<PAGE>   1
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB/A

                                   (MARK ONE)

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

                FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 1999

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

        FOR THE TRANSITION PERIOD FROM JULY 1, 1999 TO DECEMBER 31, 1999

                             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
    WEST PALM BEACH, FL                                      33401
(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
                Class A Redeemable Common Stock Purchase Warrants
              Series A Convertible Preferred Stock, $.001 par value
              Series B Convertible Preferred 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:  $18,501,497

The aggregate market value of the Registrant's voting Common Stock held by
non-affiliates of the registrant was approximately $34,768,921 (computed using
the closing price of $1.875 per share of Common Stock on August 31, 2000, as
reported by NASDAQ, based on the assumption that directors and officers and more
than 5% stockholders are affiliates).

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

There were 18,543,425 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 August 31, 2000.

                       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 health care delivery network (the "Network"). The
Network initially was intended to provide primary and subspecialty physician
care and diagnostic and therapeutic services. Metcare pursued this business plan
into 1999 through 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.

         Responding to changes in the health care industry in mid-1999 the
Company modified its business strategy and determined to become a Management
Services Organization ("MSO") in which, instead of owning and managing Physician
Practices and Ancillary Services, it would manage the total care of patients
through "Global Risk" managed care contracts. As a result, the Company undertook
to divest of or unwind several of its acquisitions.

         The Company has changed its financial reporting year to December 31
from the fiscal year of June 30. The audited financial information reported
herein is for the six months ended December 31, 1999. Management felt the change
of the financial reporting year was consistent with the changes in direction of
the Company and the restructuring of the Company, and provides its shareholders
with reporting that will more appropriately reflect Metcare's strategies, goals
and objectives.

         Several senior management and staff changes occurred in connection with
the redirection of the Company. Fred Sternberg, Metcare's CEO, was recruited in
January 2000, joining the Company's new CFO, David Gartner and Debbie Finnel,
the Company's COO, both hired in 1999. Total employee count was reduced by 98,
or 58% during this time, the result of a restructuring implemented by the
Company's new management.

         The change in business strategy and related dispositions and
restructuring were substantially completed by the end of 1999.

RECENT DEVELOPMENTS

         During the six months ended June 30, 1999, the Company secured a new
HMO contract, acquired and sold certain Physician Practices and Ancillary
Services, and entered into various strategic alliances to facilitate its
business plan. In August 2000, Metcare secured an additional HMO contract. The
new HMO contract and the Physician Practices and Ancillary Services transactions
are discussed in the appropriately captioned sections of the BUSINESS section.

         Metcare has entered into a number of strategic alliances with
businesses aimed at bringing Internet-based technologies and solutions to
healthcare. The Company believes that implementing these advanced concepts,
products and services is bringing dramatic improvements and efficiencies to all
aspects of the patient, provider and payer relationship, and is a key to
Metcare's and its Network's success in the future. In addition, these new
technologies and businesses are expected to generate significant cost savings
and incremental revenues for the Network and the Company.

         ADJUDICATION & PAYMENT OF CLAIMS. The Company entered into a strategic
alliance with Triad2000/MD2000, to create a paperless software system for
healthcare practitioners. The software will manage real-time referrals,
appointment scheduling, claims review, pharmacy management and utilization
management. The Company expects to implement the paperless software system in
its Daytona Beach market, Volusia and Flagler counties for 32,000 patients
beginning in the fourth quarter of 2000.

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         ON-LINE PHARMACY. The Company has entered into an arrangement with a
pharmacy company that will provide mail order pharmacy and pharmacy management
to its Network and patients. The Company believes that it will begin
implementation before the end of 2000.

         INTERNET PRACTICE MANAGEMENT, BILLING & COLLECTIONS. The Company has
entered into a contract with eMedSoft.com to develop, implement and provide for
Metcare's electronic healthcare needs including software, portal, Internet and
network products and services. These solutions will allow Metcare's physicians
to manage their medical practices more efficiently in such areas as patient
scheduling, claims processing, provider directory management, ordering of
diagnostic imaging and laboratory tests, and will facilitate patient interaction
in a secure Internet environment. Implementation of these technologies will
begin in late 2000.

         TELEMEDICINE. The Company has entered into the telemedicine field with
CYBeR-CARE, Inc. to utilize CYBeR-CARE's telemedicine units. The system is a
patented Internet-based technology system that provides remote monitoring of
individuals for healthcare purposes such as blood pressure, pulse, heart rate
and other vital signs. Implementation of these systems began in July 2000.
Management believes that these systems will provide more efficient interaction
with patients, while reducing hospital and emergency room visits, resulting in
significant savings to the Company.

         PURCHASING E-COMMERCE PROVIDER. The Company entered into an alliance to
provide its physicians the online capability to purchase medical supplies and
equipment. MetCare now offers its Network a more complete and efficient
purchasing solution to streamline their office management processes.

