of presenting financial information and
evaluating performance. As such, the accompanying financial statements present
information in a format that is consistent with the financial information used
by management for internal use.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents. From time to time, the Company
maintains cash balances with financial institutions in excess of federally
insured limits.

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost. Expenditures for major betterments
and additions are charged to the asset accounts, while replacements, maintenance
and repairs which do not extend the lives of the respective assets are charged
to expense currently.

Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, a loss is recognized for the difference between the fair
value and carrying value of the asset.



                                       26
<PAGE>   29

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

DEPRECIATION AND AMORTIZATION

Depreciation of property and equipment is computed using the straight-line
method over the estimated useful lives of the assets. Amortization of leasehold
improvements and property under capital leases is computed on a straight-line
basis over the shorter of the estimated useful lives or the assets in the term
of the lease. The range of useful lives is as follows:

       Machinery and equipment                                 5 - 7 years
       Computer and office equipment, including items
           under capital lease                                 5 - 7 years
       Furniture and fixtures                                  5 - 7 years
       Auto equipment                                              5 years
       Leasehold improvements                                      5 years

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses for the periods
presented. Actual results could differ from those estimates.

Direct medical expenses are based in part upon estimates of claims incurred but
not reported (IBNR). These estimates are made by the HMO utilizing actuarial
methods and are continually evaluated by management of the Company based upon
its specific claims experience. Management believes its estimates of IBNR claims
are reasonable, however, it is reasonably possible the Company's estimate of
these claims could change in the near term, and those changes may be material.

From time to time, the Company is charged for certain medical expenses for
which, under its contract with the HMO, the Company believes it is not liable.
In connection therewith, the Company is contesting (Contestation Recoveries)
certain costs aggregating $3,871,000. Management's estimate of these
contestations recovery is determined based upon its judgement and its
consideration of several factors including the nature of the contestations,
historical recovery rates and other qualitative factors. Accordingly, the
Company has reduced direct medical costs by approximately $774,000, which
represents an estimated recovery of 20% of total contestations. It is reasonably
possible the Company's estimate of these recoveries could change in the near
term, and those changes may be material.



                                       27
<PAGE>   30

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The allowance for doubtful accounts is an estimate which is established through
charges to earnings for estimated uncollectible amounts. Management's judgment
in determining the adequacy of the allowance is based upon several factors which
include, but are not limited to, the nature and volume of the accounts
receivable and management's judgment with respect to current economic conditions
and their impact on the receivable balances. It is reasonably possible the
Company's estimate of the allowance for doubtful accounts could change in the
near term, and those changes may be material.

The Company has estimated it is entitled to rebates of approximately $640,000
relating to pharmacy costs incurred during the year ended December 31, 2000.
This amount has been deducted from medical costs. Management's estimates of
pharmacy rebates is based principally upon the Company's prior experience and
other qualitative factors. It is reasonably possible the Company's estimate of
pharmacy rebates could change in the near term, and those changes may be
material.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" requires that the Company disclose estimated
fair values for its financial instruments. The following methods and assumptions
were used by the Company in estimating the fair values of each class of
financial instruments disclosed herein:

CASH AND CASH EQUIVALENTS - The carrying amount approximates fair value because
of the short maturity of those instruments.

LINE OF CREDIT FACILITIES, CAPITAL LEASE OBLIGATIONS, LONG-TERM DEBT - The fair
value of line of credit facilities, capital lease obligations and long-term debt
are estimated using discounted cash flows analyses based on the Company's
incremental borrowing rates for similar types of borrowing arrangements. At
December 31, 2000, the fair values approximate the carrying values.



                                       28
<PAGE>   31

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NET INCOME (LOSS) PER SHARE

The following table sets forth the computations of basic earnings (loss) per
share and diluted earnings (loss) per share:

<TABLE>
<CAPTION>

                                                        Year Ended         Six Month Ended        Year Ended
                                                     December 31, 2000     December 31, 1999     June 30, 1999
                                                     -----------------     -----------------     -------------
<S>                                                    <C>                  <C>                  <C>
Net income (loss)                                      $  4,928,569         $ (6,214,486)        $(10,319,816)

Less: cumulative preferred stock
  dividends                                                 166,667                  497                   --
                                                       ------------         ------------         ------------
Income available to common
  shareholders                                            4,761,902           (6,214,983)         (10,319,816)

Denominator:
Weighted average common shares
  outstanding                                            16,887,402           10,738,757            7,185,142
                                                       ------------         ------------         ------------

Basic earnings (loss) per common
  share                                                $       0.28         $      (0.58)        $      (1.44)
                                                       ============         ============         ============

Net income (loss)                                      $  4,928,569         $ (6,214,486)        $(10,319,816)

Interest on convertible securities                            8,743                   --                   --
                                                       ------------         ------------         ------------
                                                          4,937,312           (6,214,486)         (10,319,816)
                                                       ------------         ------------         ------------
Denominator:
Weighted average common shares
  outstanding*                                           16,887,402           10,738,757            7,185,142

Common shares equivalents of outstanding stock:
  Stock options                                           2,576,405                   --                   --
  Warrants                                                  187,979                   --                   --
  Convertible preferred stock                               820,210                   --                   --
  Convertible debt                                          462,500                   --                   --
                                                       ------------         ------------         ------------
                                                         20,934,496           10,738,757            7,185,142
                                                       ------------         ------------         ------------

Diluted earnings per common share*                     $       0.24         $      (0.58)        $      (1.44)
                                                       ============         ============         ============

</TABLE>

*        The total weighted average common shares outstanding for diluted loss
         per share for the six months ended December 31, 1999 and the year ended
         June 30, 1999 did not include common share equivalents, as the effect
         would have been antidilutive.



                                       29
<PAGE>   32

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION

The Company recognizes revenues, net of contractual allowances, as medical
services are provided to patients. These services are typically billed to
patients, Medicare, Medicaid, health maintenance organizations and insurance
companies. The Company provides an allowance for uncollectible amounts and for
contractual adjustments relating to the difference between standard charges and
agreed upon rates paid by certain third party payors.

The Company is a party to certain managed care contracts and provides medical
care to its patients through owned and non-owned medical practices. Accordingly,
revenues under these contracts are reported as Provider Service Network (PSN)
revenues, and the cost of provider services under these contracts are not
included as a deduction to net revenues of the Company but are reported as an
operating expense. In connection with its PSN operations, the Company is exposed
to losses to the extent of its share (100% for Medicare Part B and 50% for
Medicare Part A) of deficits, if any, on its owned and non-owned managed medical
practices.