INDUSTRY

         GENERAL

         A Health Care Financing Administration ("HCFA") study projects spending
for health care in the United States will increase from $1.035 trillion in 1996,
or to $2.1 trillion by 2007. Health care 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 $62 billion a decade earlier. A number of
factors are at work which are affecting the patient, healthcare provider and
payer 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 starting 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 is constraining health care spending for Medicare and Medicaid,
putting greater pressure on payments to doctors and hospitals. Due to those
trends, the study projects that insurance companies and consumers will see
bigger increases in health bills than Medicare. Private sources are expected to
pay nearly 55% of healthcare costs in 2007 compared to 53% in 1996. Hospitals
will receive less, receiving 30 percent of healthcare expenditures by 2007,
compared with 35% in 1996, due to the trend toward more outpatient care. Of the
$1.035 trillion spent in healthcare in 1996 over 19% was directly attributable
to physician services while nearly 58% was under physicians' direction.

         CHANGES IN INDUSTRY

         As a result of increased HMO enrollment, health care providers have
sought to reorganize themselves into health care delivery systems that are
better suited to negotiate with managed care organizations. The Company believes
that physician groups are joining with hospitals and other institutional
providers in creative ways that provide medical and hospital services ranging
from community based primary medical care to specialized inpatient services
through single coordinated delivery systems. These health care delivery systems
contract with HMOs to provide hospital and medical services to enrollees under
full risk contracts, under which providers assume the obligation of providing

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both the professional and institutional components of covered health care
services to the enrollees for predetermined fixed per capita payments.

         In particular, physicians are concluding that they must have control
over the delivery and financial impact of a broader range of health care
services. To this end, groups of independent physicians and medium to large
medical groups are taking steps to assume responsibility and risk for health
care services that they do not provide. Physicians are increasingly abandoning
traditional private practice in favor of affiliations with larger organizations
that offer skilled and innovative management, information systems and capital
resources. Many payers and their intermediaries, including governmental entities
and HMOs are increasingly looking to outside providers of physician services to
develop and maintain quality outcomes, management programs and patient care
data. One of the vehicles being used by physicians to better compete and manage
within the health care industry are Managed Service Organizations or MSOs, which
provide the resources necessary to function effectively in a managed care
environment. MSO providers, such as the Company, manage the total care of the
patients through managed care contracts, and receive a percentage of the
premiums paid by the managed care member or by Medicare.

BUSINESS

         Metropolitan Health Networks, Inc. is an MSO currently operating in
South and Central Florida. The Company had a contract with an HMO as of June 30,
1999 and was responsible for approximately 10,000 patient lives. As of June 30,
2000 several HMO agreements were in place and Metcare was responsible for
approximately 44,000 patient lives. At September 30, 2000 Metcare is responsible
for approximately 50,000 patient lives. Metcare provides its services through
its Network of primary care physicians, specialists, hospitals, ancillary and
diagnostic facilities. These providers have contracted to provide services to
the Company's patients agreeing to certain fee schedules and care requirements.

         HMO AGREEMENTS

         Under HMO agreements, the Company, through its affiliated providers, is
generally responsible for the provision of all outpatient benefits, as well as
all covered hospital benefits, regardless of whether the affiliated providers
directly provide the healthcare services associated with the covered benefits.
This type of agreement is called a "Full Risk" agreement. To the extent that
enrollees require supplemental healthcare that is not otherwise reimbursed by
the HMO, the aggregate monies received may be insufficient to cover the costs
associated with the treatment of enrollees. If revenue is insufficient to cover
costs, the Company's operating results could be adversely affected. The
Company's contracts have a provision for a stop-loss coverage, which caps the
Company's cost for Medicare at $40,000 per patient, and for commercial insurance
at $15,000-$20,000 per patient. As a result, the success of the Company depends
in large part on the effective management of health care costs through various
methods, including utilization management, competitive pricing for purchased
services and favorable agreements with payers. Recently, many providers,
including the Company, have experienced more favorable pricing with respect to
negotiations with HMOs. In addition, employer groups are becoming increasingly
successful in negotiating reductions in the growth of premiums paid for their
employees' health insurance, which tends to continue the growth in membership by
HMOs. At the same time, employer groups are demanding higher accountability from
payers and providers of health care services with respect to measurable
accessibility, quality and service. Changes in health care practices, inflation,
new technologies, major epidemics, natural disasters and numerous other factors
affecting the delivery and cost of health care are beyond the control of the
Company and may adversely affect its operating results.

         In addition to the full-risk capitation arrangements previously
discussed, the Company also has discount "fee for service" arrangements with
physicians. These arrangements are either negotiated rates for covered services,
usually calling for a discount of up to 70% from ordinary and customary charges,
or call for a payment at a percentage of Medicare allowable rates.

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         Effective December 1, 1998, the Company entered into a percent of
premium Global Risk Agreement for a renewable one year term with Humana Medical
Plan, Inc., PCA Health Plans of Florida, Inc. and PCA Family Health Plan, Inc.,
Humana Health Insurance Company, Employers Health Insurance Company and PCA Life
Insurance Company ("Humana") to provide covered health care services to members
in certain healthcare networks established or managed by Humana and PPM
Physicians' services to members. The original contract provided for coverage in
Dade, Broward and Palm Beach Counties. A new contract was entered into for
Volusia (Daytona) and Flagler counties, which was implemented on January 1,
2000. Under the terms of the contract the Company is paid a percentage of
premium of basic established fees by HCFA based upon the Medicare+ Choice
program. The Company's proven ability to negotiate contracts with these
providers is an important element in the Company's strategic growth model.

         At December 31, 1999, approximately 68% of the Company's revenues were
from managed care contracts with HMO's, compared to 47.9% at June 30, 1999. At
June 30, 2000, managed care contract revenues accounted for approximately 95% of
total revenues. All of the Company's active HMO contracts are with Humana. The
Company has recently negotiated a contract with another HMO to provide services
through our Network of providers in the Treasure Coast (Martin, St. Lucie &
Okeechobee counties), which is subject to final governmental approvals.
Management anticipates implementation of this contract in the first quarter of
2001.

         PHYSICIAN PRACTICES

         While the Company was initially organized as a PPM, the Company's
management subsequently determined that it should primarily operate as an MSO.
As such, with the exception of practices described below, it undertook a program
to dispose of its Physician Practices. These remaining practices complement the
Company's strategy and are expected to remain a part of Metcare.

         GMA

         GMA is a multi-specialty group with components of neurology, orthopedic
surgery and occupational medicine, in addition to chiropractic physicians,
licensed massage therapists and additional ancillary services. GMA uses both
staff and subcontracted services to provide healthcare services and currently
has three physicians, two massage therapists, two medical assistants, one x-ray
technician and two electro-diagnostic technicians who perform nerve studies. GMA
provides full-service medical evaluations including x-rays, EKG,
electro-diagnostics, minor surgical procedures as well as physical therapy. GMA
currently sees approximately 200 patients per week in its facilities and has
over 3,000 active charts. The GMA facility has been combined with our Skylake
facility to enhance the services provided while reducing overhead costs.

         SKYLAKE MEDICAL CENTER

         Metcare purchased substantially all of the assets and operations
related to two physician practices (the "Practices") located in North Miami
Beach, Florida owned by Primedica in April 1998. The aggregate purchase price
was $3,500,000. Skylake Medical Center provides primary care services to
approximately 4,000 patients including more than 900 Humana members.

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         ADVANCED HEALTH CARE

         Advanced Health Care is comprised of two primary care centers, which
currently provide medical care on a fee-for-service basis to patients in St.
Lucie and Martin counties. These centers will be integrated into the Network
with the implementation of the new HMO contract. On March 17, 1999 the Company
purchased the assets and certain liabilities of Advanced Health Care 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
common stock of the Company. As of June 30, 1999 the shares were held in escrow.
Subsequently, the note was paid through cash payments and by tendering the
70,000 shares for the any balance owed on the Promissory Note. 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 for the period ended June 30, 1999. As a
result of this acquisition, $125,000 was recorded as goodwill.

         DR. FEDERGREEN

         This is a primary care practice, which has been merged into the
Advanced Health Care facilities. Effective December 30, 1999, the Company
acquired certain assets and liabilities of Dr. Federgreen's practice for a
purchase price of $120,000 that consisted entirely of a 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. In addition to the purchase price, Dr. Federgreen is entitled to a bonus
based upon adjusted pre-tax earnings on a scalable basis up to $60,000, if
earnings are $225,000 or above.

         PURCHASE OF DR. SREEKUMAR

         This primary care practice that services Humana and other
fee-for-service patients is located in Palm Beach County and is part of our
Network. 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, have been be included in the Company's statement of operations
for the six months ended December 31, 1999. As a result of this acquisition,
approximately $700,000 was recorded as goodwill.

DISPOSITION OF PHYSICIAN PRACTICES AND ANCILLARY SERVICES

         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 its
Ancillary 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 obligations, 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).

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         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
Metropolitan. 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, Michael Goldstein, 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.

AGREEMENTS

         BILLING AGREEMENT

         In November 1999 Metropolitan entered into an agreement to assign all
of its current billing contracts to an unaffiliated third party. Under the
agreement the third party paid the Company $250,000. As of September 30, 2000
the Company is reviewing this arrangement with the third party.

         ALPHA CLINICAL LABORATORY, INC.

         In October 1999, the Company entered into a management agreement with
Alpha Clinical Laboratory, Inc. ("Alpha") that provides for a fee based on 10%
of revenues. In addition, the Company acquired an irrevocable option to purchase
Alpha any time prior to October 31, 2000. Alpha is a full service clinical
laboratory. It is management's intention to exercise its purchase option and
close the transaction during this quarter. The designated purchase price will be
three (3) times the pre-tax profit for the twelve (12) month period preceding
the measurement date. Subsequent to October 1999 and through August 31, 2000 the
Company has advanced approximately $812,000 that has been converted to a
promissory note. The note is payable on demand and bears interest at 18% per
annum and is collateralized by Alpha's accounts receivable and substantially all
of the other assets of Alpha.

IMPACT OF THE Y2K COMPUTER ISSUE

         The Company did not experience any impact from the date change
occurring between December 31, 1999 and January 1, 2000 with regard to its data
processing systems, and does not expect to experience any significant problems
in the future.