Revenues for the year ended December 31, 2000, six month period ended December
31, 1999 and the year ended June 30, 1999 were as follows:

<TABLE>
<CAPTION>

                                        Year Ended          Six Months Ended        Year Ended
                                     December 31, 2000     December 31, 1999      June 30, 1999
                                     -----------------     -----------------      -------------
<S>                                    <C>                   <C>                   <C>
Patient revenues, net                  $  4,240,709          $  3,170,405          $  9,606,854
PSN revenues                            114,889,145             6,838,390             8,862,826
Billing service revenues, net                    --                12,000                31,817
                                       ------------          ------------          ------------
                                       $119,129,854          $ 10,020,795          $ 18,501,497
                                       ============          ============          ============

</TABLE>

ADVANCES FROM HMO

Advances represent amounts advanced from the HMO to the Company. These advances
are due on demand and are being repaid via offsets to future revenues earned
from the HMO.

GOODWILL

In connection with its acquisitions of physician and ancillary practices, the
Company has recorded goodwill of $3,783,692 and $2,644,446 as of December 31,
2000 and 1999, respectively, which is the excess of the purchase price over the
fair value of the net assets acquired. The goodwill is attributable to the
general reputation of these businesses in the communities they serve, the
collective experience of the management and other employees, contracts with
health maintenance organizations, licenses, relationships between the physicians
and their patients, patient lists and other similar intangible assets. The
Company evaluates the underlying facts and circumstances related to each
acquisition in establishing amortization periods for the related goodwill. The
goodwill related to current and prior year's acquisitions is being amortized on
a straight-line basis over 10 years.



                                       30
<PAGE>   33

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Company continuously evaluates whether events have occurred or circumstances
exist which impact the recoverability of the carrying value of long-lived assets
and related goodwill, pursuant to Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of."

TRADING SECURITIES

The Company considers all investments in marketable equity securities acquired
in its trading account as Trading Securities. Accordingly, unrealized gains and
losses are included as a component of earnings. Realized gains or losses are
computed based on specific identification of the securities sold.

CAPITAL LEASE SETTLEMENT

During the year ended December 31, 2000, a vendor/lessee to a former subsidiary
disposed of during 1999 repossessed equipment from the former subsidiary in
partial satisfaction of certain company obligations. In connection with this
satisfaction, the Company recorded other income of approximately $572,000.

INCOME TAXES

The Company accounts for income taxes according to Statement of Financial
Accounting Standards No. 109, which requires a liability approach to calculating
deferred income taxes. Under this method, the Company records deferred taxes
based on temporary taxable and deductible differences between the tax bases of
the Company's assets and liabilities and their financial reporting bases. A
valuation allowance is established when it is more likely than not that some or
all of the deferred tax assets will not be realized.

NEW ACCOUNTING PRONOUNCEMENTS

In September 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities (a replacement of FASB
statement No. 125) ("SFAS No. 140"). This statement revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carries over most of
Statement 125's provisions without reconsideration. The Company has determined
that the impact of adopting SFAS No. 140 will not be material to its
consolidated financial statements.

In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137, Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133
(an amendment of FASB Statement No. 133). Under the provisions of this
statement, the effective date of Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No.
133"), is deferred to fiscal years beginning after June 15, 2000. The Company
has determined that the impact of adopting SFAS No. 133 will not be material to
its consolidated financial statements.



                                       31
<PAGE>   34

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements,
("SAB 101") issued by the Securities and Exchange Commission, became effective
beginning the fourth quarter of 2000. SAB 101 had no material impact on the
Company's revenue recognition policies.

RECLASSIFICATION

Certain amounts in the financial statements for the six month period ended
December 31, 1999 and the year ended June 30, 1999 have been reclassified to
conform with the December 31, 2000 financial statement presentation.

NOTE 2. ACQUISITIONS AND DISPOSALS

ALPHA CLINICAL PURCHASE

During October 1999, the Company entered into a management agreement with Alpha
Clinical Laboratory (Alpha) to act as Alpha's management company for a fee of
10% of Alpha's collections. Concurrently, the Company entered into an
unconditional and irrevocable option to purchase or designate a third party to
purchase at any time prior to October 31, 2000 all of the outstanding common
stock of Alpha. Subsequent to October 1999, the Company began advancing Alpha
funds to support its operations. At December 31, 1999 the Company had advanced
approximately $210,000 to Alpha. On May 12, 2000 these advances, plus additional
advances in 2000 were converted into a promissory note in the amount of
$512,000.

Effective October 1, 2000, the Company acquired Alpha for approximately
$1,035,000. The acquisition was accounted for as a purchase. Accordingly, the
purchase price was allocated to the net assets acquired based upon their fair
market values. In connection with this acquisition, approximately $1,099,000 was
allocated to goodwill as follows:

       50,000 shares of the Company's common stock              $   66,767
       Forgiveness of promissory note and other advances           968,000
                                                                ----------
       Total consideration                                       1,034,767
       Fair value of assets acquired                              (134,775)
       Fair value of liabilities assumed                           198,769
                                                                ----------

                                                                $1,098,761
                                                                ==========

The results of the operations beginning October 1, 2000 are included in the
Company's statement of operations.



                                       32
<PAGE>   35

NOTE 2. ACQUISITIONS AND DISPOSALS (CONTINUED)

Unaudited pro forma results of operations, assuming the business combination had
occurred at the beginning of each period, after giving effect to certain
adjustments resulting from the acquisition for each of the periods presented
below were as follows:

<TABLE>
<CAPTION>

                                                               Unaudited
                                        ------------------------------------------------------------
                                            For the               For the               For the
                                           Year Ended         Six Months Ended         Year Ended
                                        December 31, 2000      December 31, 1999       June 30, 1999
                                        -----------------      -----------------       -------------
<S>                                        <C>                    <C>                  <C>
Revenue                                    $119,372,854           $10,182,795          $ 18,825,497
Net income (loss)                          $  4,640,569           $ 6,406,486)         $(10,703,816)
Net income (loss) per share                $       0.26           $     (0.60)         $      (1.49)
</TABLE>

The pro forma data is provided for information purposes only and does not
purport to be indicative of results which actually would have been obtained if
the combination had been effected at the beginning of each period presented, or
of those results which may be obtained in the future.