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. In addition, certain businesses, including hospitals
and insurers, are expanding their presence in the physician management market.
The Company's operations compete 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,
provide a wider variety of services, have greater experience in providing health
care management services and may have longer established relationships with
buyers of such services.

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RISKS OF CHANGES IN PAYMENT FOR MEDICAL SERVICES

         The United States Congress and many state legislatures routinely
consider proposals to reform or modify the health care 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. There can be no assurance that such legislation, programs and
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.

EMPLOYEES

         As of December 31, 2000, the Company had approximately 70 full-time
employees down from 168 on June 30, 1999. Of the total, seventeen (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

         As of December 31, 1999 the Company was located at 5100 Town Center,
Boca Raton, Florida. However, as of the date of filing, the Company's Executive
offices are presently 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. The Company relocated its corporate offices April 15, 2000.

         Magnetic Imaging Systems, I, Ltd. leased approximately 4,656 square
feet for diagnostic facilities located in Fort Lauderdale, Florida at a monthly
rental rate of approximately $13,126 plus real estate taxes. The lease expires
December 31, 2003, and was leased from Dr. Kagan, a former Director and Vice
President of the Company and Medical Director of the MRI Scan Center. The lease
was assigned to Dr. Kagan as part of the Global Settlement Agreement and First
Amendment Agreement as of December 15, 1999. (See LEGAL PROCEEDINGS: MRI Scan
Center, Inc. and Dr. Kagan).

         GMA occupied approximately 1,800 square feet in North Miami, Florida at
a monthly rental of approximately $5,140. The term of this lease was month to
month. This lease was terminated as of June 30, 2000 and the premises were
vacated in conjunction with its consolidation with the Skylake practice.

         Datascan's offices were located at 2301 West Sample Road, Building 4,
Suite 2A, Pompano Beach, Florida 33073 where it occupied approximately 5,000
square feet at a monthly rental of approximately $2,900. This lease expired on
July 13, 1999.

         The Skylake Practice occupies approximately 4,800 square feet in North
Miami Beach, Florida at a monthly rental of $13,931. This lease expired on June
30, 2000. As of July 1, 2000 a new lease was signed for five years with an
approximate monthly base rental of $4,400.

         The Company leased approximately 5,740 square feet for diagnostic
facilities in Fort Lauderdale, Florida at a monthly rate of approximately
$7,395. This agreement expires December 31, 2003, and is leased from KFK
Enterprises, Inc., a corporation in which Dr. Kagan, an employee and former
Director of the Company, is a principal shareholder. The lease was assigned to
the former owner as part of a settlement agreement dated December 15, 1999 (see
LEGAL PROCEEDINGS: MRI Scan Center, Inc. and Dr. Kagan).

         None of the Company's properties, except as otherwise indicated, are
leased from affiliates.

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ITEM 3. LEGAL PROCEEDINGS

MRI SCAN CENTER, INC. AND DR. KAGAN

         As of 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.

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 total outstanding
debt to $1,513,235 from $4,745,364. 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 $4,745,364. As of August 4, 2000 the Company entered into a new
agreement in which Primedica acknowledged payments of $700,000 and provided for
continued weekly payments of $25,000 for 32 weeks, with a balloon payment of
$500,000 in March 2001, which would result in total payments of $2,000,000. In
the event the Company is not able to meet this obligation, the Company may
continue payments through December 2001 with a balloon payment, bringing the
total to $2,500,000. In the event of a default by the Company in the required
payments to Primedica, the Company shall be obligated to pay the full amount of
$4,745,364. The recorded liability at December 31, 1999 was $4,524,462. This
liability was settled in full in September 2000 through a negotiation and
subsequent payment of $350,000. A gain of approximately $3,500,000 will be
recognized in the quarter ended September 30, 2000 in connection with this
settlement.

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 six months ended December 31,
1999.

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's Common Stock and Warrants are currently traded on the
NASDAQ SmallCap Stock Market ("NASDAQ") OTC Bulletin Board under the symbols
"MDPA" and "MDPAW", respectively. The following table sets forth the high and
low closing bid prices for the common stock and warrants, as reported by NASDAQ:

                                                      HIGH                 LOW
                                                      ($)                  ($)

     COMMON STOCK
     Quarter ended September 30, 1997                 6.125                3.375
     Quarter ended December 31, 1997                  7.375                5.625
     Quarter ended March 31, 1998                     6.125                2.500
     Quarter ended June 30, 1998                      4.063                2.750
     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

     WARRANTS
     Quarter ended September 30, 1997                 0.97                 0.44
     Quarter ended December 31, 1997                  1.06                 0.53
     Quarter ended March 31, 1998                     0.66                 0.25
     Quarter ended June 30, 1998                      0.59                 0.31
     Quarter ended September 30, 1998                 0.47                 0.25
     Quarter ended December 31, 1998                  0.28                 0.09
     Quarter ended March 31, 1999                     0.13                 0.03
     Quarter ended June 30, 1999                      0.13                 0.01
     Quarter ended September 30, 1999                 0.10                 0.02
     Quarter ended December 31, 1999                  0.10                 0.01

         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.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS-SIX MONTHS ENDED DECEMBER 31, 1999

RESULTS OF OPERATIONS

OVERVIEW: The Company had revenues of $10,020,795 for the six month period ended
December 31, 1999 compared to $8,377,103 for the same period in 1998, an
increase of 19.6%. Operating expenses for those same periods were $14,049,744
and $11,008,810 respectively, a 27.6% increase of $3,040,934 in 1999. The loss
from operations for the six months ended December 31,1999 amounted to $4,028,949
compared to $2,631,707 in 1998. The Company recognized a net loss of $6,214,486
and $2,720,512 for the six-month period ended December 31, 1999 and 1998,
respectively. The current period results included a $2,185,537 loss on disposal
of assets related to the Company's restruct ring.

REVENUES: As previously noted, revenues for the six-month period ended December
31, 1999 increased $1,643,692 (19.6%) over the same period in 1998, from
$8,377,103 to $10,020,795. MSO revenues for the two periods were $6,838,390 and
$3,445,053, respectively, a $3,393,337 (98.5%) increase from 1998 to 1999. This
was offset in part by a $1,749,645 (35.5%) decrease in diagnostic and physician

                                       11
<PAGE>   12

billings. MSO revenues for the six months ended December 31, 1999 represented
68.2% of total revenues compared to 41.1% in the prior year's period, reflecting
the Company's shift to the MSO business model.

Management believes that future growth in revenues will result from increases in
its present HMO contracts, new HMO contracts, and from revenues relating to its
strategic alliances to provide products and services including mail order
pharmacy, physician purchasing of supplies and equipment, and telemedicine.

OPERATING EXPENSES: Total operating expenses increased 27.6% for the six-month
period ended December 31, 1999 compared to the prior year, rising from
$11,008,810 to $14,049,744. Direct medical costs, expenses directly related to
MSO revenue, increased from $2,506,228 for the six months ended December 31,
1998 to $6,455,678 for the same period in 1999. Medical expenses include all
costs associated with providing services of the MSO operation including direct
medical payments to physician providers, hospitals and ancillary services on a
capitated and fee for service basis.

Payroll, payroll taxes and benefits decreased 6.3% from 1998 to 1999, from
$3,503,208 for the six-month ended December 31 to $3,280,791. Payroll and
related expenses amounted to 41.8% of revenue in 1998 compared to 32.7% of
revenue in 1999. This improvement reflects both the Company's efforts to
streamline operations and the less labor-intensive nature of MSO business.

Rent and lease expenses totaled $1,225,910 for the six months ended December 31,
1999 and $672,061 for 1998. This increase of $553,849 was due to the acquisition
of new practices and the addition of new locations in early 1999. The Company
divested certain physician offices and its diagnostic operations in late 1999
that included certain rent and lease expenses. The Company moved its corporate
offices to its new location in West Palm Beach in April 2000. There is
sufficient capacity at the Company's current locations for future growth.

Bad debt expense totaled $54,418 or 0.5% of the total revenue for the six months
ended December 31, 1999 compared to $630,184 or 7.5% for the 1998 six month
period. The decrease was due to a decline in the MRI and Datascan revenues and
improved collection procedures.

Consulting expense increased $147,095 to $304,283 for the six months ended
December 31, 1999 compared to $157,188 in 1998. The Company contracted with
consultants to provide services relating to the expansion of medical offices and
to review its business plan to make recommendations regarding new strategic
initiatives.

General and administrative expenses decreased by $700,697 or 31.7% to $1,510,497
for the six months ended December 31, 1999. General and administrative expenses
were 15.1% of total revenue for the six months ended December 31, 1999 compared
to 26.4% of revenue the for prior year period. This improvement was primarily
due to decreases in legal and professional fees related to litigation and
reduction in costs associated with the disposition of physician offices and
diagnostic operations. The Company effectively settled all material litigation
as of December 31, 1999.

Depreciation and amortization totaled $918,145 or 9.2% of revenue for the six
months ended December 31, 1999, and $911,394 or 10.9% of revenue for the 1998
period. This increase is due to the combination of having a full year's
depreciation and amortization on previously acquired assets, and the acquisition
of assets during 1999.

Interest expense was $300,022 for the six months ended December 31, 1999
compared to $416,813 in 1998. This decrease is due to the disposition of assets
and leases relating to diagnostic operations.

The 1999 loss on disposal of assets in the amount of $2,185,537 mainly relates
to the disposal of the Company's MRI and Datascan businesses as part of its
restructuring.

                                       12
<PAGE>   13

LIQUIDITY AND CAPITAL RESOURCES

         The Company has experienced liquidity and cash flow problems, the
result of the Company's operating losses and costs associated with
restructuring, closing of operations, severance and separation agreements.
Current operations and the Company's future development and growth may be
hampered if the Company is not able to raise additional capital. There can be no
assurance that the Company will be able to raise sufficient capital.

         While the Company's net loss was approximately $6.2 million for the six
months ended December 31, 1999, approximately $3,278,347 was attributable to
non-cash items, including stock and stock options issued for services and
compensation, loss on disposal of assets, and depreciation and amortization. The
Company's cash needs in fiscal 1999 were met in part by an advance from an HMO
of approximately $107,000 and certain private borrowings totaling approximately
$850,000.