MAGNETIC IMAGING SYSTEMS I, LTD. AND THE NUCLEAR MAGNETIC IMAGING, INC. (MIS)

Effective August 31, 1996, the Company acquired MIS for $2,426,984. The purchase
price consisted of 585,000 shares of the Company's common stock (valued at $3
per share), $575,923 of notes payable, and related acquisition costs of
$106,061. The acquisition was accounted for as a purchase, and accordingly, the
purchase price was allocated to the net assets acquired based on their estimated
fair market values. As a result of this acquisition, $2,513,627 was allocated to
goodwill.

In addition to the purchase price the acquisition agreement provided for
contingent consideration of 200,000 shares of common stock if MIS achieved
earnings before interest, income taxes, depreciation and amortization ("EBITDA")
in excess of $1,200,000 for the year ended June 30, 1997 or in excess of
$1,500,000 for the year ended June 30, 1998, a total maximum contingent
consideration of 400,000 shares, plus additional shares issuable in connection
with a price guarantee based upon the company's pre-tax earnings at the first
and second anniversary of the transaction. The Company was not liable for any
contingent consideration associated with its acquisition of MIS. Effective
December 18, 1999, MIS was sold to its former owner in exchange for the
settlement of all outstanding litigation with its former owner, the discharge of
a note payable of approximately $185,000 and other amounts due to the former
owner. Also, the former owner agreed to assume certain liabilities of MIS. In
connection with this disposal, the Company recognized a loss of approximately
$968,000 during the six months ended December 31, 1999.



                                       33
<PAGE>   36

NOTE 2. ACQUISITIONS AND DISPOSALS (CONTINUED)

DATASCAN

Effective September 30, 1996, the Company acquired Datascan of Florida, Inc.
(Datascan) for $1,170,529. The purchase price consisted of 300,000 shares of the
Company's common stock (valued at $3 per share), related acquisition costs of
$42,529 and contingent consideration of 100,000 shares of the Company's common
stock (valued at $2.28) issued on June 30, 1997. The acquisition was accounted
for as a purchase, and accordingly, the purchase price was allocated to the net
assets acquired based on their estimated fair market value. As a result of this
acquisition, $429,463 was allocated to goodwill. Effective December 31, 1999,
Datascan was sold to its former owner in exchange for the settlement of all
outstanding litigation and termination of all Executive Employment Agreements
and all stock options held by the former owner. The Buyer also assumed certain
third party obligations of the Company. In connection with this disposal, the
Company recognized a loss of approximately $1,163,000 during the six months
ended December 31, 1999.

THE PRACTICES

Effective April 1, 1998, the Company acquired two physician practices (the
Practices) from Primedica Healthcare, Inc. (Primedica) for $2,431,123. The
purchase price consisted of a 7.5% note payable of $3,500,000, which was to be
amortized over 20 years, with a balloon payment due on April 1, 2003 (the
Promissory Note). The Company discounted this Promissory Note $1,068,877 based
upon the Company's incremental borrowing rate at April 1, 1998 (16%). The
acquisition was accounted for as a purchase, and accordingly, the purchase price
was allocated to the net assets acquired based on their estimated fair market
values. As a result of this acquisition, $1,588,349 was allocated to goodwill.

During 1999, the Company defaulted on the Promissory Note and a judgement was
entered against the Company for $4,745,370. Accordingly, the Promissory Note was
increased to $4,745,370, and a loss of $2,206,448 was recorded in the
consolidated statement of operations for the year ended June 30, 1999.

Subsequent to June 30, 1999, the Company and Primedica reached a settlement
whereby the Company agreed to pay Primedica $1,513,235, subject to a provision
stating that if timely payments were not received by Primedica, the Company
would be liable for $4,745,364. On October 26, 1999, the Company was notified by
Primedica that it was in default of this settlement agreement.

In August 2000, the Company and Primedica reached a final settlement agreement
providing for full settlement of all Primedica judgments upon a payment of
$350,000. In connection therewith, the Company recorded "other income" of
approximately $3,500,000 for the year ended December 31, 2000.



                                       34
<PAGE>   37
NOTE 2. ACQUISITIONS AND DISPOSALS (CONTINUED)

DISPOSAL OF DR. GLICKMAN'S PRACTICE

Effective January 31, 1999, one of the Company's physician practices was sold to
its former owner for $20,000 cash, the cancellation of a note payable to the
former owner of $25,000 and the return of the initial 19,677 shares of the
Company's common stock and 19,677 additional shares held in escrow. In
connection with the disposal, the Company incurred a loss of approximately
$142,000, which is included in loss on disposal of assets in the accompanying
consolidated statement of operations for the year ended June 30, 1999.

FAMILY MEDICAL PLAZA, INC.

Pursuant to an asset purchase agreement effective December 1, 1998, the Company
acquired certain assets and liabilities of Family Medical Plaza Inc. The
purchase price consisted of assumed liabilities of approximately $67,000 and the
issuance of an 8% promissory note for approximately $38,000. The acquisition was
accounted for as a purchase, and accordingly, the purchase price was allocated
to the net assets acquired based on their estimated fair market values. The
results of operations beginning December 1, 1998 are included in the Company's
statement of operations. As a result of this acquisition $12,622 was recorded as
goodwill.

ADVANCED HEALTHCARE, INC.

Pursuant to an asset purchase agreement effective March 17, 1999, the Company
acquired all operating assets and certain liabilities of Advanced Healthcare,
Inc. (Advanced) for $512,000. The purchase price consisted of assumed
liabilities of approximately $387,000 and payments of approximately $90,000 in
cash and 70,000 shares of the Company's common stock (valued at $0.50 per
share). At June 30, 1999, the shares were held in escrow and subsequently were
released from escrow and issued. The acquisition was accounted for as a
purchase, and accordingly, the purchase price was allocated to the net assets
acquired based on their estimated fair market values. The results of operations
beginning March 17, 1999 are included in the Company's statement of operations.
As a result of this acquisition $125,000 was recorded as goodwill.

Unaudited pro forma results of operations, assuming the acquisition of Family
Medical Plaza, Inc. and Advanced occurred as of the beginning of the fiscal year
ended June 30, 1999, after giving effect to certain adjustments such as the
elimination of intercompany transactions resulting from the acquisitions were as
follows:

                                                           Unaudited
                                                          -------------
                                                          June 30, 1999
                                                          -------------

      Revenues                                             $ 19,749,497
      Net loss                                             $(10,947,319)
      Loss per share                                       $       1.52)

The pro forma data is provided for information purposes only and does not
purport to be indicative of results which actually would have been obtained if
the combination had been effected at the beginning of each period presented, or
of those results which may be obtained in the future.