         The primary source of the Company's liquidity is derived from its
payments from its full-risk contracts with HMOs. In addition the Company has
other revenues and accounts receivable, which are financed under a line of
credit. Such borrowings are available on a formula basis taking into account the
amount and age of eligible receivables. Borrowings amounted to $1,520,668 at
December 31, 1999, with $924,545 remaining at September 30, 2000. Metcare is
negotiating with its current lender to restructure its line of credit. The
Company currently has no additional availability under the current line.

         Subsequent to December 31, 1999 the Company has raised in excess of
$3,000,000 in debt and equity to fund its current operations.

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.

                                       13
<PAGE>   14






PART III

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

         As of December 31, 1999, the directors, control persons and executive
officers of the Company were as follows:

    NAME                         AGE           TITLE

    Noel J. Guillama              39           Chairman, President, Chief
                                                 Executive Officer and Director
    Debra A. Finnel               37           Chief Operating Officer-MSO
                                                 Division
    David S. Gartner, CPA         40           Chief Financial Officer
    Walter A. Fox, D.O.           71           Director
    Mark K. Gerstenfeld           56           Director
    Paul Preste                   47           Director
    Karl Sachs                    63           Director

--------------
         MARK K. GERSTENFELD has served as Director of the Company since October
9, 1998. In addition, Mr. Gerstenfeld has served from October of 1996 to present
as an advisor to the Company. Mr. Gerstenfeld has since 1986 served as Vice
President of Sales at Action West in New York, NY. Mr. Gerstenfeld received a
Bachelor or 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.

         KARL M. SACHS, CPA has served as a Director of the Company since March
15, 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.

         PAUL PRESTE, M.D. has served as a member of the Board of Directors
since March 15, 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.

         FRED STERNBERG, President - Mr. Sternberg has been a director and
President of the Company since January 2000. For more than five years prior
thereto, Mr. Sternberg, through Sternco, Inc., has been involved in the
healthcare industry, providing consulting services relating to
billings/collections, accounts receivables (AR) financing and mobile diagnostics
companies. Mr. Sternberg has also provided consulting services to assisted care
living facilities and skilled nursing homes as well as a dental management
company.

         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.

                                       14
<PAGE>   15

         DAVID S. GARTNER, CPA joined the Company in November 1999 as its Chief
Financial Officer. He has 19 years experience in accounting and finance,
including nine 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.

         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 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.
He is President and Chairman of the Board of Sussex Financial Group, Inc. and
Sussex Insurance Group, an asset money manager for hundreds of physicians in the
Chicago area. He also manages group health plans for many physician practices.
From 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, a recognize 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.

         NOEL J. GUILLAMA served as Chairman, President and Chief Executive
Officer since inception in January 1996 until February 2000. During 1995, Mr.
Guillama served as a health care consultant to public and private health care
providers and companies. During 1995, he was Vice President of Development for
MedPartners, Inc., a Birmingham, Alabama-based physician practice management
public company. From 1991 to 1994, he served as Director and Vice President of
Operations of Quality Care Networks, Inc.

         WALTER A. FOX, D. O., M.Sc., F.A.C.O.I., served as Director of the
Company since October 9, 1998 until February 4, 2000. From 1994 to 1997, Dr. Fox
was practicing internal medicine for the Lake Hospital System based in
Gainesville, Ohio. From 1992 to 1994, Dr. Fox served as Medical Director of
Southern Community Medial Center in Ft. Lauderdale, Florida. Dr. Fox received a
Bachelor or Science degree from Albright College in Reading, Pennsylvania and a
Doctorate of Osteopathic degree from Philadelphia College of Osteopathic
Medicine in Philadelphia, Pennsylvania. Dr. Fox received a Fellowship from the
American College of Osteopathic Internist and a 30-Year Service Award from the
College of Osteopathic Internist. He is a member of the American Medical
Association and the American Osteopathic Association.

                                       15
<PAGE>   16

BOARD OF DIRECTORS

         ELECTION OF OFFICERS

         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 seven 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 among any officers or directors of the Company. The officers of the
Company devote full time to the business of the Company.

         BOARD COMMITTEES

         The Company has three committees, an Audit and Compensation Committee,
Executive Committee and Regulatory Compliance Committee. 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,
selection of independent auditors, reviews the results and scope of the audit
and other services provided by the Company's independent auditors, reviews and
evaluates the Company's internal control functions. During fiscal 1999, the
Audit and Compensation Committee members were Messrs. Guillama, Fox and
Gerstenfeld.

         The Executive Committee was established as of June 30, 1999 and has and
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. During fiscal 1999, the Executive Committee consisted of Messrs.
Guillama and Gerstenfeld.

         The Regulatory Compliance Committee consists of Messrs. Sachs, Preste
and Cahr.

         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 seven Directors
of the Company is also an employee of the Company and did not receive additional
compensation for his services as Director. A formal compensation and stock
option plan has been adopted for the Company's outside Directors in the amount
of $12,000 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 other 20,000
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.

                                       16
<PAGE>   17

         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 six months ended December 31, 1999.