                                       35
<PAGE>   38
NOTE 2. ACQUISITIONS AND DISPOSALS (CONTINUED)

PURCHASE OF DR. P. SREEKUMAR

Effective August 12, 1999, the Company acquired the medical practice of Dr. P.
Sreekumar. The purchase price consisted of assumed liabilities of approximately
$300,000, cash of $200,000 and the issuance of a note payable in the amount of
$300,000. The acquisition was accounted for as a purchase, and accordingly, the
purchase price was allocated to the net assets acquired based on their estimated
fair market values. The results of operations beginning August 13, 1999 are
included in the Company's statement of operations for the six month period ended
December 31, 1999. As a result of this acquisition approximately $700,000 was
recorded as goodwill.

PURCHASE OF DR. FEDERGREEN

Pursuant to an asset purchase agreement effective December 30, 1999, the Company
acquired certain assets of the Medical practice of Dr. Federgreen. The purchase
price consisted of a $120,000 note payable. The acquisition was accounted for as
a purchase and accordingly, the purchase price was allocated to the net assets
acquired based on their estimated fair market values. The results of operations
beginning January 1, 2000 are included in the Company's statement of operations.
As a result of this acquisition approximately $120,000 was recorded as goodwill.

In addition to the purchase consideration, the Company is potentially liable for
additional consideration based on the amount of adjusted pre-tax earnings for
the first year of operations, on a scalable basis up to $60,000 if earnings are
$225,000 or above.

Unaudited pro forma results of operations, assuming the acquisition of the
Sreekumar and Federgreen practices occurred as of the beginning of the six month
ended December 31, 1999 and the year ended June 30, 1999, after giving effect to
certain adjustments such as the elimination of intercompany transactions
resulting from the acquisitions were as follows:

                                                      Unaudited
                                      -----------------------------------------
                                       Six Months Ended            Year Ended
                                      December 31, 1999           June 30, 1999
                                      -----------------           -------------
Revenues                                  $10,560,795             $ 19,581,497
Net loss                                  $ 6,094,486)            $(10,079,816)
Loss per share                            $     (0.57)            $      (1.40)
                                          ===========             ============

The pro forma data is provided for information purposes only and does not
purport to be indicative of results which actually would have been obtained if
the combination had been effected at the beginning of each period presented, or
of those results which may be obtained in the future.



                                       36
<PAGE>   39
NOTE 3. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

                                                              December 31, 2000
                                                              -----------------

Computer and office equipment under capital lease               $   396,000
Machinery and medical equipment                                     264,020
Furniture and fixtures                                              582,187
Leasehold improvements                                              441,153
Computer and office equipment                                       504,115
Automobile equipment                                                 61,380
                                                                -----------
                                                                  2,248,855
Less accumulated depreciation and amortization                   (1,149,163)
                                                                -----------
                                                                $ 1,099,692
                                                                ===========

Accumulated amortization of computer equipment and office equipment under
capital leases was $307,183 at December 31, 2000

Depreciation and amortization expense totaled approximately $286,800, $594,000
and $1,361,000 for the year ended December 31, 2000, the six months ended
December 31, 1999 and for the year ended June 30, 1999, respectively.

NOTE 4. INVESTMENTS

During the year ended June 30, 1999, the Company disposed of all investments in
trading securities. The change in unrealized gain (loss) on trading securities
for the year ended June 30, 1999 was $85,314. These changes are included in
other income (expense) in the consolidated statements of operations.

Net realized losses on sales of trading securities for the period ended June 30,
1999 were $131,452 and are included in other income (expense) in the
consolidated statements of operations.

NOTE 5. LINE OF CREDIT FACILITIES

During June 1999, the Company entered into a three year line of credit agreement
providing for maximum borrowings not to exceed $2,000,000. Any outstanding
amounts under this credit facility are collateralized by substantially all
assets of the Company and the Company can borrow up to 85% of eligible accounts
receivable, as defined. This facility bears interest at prime plus 4% with
repayments made directly through a lock box arrangement. At December 31, 2000,
$811,100 was outstanding on this credit facility.



                                       37
<PAGE>   40
NOTE 5. LINE OF CREDIT FACILITIES (CONTINUED)

Subsequent to year end $377,009 of the line of credit balance was refinanced on
a long-term basis and is reflected as a long-term liability at December 31,
2000.

NOTE 6. UNEARNED REVENUE

On August 22, 2000, the Company entered into a Pharmacy Services Agreement
(Pharmacy Agreement) with a medical management and software company (Pharmacy
Consultant), to provide consulting, technology, and software services for the
Company's start-up pharmacy operation, for an initial term of three years. In
connection with this agreement, the Pharmacy Consultant paid the Company
$500,000, subject to return if the Company elects to cancel the Pharmacy
Agreement under certain provisions. Of this amount approximately $56,000 has
been recognized as revenue during the year ended December 31, 2000, and
approximately $167,000 and $278,000 are included as unearned revenue - current
liabilities and unearned revenue - long term, respectively, in the accompanying
balance sheet.

On October 6, 2000, the Company received an additional $500,000 in funding from
the Pharmacy Consultant in connection with a 10 year exclusive preferred
provider agreement. This amount may be required to be repaid, together with
interest at prime plus 2%, should the Company default or elect to cancel the
Agreement. Of this $500,000, approximately $38,000 has been recognized as
revenue during the year ended December 31, 2000, and approximately $150,000 and
$312,000 are included as unearned revenue - current liabilities and unearned
revenue - long term, respectively, in the accompanying balance sheet.