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, 1999 ("fiscal 1999").

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>                    <C>

Noel J. Guillama
Chairman of the Board,       1998         41,466                   11,592
President,
Chief Executive Officer      1999         64,200                  197,989

Robert L. Kagan, MD
Vice President and           1998        348,818     77,500         7,700
Medical Director MRI Scan
Center

Michael P. Goldstein
Director, Acting Chief       1998         81,976                    8,400
Operating Officer and
President Metcare
Diagnostic Services
</TABLE>


                                       17
<PAGE>   18




OPTIONS GRANTED IN THE YEAR ENDED DECEMBER 31, 1999 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>

NONE
</TABLE>

         Total number of options granted to non-executives for the six months
ended December 31, 1999 was 807,000 and for the twelve months ended December 31,
1999 was 1,778,000.

AGGREGATED FISCAL YEAR-END OPTION VALUE TABLE

         The following table sets forth certain information concerning
unexercised stock options as of December 31, 1999. No stock appreciation rights
were granted or are outstanding.

<TABLE>
<CAPTION>
                                                                              Value of Unexercised
                            Number of Unexercised Options                          In-the-Money
                              Held at December 31, 1999                    Options at December 31, 1999(1)
                          --------------------------------                ---------------------------------
NAME                      EXERCISABLE        UNEXERCISABLE                EXERCISABLE         UNEXERCISABLE
----                      -----------        -------------                -----------         -------------
                              (#)                (#)                          ($)                 ($)
                              ---                ---                          ---                 ---
<S>                           <C>                <C>                          <C>                 <C>

Robert Kagan                 80,000             20,000
Donald B. Cohen             306,000
</TABLE>


(1) The closing sale price of the Common Stock on December 31, 1999 as reported
    by NASDAQ was $0.2344 per share. Value is calculated by multiplying (a) the
    difference between $0.2344 and the option exercisable price by (b) the
    number of shares of Common Stock underlying.

         COMPENSATION OF DIRECTORS. For the six-month period ending December 31,
1999, all directors who received remuneration in excess of $100,000 are listed
above.

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

         In connection with their employment with the Company, Fred Sternberg
and Debra Finnel have entered into written contracts with the Company providing
for base compensation of $150,000 and $125,000, respectively, together with
additional bonus provisions based on performance.

                                       18
<PAGE>   19



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(I AM NOT REVIEWING THIS SECTION)

         The following table sets forth certain information regarding the
Company's Common Stock beneficially owned at August 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.

                                                               Percentage of
Name/Address of               Beneficial Ownership          Beneficial Ownership
Beneficial Owner                  Common Stock                  Common Stock
----------------                  ------------                  ------------

Noel J. Guillama(1)                1,490,666                          8.04%
Martin Harrison, M.D.(2)           5,291,372                         28.54%
Fred Sternberg(3)                    923,850                          4.98%
Paul Preste, M.D.(4)                  57,500                          0.31%
Karl Sachs(5)                        240,000                          1.21%
Mark Gerstenfeld(6)                  255,666                          1.24%
Michael Cahr(7)                      303,615                          1.64%
Marvin Heiman(8)                     131,100                          0.71%
Michael Earley(9)                     20,000                          0.11%
David Gartner(10)                     50,000                          0.27%
Debbie Finnel(11)                    200,000                          1.08%
Directors and Executive
Officers as a group
(9 persons)                        2,456,731                         11.63%

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

(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) 1,500,000 shares
currently held as collateral for an existing loan, (2) 50,000 shares issuable
upon exercise of options at a price of $0.50 until July 23, 2005, (3) 50,000
shares issuable upon exercise of options at a price of $0.75 from January 28,
2001 to January 28, 2006, (4) 50,000 shares issuable upon exercise of options at
a price of $1.00 from July 28, 2001 to July 28, 2006 and (5) 50,000 shares
issuable upon exercise of options at a price of $1.25 from January 28, 2002 to
January 28, 2007.

(2) Includes (1) 4,391,372 shares held by Dr. Harrison and (2) 900,000 shares
held by H3O, Inc., a corporation which Dr. Harrison is a Director. Does not
include: (1) 7,000 shares issuable upon exercise of options at a price of $6.938
per share until April 18, 2003, (2) 7,000 shares issuable upon exercise of
options at a price of $7.938 per share until April 18, 2003, (3) 7,000 shares
issuable upon exercise of options at a price of $6.938 per share until October
18, 2003, (4) 7,000 shares issuable upon exercise of options at a price of
$7.938 per share until October 18, 2003, (5) 7,000 shares issuable upon exercise
of options at a price of $6.938 per share until April 18, 2004, (6) 7,000 shares
issuable upon exercise of options at a price of $7.938 per share until April 18,
2004, (7) 7,000 shares issuable upon exercise of options at a price of $6.938
per share until October 18, 2004, (8) 7,000 shares issuable upon exercise of
options at a price of $7.938 per share until October 18, 2004, (9) 7,000 shares
issuable upon exercise of options at a price of $6.938 per share until April 18,
2005, or (10) 7,000 shares issuable upon exercise of options at a price of
$7.938 per share until April 18, 2005.