NOTE 7. CAPITAL LEASE OBLIGATIONS

The Company is obligated under capital leases relating to certain of its
property and equipment. Future minimum lease payments for capital lease
obligations as of December 31 were as follows:

      2001                                                  $        45,605
      2002                                                           27,790
      2003                                                           10,527
                                                            ---------------
                                                                     83,922
      Less amount representing interest                              14,297
                                                            ---------------
                                                                     69,625

      Less current maturities                                        35,978
                                                            ---------------
                                                            $        33,647
                                                            ===============



                                       38
<PAGE>   41
NOTE 8. LONG-TERM DEBT


Long-term debt consisted of the following:

<TABLE>
<CAPTION>

                 <S>                                                                                 <C>
                  Note payable to HMO in connection with the Advanced acquisition (Note 3);
                    interest at 5%, increased to 14% if note defaults; payable in 60 monthly
                    installments of $7,489 commencing May 1, 1999; collateralized by accounts
                    receivable and property and equipment.                                           $      277,599

                  Notes payable with interest prepaid in the form of one share of the Company's
                       common stock for each dollar loaned, plus additional interest upon
                       default; principal payable in 6 equal installments.  The holders of these
                       notes have the right to convert the outstanding obligation to common
                       stock at $1 per share at any time.                                                   252,991

                  Note payable to former owner of Federgreen practice; non-interest bearing;
                       payable in installments of $10,000 commencing January 2000.                           23,943

                  Promissory notes; unsecured, with interest at 12%, increased to 18% upon
                       default, due and payable at various dates from May to June 2001.  The
                       holders have the right to convert into common stock at varying prices
                       from $0.75 to $1.00 per share, at any time.  The Company has the right,
                       but not the obligation to convert to stock, if the common stock price of
                       the Company is at $1.40 or greater for 20 consecutive trading days.  The
                       notes have 225,000 attached warrants at prices ranging from $1.00 to
                       $1.50 with the provision that the payee must exercise the warrants if the
                       Company's closing stock price is from $1.75 to $2.00 for 30 consecutive
                       trading days.                                                                        463,794

                  Promissory note to shareholder of the Company, interest at 8% due and payable
                       on July 31, 2001, or as otherwise agreed to by the parties.                          100,000

                  Promissory note, interest at 10%, due on demand; collateralized by
                       substantially all assets of the Company.                                             100,000
                                                                                                     --------------
                                                                                                          1,218,327

                  Less current maturities                                                                 1,022,697
                                                                                                     --------------

                  Long-term debt                                                                     $      195,630
                                                                                                     --------------
</TABLE>

                  Aggregate maturities of long-term debt for years subsequent to
December 31, 2000, are as follows:

<TABLE>
<CAPTION>
                  <S>                                                                                <C>
                  2001                                                                               $    1,022,697
                  2002                                                                                       80,452
                  2003                                                                                       85,344
                  2004                                                                                       29,834
                                                                                                     --------------
                                                                                                     $    1,218,327
                                                                                                     ==============
</TABLE>





                                       39
<PAGE>   42
NOTE 9. RELATED PARTY TRANSACTIONS

OFFICE RENT

The Company rented one of its office facilities from an individual who is the
former majority owner of MIS and director of the Company, and another office
facility from a company owned 50% by this individual. Total rent expense related
to these leases amounted to approximately $105,000 for the six month period
ended December 31, 1999 and $269,000 for the year ended June 30, 1999. These
leases were canceled in December 1999. (Note 2)

DUE TO RELATED PARTIES

During 1998, the Company entered into an agreement with an entity controlled by
the current President of the Company (Related Consultant). Under the agreement,
the Related Consultant provides consulting services to the Company. Fees and
expenses paid to the Related Consultant for services amounted to approximately
$40,000 for the year ended December 31, 2000 for amounts outstanding at December
31, 1999, $60,000 for the six month period ended December 31, 1999 and $142,000
for the year ended June 30, 1999.

For the year ended December 31, 2000, the six month period ended December 31,
1999 and the year ended June 30, 1999, approximately $238,000, $26,000 and
$220,000, respectively of Company expenses were paid by the former owner of GMA,
who is presently a shareholder of the Company. At December 31, 2000, $92,800 and
$100,000 of these amounts were included in due to related parties and current
maturities of long term debt, respectively, in the accompanying balance sheet.

NOTE 10.          INCOME TAXES

The components of income taxes were as follows:

<TABLE>
<CAPTION>

                                               Year Ended            Six months ended          Year Ended
                                            December 31, 2000        December 31, 2000        June 30, 1999
                                            -----------------        -----------------        -------------
<S>                                             <C>                     <C>                     <C>
Provision (Benefit) For Income Taxes
Current
     Federal                                    $        --             $        --             $        --
     State                                               --                      --                      --

Deferred
     Federal                                      1,616,000              (1,669,000)             (3,353,000)
     State                                          278,000                (288,000)               (381,000)

Change in Valuation Allowance                    (1,894,000)              1,957,000               3,734,000
                                                -----------             -----------             -----------
Income Tax Benefit                              $        --             $        --             $        --
                                                ===========             ===========             ===========

</TABLE>




                                       40
<PAGE>   43
NOTE 10. INCOME TAXES (CONTINUED)

The effective tax rate for the year ended December 31, 2000, differed from the
federal statutory rate due principally to state income tax benefits of
approximately $278,000, a decrease in the valuation allowance of approximately
$1,894,000 and permanent and other differences of approximately $193,000.

The effective tax rate for the six months ended December 31,1999, differed from
the federal statutory rate due to state income tax benefits of approximately
$288,000, an increase in the valuation allowance of approximately $1,957,000 and
permanent and other differences of approximately $457,000.

The effective tax rate for the year ended June 30, 1999 differed from the
federal statutory rate due to state income tax benefits of approximately
$381,000, an increase in the valuation allowance of approximately $3,734,000 and
permanent and other differences of approximately $156,000.

The Company has net operating loss carryforwards totalling approximately
$18,583,000, expiring in various years through 2019.

At December 31, 2000, approximate deferred tax assets and liabilities were as
follows:

Deferred Tax Assets:
--------------------

Allowances for doubtful accounts                               $   918,000
Amortization                                                        36,000
Net operating loss carryforward                                  6,898,000
                                                               -----------
Total deferred tax assets                                        7,852,000
                                                               -----------
Deferred Tax Liabilities:
-------------------------

Cash basis subsidiaries                                            801,000
Depreciation                                                        58,000
                                                               -----------
Total deferred tax liabilities                                     859,000
                                                               -----------
Net deferred tax asset                                           6,993,000
Less valuation allowance                                        (6,993,000)
                                                               -----------
                                                               $        --
                                                               ===========

NOTE 11. STOCKHOLDERS' EQUITY

At December 31, 2000, the Company has authorized 40,000,000 shares of par value
$0.001 common stock, with 21,717,233 shares issued and outstanding.
Additionally, the Company has authorized 10,000,000 shares of preferred stock,
with 5,000 shares issued and outstanding.



                                       41
<PAGE>   44
NOTE 11. STOCKHOLDERS' EQUITY (CONTINUED)

The Company completed an initial public offering of its common stock effective
February 13, 1997, and issued 825,000 shares of common stock at a price of $6.00
per share. As part of the offering, the Company issued 1,650,000 redeemable
common stock purchase warrants at a purchase price of $0.15 per warrant plus
247,500 additional warrants under an over-allotment agreement, also at $0.15 per
warrant. Each warrant entitled the holder to purchase one share of common stock
at $7.00 per share during the four year period commencing thirty days after the
effective date of the offering. The initial public offering generated net
proceeds to the Company of $3,428,645.

At December 31, 2000, the Company has 3,342,850 warrants outstanding.

During the year ended June 30, 1998, the Company completed two separate
placements of non-voting preferred stock. The Company authorized 30,000 shares
of Series A preferred stock, par value $.001, of which 5,000 were issued during
the year ended June 30, 1998. Each share of Series A preferred stock has a
stated value of $100 and pays dividends equal to 10% of the stated value per
annum. At December 31, 2000, the aggregate and per share amounts of cumulative
dividend arrearages were approximately $166,667 and $33.40. Each share of Series
A preferred stock is convertible into shares of common stock at the option of
the holder at the lesser of 85% of the average closing bid price of the common
stock for the ten trading days immediately preceding the conversion or $6.00.
The Company has the right to deny conversion of the Series A preferred stock, at
which time the holder shall be entitled to receive and the Company shall pay
additional cumulative dividends at 5% per annum, together with the initial
dividend rate to equal 15% per annum. At December 31, 2000 there were 5,000
series A preferred shares issued and outstanding. In the event of any
liquidation, dissolution or winding up of the Company, holders of the Series A
preferred stock shall be entitled to receive a liquidating distribution before
any distribution may be made to holders of common stock of the Company.

The Company has also designated 7,000 shares of preferred stock as Series B
preferred stock, with a stated value of $1,000 per share. During the year ended
June 30, 1998, 1,200 shares of Series B preferred stock were issued. Holders of
the Series B preferred stock are entitled to receive, whether declared or not,
cumulative dividends equal to 5% per annum. Each share of Series B preferred
stock is convertible into such number of fully paid and nonassessable shares of
common stock as is determined by dividing the stated value by the conversion
price. The conversion price shall be the lesser of the market price, as defined
or $4.00. From September 1998 to October 1999, all Series B preferred shares
were converted into 3,597,305 shares of the Company's commons stock at various
prices. At December 31, 2000, there were no shares of series B preferred stock
issued and outstanding.

During 2000, the Company borrowed approximately $1,600,000 from a private trust.
In connection therewith, the Company issued 1,832,768 shares of its common stock
during September 2000 as repayment of such debt.



                                       42
<PAGE>   45
NOTE 12. STOCK OPTIONS

The Company adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS
123") in 1997. The Company has elected to continue using Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" in accounting
for employee stock options. Accordingly, compensation expense has been recorded
to the extent that the market value of the underlying stock exceeded the
exercise price at the date of grant. For the year ended December 31, 2000
compensation costs related to stock options amounted to approximately $132,106.
For the six month period ended December 31, 1999 and year ended June 30, 1999,
compensation costs related to stock options amounted to approximately $97,200
and $729,600, respectively.

Stock option activity for the year ended December 31, 2000 was as follows:

<TABLE>
<CAPTION>


                                                 Number of        Weighted Average
                                                  Options         Exercise Price
                                                ----------        ----------------
<S>                                              <C>                 <C>
Balance, December 31, 1999                       2,643,692           $   3.70
Granted during the year                          3,868,000           $   1.21
Exercised and returned during the year            (357,028)          $   0.53
Forfeited during the year                       (1,103,217)          $   1.42
                                                ----------
Balance, end of the year                         5,051,447           $   1.88
                                                ==========
Exercisable at end of the year                   3,317,975           $   2.06
                                                ==========
</TABLE>

The following table summarizes information about stock options outstanding at
December 31, 2000:

<TABLE>
<CAPTION>

                                                     Options Outstanding                      Options Exercisable
                                               -------------------------------         -------------------------------
                                                              Weighted Average                        Weighted Average
                                               Number of         Remaining             Number of          Remaining
                  Exercise Price                Options       Contractual Life          Options       Contractual Life
                  --------------               ---------      ----------------         ---------      ----------------
                  <S>                          <C>                  <C>                 <C>                  <C>
                  $0.100 - $1.000              3,109,197            4.9                 1,925,725            3.8
                  $1.250 - $2.000                659,450            4.3                   484,450            3.9
                  $2.500 - $3.000                490,700            2.7                   390,700            2.1
                  $3.125 - $5.000                214,100            4.1                    89,100            2.5
                  $5.250 - $8.000                397,000            3.5                   329,500            1.6
                  $9.000 - $18.000               181,000            1.5                    98,500            1.9
                                               ---------                                ---------
                                               5,051,447                                3,317,975
                                               =========                                =========


</TABLE>


                                       43
<PAGE>   46
NOTE 12. STOCK OPTIONS (CONTINUED)

The weighted average fair value per option as of grant date was $0.21 for stock
options granted during the year ended December 31, 2000. The determination of
the fair value of all stock options granted during the year ended December 31,
2000 was based on (i) risk-free interest rate of 5.3%, (ii) expected option
lives ranging from 1 to 7 years, depending on the vesting provisions of each
option, (iii) expected volatility in the market price of the Company's common
stock of 100%, and (iv) no expected dividends on the underlying stock.

The following table summarizes the pro forma consolidated results of operations
of the Company as though the fair value based accounting method in SFAS 123 had
been used in accounting for stock options.

                                                      Period Ended
                                                   December 31, 2000
                                                   -----------------
         Net income                                    $4,219,555

         Net income per share                          $     0.24

Stock option activity for the six month period ended December 31, 1999 was as
follows:

<TABLE>
<CAPTION>

                                                        Number of            Weighted Average
                                                         Options              Exercise Price
                                                        ---------            ----------------
<S>                                                     <C>                      <C>
Balance, June 30, 1999                                  2,383,842                $   4.27
Granted during the period                                 507,000                $   0.37
Exercised and returned during the period                       --                $     --
Forfeited during the period                              (247,150)               $   4.29
                                                        =========
Balance, end of the period                              2,643,692                $   3.70
                                                        =========
Exercisable at end of the period                        1,907,554                $   3.54
                                                        =========

</TABLE>

The following table summarizes information about stock options outstanding at
December 31, 1999:

<TABLE>
<CAPTION>

                                   Options Outstanding                      Options Exercisable
                             --------------------------------         -------------------------------
                                             Weighted Average                        Weighted Average
                             Number of          Remaining             Number of          Remaining
 Exercise Price               Options        Contractual Life          Options       Contractual Life
 --------------              ---------       ----------------         --------       ----------------
<S>                           <C>                  <C>                   <C>                <C>
 $0.100 - $1.000              1,333,125            4.1                   634,004            4.3
 $1.250 - $2.000                217,000            4.2                   227,333            4.2
 $2.500 - $3.000                491,017            3.2                   471,317            3.0
 $3.125 - $5.000                147,050            3.3                   139,400            3.1
 $5.250 - $8.000                280,000            2.9                   260,000            2.7
 $9.000 - $18.000               175,500            3.2                   175,500            3.2
                              ---------                                ---------
                              2,643,692                                1,907,554
                              =========                                =========
</TABLE>



                                       44
<PAGE>   47
NOTE 12. STOCK OPTIONS (CONTINUED)

The weighted average fair value per option as of grant date was $0.12 for stock
options granted during the six month period ended December 31, 1999. The
determination of the fair value of all stock options granted during the six
month period ended December 31, 1999 was based on (i) risk-free interest rate of
6.1%, (ii) expected option lives ranging from 5 to 7 years, depending on the
vesting provisions of each option, (iii) expected volatility in the market price
of the Company's common stock of 100%, and (iv) no expected dividends on the
underlying stock.

The following table summarizes the pro forma consolidated results of operations
of the Company as though the fair value based accounting method in SFAS 123 had
been used in accounting for stock options.

<TABLE>
<CAPTION>
                                                        Period ended
                                                        December 31,                Year ended
                                                            1999                   June 30, 1999
                                                        -------------              --------------
<S>                                                      <C>                       <C>
Net loss                                                 $(6,272,057)              $(10,588,216)

Net loss per share                                       $     (0.58)              $      (1.47)

</TABLE>

During the six month period ended December 31, 1999, no options were exercised,
and 247,150 options were returned. During the year ended June 30, 1999, 252,318
options were exercised with net proceeds of $90,000 to the Company, plus the
return of 8,182 options.

NOTE 13. COMMITMENTS AND CONTINGENCIES

LEASES

The Company leases office and medical facilities under various non-cancelable
operating leases. Approximate future minimum payments under these leases for the
years ended December 31, are as follows:

                  2001                                      $  511,000
                  2002                                         564,000
                  2003                                         310,000
                  2004                                         288,000
                  2005                                         266,000
                  Thereafter                                   177,000
                                                            ----------
                  Total                                     $2,116,000
                                                            ==========



                                       45
<PAGE>   48
NOTE 13. COMMITMENTS AND CONTINGENCIES (CONTINUED)

EMPLOYMENT CONTRACTS

The Company has employment contracts with certain executives, physicians and
other clinical and administrative employees. Future annual minimum payments
under these employment agreements for the years ended December 31, are as
follows:

                  2001                                       $  806,000
                  2002                                          384,000
                  2003                                          329,000
                  2004                                          228,000
                                                             ----------
                                                             $1,747,000
                                                             ==========


Under the terms of the employment agreement with the Company's Chief Executive
Officer (CEO), if the Company terminates the CEO without good cause, the Company
would be obligated to continue to pay all salary and any current and future
bonuses that would have been earned under the agreement. In addition, the CEO
would also be entitled to all stock options earned or not yet earned through the
full term of the Agreement, and the Company would be required to register all
shares owned, directly or indirectly by the CEO.

LITIGATION

The Company is a party to various claims arising in the ordinary course of
business. Management believes that the outcome of these matters will not have a
materially adverse effect on the financial position or the results of operations
of the Company.

PAYROLL TAXES PAYABLE

The Company has unpaid payroll tax liabilities owed to the Internal Revenue
Service (IRS) totaling approximately $2,515,000, including penalties and
interest. The Company has negotiated an installment plan with the IRS whereby
the Company will make monthly installments ranging from $50,000 to $100,000 a
month until the amount is retired. Of the $2,515,000 in payroll tax liabilities
recorded at December 31, 2000, $675,000 is included in accrued expenses and
$1,840,000 is reflected as payroll taxes payable - long term in the accompanying
balance sheet. Management has recorded $400,000 in penalties at December 31,
2000, the maximum it believes that can be imposed. See Note 16.



                                       46
<PAGE>   49
NOTE 14. CONCENTRATIONS

REVENUE CONCENTRATION AND ECONOMIC DEPENDENCY

During the year ended December 31, 2000, six month period ended December 31,
1999 and year ended June 30, 1999 one HMO accounted for approximately 96%, 68%
and 48% of revenue, respectively. The loss of this contract with the HMO could
significantly impact the operating results of the Company.

NOTE 15. SUBSEQUENT EVENTS

Subsequent to year end the Company issued 720,000 shares to accredited
investors, in connection with a private placement, resulting in proceeds of
$720,000 that were used for working capital.

EQUITY LINE OF CREDIT AGREEMENT

On March 30, 2001 the Company entered into an equity line of credit agreement
with a British Virgin Islands corporation (Purchaser), in order to establish a
possible source of funding for the company's planned operations. The equity line
of credit agreement establishes what is sometimes also referred to as an equity
drawdown facility (Equity Facility).

Under the Equity Facility, the Purchaser has agreed to provide the Company with
up to $12,000,000 of funding during the twenty-four (24) month period following
the date of an effective registration statement. During this twenty-four (24)
month period, the Company may request a drawdown under the equity line of credit
by selling shares of its common stock to the Purchaser, and the Purchaser will
be obligated to purchase the shares. The Company may request a drawdown once
every 27 trading days, although the Company is under no obligation to request
any drawdowns under the Equity Facility.

During the 22 trading days following a drawdown request, the Company will
calculate the amount of shares it will sell to the Purchaser and the purchase
price per share. The purchase price per share of common stock will be based on
the daily volume weighted average price of the Company's common stock during
each of the 22 trading days immediately following the drawdown date, less a
discount of 10%. The Company will receive the purchase price less a placement
agent fee payable to a registered broker-dealer (Placement Agent) equal to 7% of
the aggregate purchase price. The Purchaser may then resell all or a portion of
these shares. The Placement Agent introduced the Purchaser to the Company.

The minimum amount the Company can draw down at any one time is $100,000. The
maximum amount the Company can draw down at any one time is the lesser of
$750,000 or the amount equal to six percent (6%) of the weighted average price
of the Company's common stock for the sixty (60) calendar days prior to the date
of the drawdown request, multiplied by the total trading volume of the Company's
common stock for the sixty (60) calendar days prior to the date of the drawdown
request.



                                       47
<PAGE>   50
NOTE 15. SUBSEQUENT EVENTS (CONTINUED)

GRANT OF WARRANTS

Upon closing of the equity line of credit Agreement, the Company paid to
Purchaser's legal counsel, $25,000 to cover its legal and administrative
expenses. As consideration for extending the equity line of credit, the Company
granted Purchaser warrants to purchase up to the number of shares equaling
$720,000 based upon the average closing price of the Company's common stock for
the 15 trading days prior to the closing of this agreement (Base Price). The
warrant entitles the Purchaser to purchase such shares for 120% of the Base
Price at any time prior to March 30, 2004.

As partial consideration for Placement Agent's services in connection with this
offering, the Company granted Placement Agent warrants to purchase up to the
number of shares equaling $840,000 based upon the Base Price, for 120% of the
Base Price, any time prior to March 30, 2004.

NOTE 16. RESTATEMENT

Although the Company continues to negotiate with the Internal Revenue Service
(IRS), and management believes that it will be successful in obtaining a waiver
of any penalties relating to past due payroll taxes, it has restated its
financial statements to give effect to such penalties as incurred, as specified
by statute. If and when the Company obtains a formal notification of waiver from
the IRS, the Company will, at that time, record as income all penalties accrued
to date.

The impact of the restatement on affected financial information in the balance
sheet and the consolidated statement of operations at and for the year ended
December 31, 2000 and at and for the six month period ended December 31, 1999,
is as follows:

<TABLE>
<CAPTION>

                                                   As Previously Reported       As Restated as of
                                                   as of December 31, 2000      December 31, 2000
                                                   -----------------------      -----------------
<S>                                                 <C>                        <C>
Payroll Taxes Payable                               $        1,440,000         $       1,840,000
Accumulated deficit                                         18,184,540                18,584,540
Stockholders' equity                                         1,240,633                   840,633
</TABLE>

<TABLE>
<CAPTION>

                                                   As Previously Reported      As Restated for the
                                                     for the year ended           year ended
                                                      December 31, 2000         December 31, 2000
                                                   -----------------------     -------------------
<S>                                                 <C>                        <C>
Interest and penalties expense                      $         588,208          $         768,208
Total other income                                           3,440,306                 3,260,306
Net income                                                   5,108,569                 4,928,569
Net income per share, basic                                       0.29                      0.28
Net income per share, diluted                                     0.24                      0.24
</TABLE>




                                       48
<PAGE>   51
NOTE 16. RESTATEMENT (CONTINUED)

<TABLE>
<CAPTION>


                                                   As Previously Reported     As Restated for the Six
                                                  for the Six Months Ended        Months Ended
                                                      December 31, 1999         December 31, 1999
                                                  ------------------------    ------------------------
<S>                                                 <C>                        <C>
Interest and penalty expense                        $          300,022         $         520,022
Total other expense                                          2,485,559                 2,705,559
Net loss                                                     5,994,486                 6,214,486
Net loss per share, basic and diluted                             0.55                      0.58

</TABLE>




                                       49
<PAGE>   52
The financial statements listed on the index to financial statements on page F-1
are filed as part of this Form 10-KSB.

(a) (2) Exhibits

         Exhibits marked with footnote one are filed herewith. The remainders of
the exhibits have heretofore been filed with the Commission and are incorporated
herein by reference. Each management contract or compensation plan or
arrangement filed as an exhibit hereto is identified by a dagger (+).

Exhibit
Number         Description
-------        -----------

3.1            Articles of Incorporation. (1)

3.2            Articles of Amendment to the Articles of Incorporation. (1)

3.3            By-laws. (1)

3.4            Article of Amendment to the Articles of Incorporation designating
               the Series A Preferred Stock. (8)

4.1            Specimen Common Stock Certificate. (1)

10.1           Stock Option Plan. (1)

10.40          Stock Purchase Agreement dated July 1997 between Neal Jay Tolar
               and the Company. (1)

21             Subsidiaries of the Company. (8)

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

(1)      Incorporated by reference to the exhibit of the same number filed with
         the Company's Registration Statement on Form SB-2 (No. 333-5884-A)
(2)      Incorporated by reference to the Company's Current Report on Form 8-K
         dated August 6, 1997
(3)      Incorporated by reference to the Company's Quarterly Report on Form
         10-KSB for the year ended June 30, 1997
(4)      Incorporated by reference to the Company's Current Report on Form 8-K/A
         dated August 6, 1997
(5)      Incorporated by reference to the Company's Current Report on Form 8-K
         dated February 22, 1998
(6)      Incorporated by reference to the Company's Current Report on Form 8-K
         dated April 2, 1998
(7)      Filed herewith




                                       50
<PAGE>   53
SIGNATURES

         Pursuant to the requirements of the Securities Act, as amended, the
registrant has duly caused this Form 10-KSB/A to be signed on its behalf by the
undersigned, thereunto duly authorized in the Boca Raton, State of Florida on
the 17th of September, 2001.

METROPOLITAN HEALTH NETWORKS, INC.

                                     By: /s/ Fred Sternberg
                                         ---------------------------------------
                                     Fred Sternberg, President, Chief Executive
                                     Officer and Chairman

         Pursuant to the requirements of the Securities Act, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>


Signature                                   Title                                         Date
---------                                   -----                                         ----



<S>                                 <C>                                             <C>
/s/ Fred Sternberg                  President, Chief Executive                      September 17, 2001
---------------------------------   Officer and Chairman of the Board
Fred Sternberg



/s/ David S. Gartner                Chief Financial Officer                         September 17, 2001
---------------------------------   and Secretary
David S. Gartner



                                    Director                                        September 17, 2001
---------------------------------
Karl Sachs


                                    Director                                        September 17, 2001
---------------------------------
Michael Cahr



                                    Director                                        September 17, 2001
---------------------------------
Marvin Heiman



                                    Director                                        September 17, 2001
---------------------------------
Mark Gerstenfeld



                                    Director                                        September 17, 2001
---------------------------------
Michael Earley


                                    Director                                        September 17, 2001
---------------------------------
Martin Harrison


</TABLE>



                                       51