(3) Includes (1) 405,850 shares held by Sternco, Inc., a corporation which Mr.
Sternberg is a President, (2) 18,000 shares held by Mr. Sternberg's wife, (3)
300,000 shares issuable upon the exercise of options at a price of $0.30 per
share until March 15, 2005, (4) 100,000 shares issuable upon the exercise of
options by Sternco, Inc. at a price of $0.75 per share until May 7, 2004, and
(5) 100,000 shares issuable

                                       19
<PAGE>   20

upon the exercise of options by Sternco, Inc. at a price of $1.00 per share
until May 7, 2004. Does not include (1) 100,000 shares issuable upon the
exercise of options by Sternco, Inc. at a price of $2.00 per share with vesting
based upon certain earnings criteria of the Company or (2) 1,000,000 shares that
may be issued upon the exercise of options at a price of $0.50 per share with
vesting based upon certain earnings criteria of the Company.

(4) Includes (1) 17,500 shares held by Dr. Preste, (2) 20,000 shares issuable
upon exercise of options at a price of $0.30 until May 7, 2004 and (3) 20,000
shares issuable upon exercise of options at a price of $0.30 per share until
April 23, 2005.

(5) Includes (1) 200,000 shares held by Mr. Sachs, (2) 20,000 shares issuable
upon exercise of options at a price of $0.30 per share until March 15, 2004, and
(3) 20,000 shares issuable upon exercise of options at a price of $0.30 per
share until March 15, 2004. Does not include 25,000 shares issuable upon
exercise of options at a price of $0.30 per share from February 4, 2001 through
February 4, 2002.

(6) Includes (1) 85,666 shares held by Mr. Gerstenfeld, (2) 20,000 shares
issuable upon exercise of options at a price of $0.30 per share until October 8,
2003, (3) 20,000 shares issuable upon exercise of options at a price of $0.30
per share until April 8, 2004, (4) 80,000 shares issuable upon exercise of
options at a price of $0.625 per share until March 15, 2004, (5) 25,000 shares
issuable upon exercise of options at a price of $0.75 per share until November
7, 2004 and (6) 25,000 shares issuable upon exercise of options at a price of
$0.75 per share until May 7, 2005. Does not include (1) 25,000 shares issuable
upon exercise of options at a price of $0.75 per share from November 7, 2000
through November 7, 2005, (2) 25,000 shares issuable upon the exercise of
options at a price of $0.75 per share from May 7, 2001 through May 7, 2006 or
(3) 25,000 shares issuable upon the exercise of options at a price of $0.75 per
share from November 7, 2001 through November 7, 2006.

(7) Includes (1) 229,615 shares held by Michael Cahr, (2) 4,000 shares held by
Michael Cahr as custodian for his son, (3) 20,000 shares issuable upon the
exercise of options at the price of $0.75 per share until February 4, 2005 and
(4) 50,000 shares issuable upon the exercise of options at the price of $0.50
per share until April 4, 2001. Does not include 20,000 shares issuable upon the
exercise of options at the price of $0.75 per share from February 4, 2001
through February 4, 2005.

(8) Includes (1) 1111,100 shares held by Marvin Heiman and (2) 20,000 shares
issuable upon the exercise of options at the price of $0.75 per share until
February 17, 2005. Does not include 20,000 shares issuable upon the exercise of
options at a price of $0.75 per share from February 17, 2001 through February
17, 2005.

(9) Includes 20,000 shares issuable upon the exercise of options at a price of
$0.75 per share until June 9, 2005. Does not include 20,000 shares issuable upon
the exercise of options at a price of $0.75 per share from June 9, 2001 through
June 9, 2005.

(10) Includes 50,000 shares issuable upon the exercise of options at a price of
$0.30 per share until February 4, 2001. Does not include 50,000 shares issuable
upon the exercise of options at a price of $0.30 per share from November 1, 2000
to November 1, 2001 or 50,000 options issuable upon the exercise of options at a
price of $0.30 per share from November 1, 2001 to November 1, 2002.

(11) Includes 150,000 shares issuable upon the exercise of options at a price of
$0.30 per share until March 16, 2001 and 50,000 shares issuable upon the
exercise of options at a price of $0.50 per share until October 8, 2005. Does
not include 50,000 shares issuable upon the exercise of options at a price of
$0.50 per shares from October 8, 2001 through October 8, 2006 or 50,000 shares
issuable upon the exercise of options at a price of $0.50 per shares from
October 8, 2002 through October 8, 2007.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The Company 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

                                       20
<PAGE>   21

materially contributed to such acquisition. Prior to becoming an officer and
director of the Company any and all obligations under this agreement were
satisfied with the payment of $24,000 cash and 160,000 shares of common stock.

         The facility leases between Dr. Robert Kagan and the Company are for
the addresses 3122 East Commercial Boulevard and 3079 East Commercial Boulevard.
The property located at 3122 East Commercial Boulevard is owned by Dr. Kagan, a
former director of the Company, and leased by Magnetic Imaging Systems I, Ltd.
The current rent is $13,126 per month net of expenses. The total square footage
is 4,656 of office space plus an additional 2,000 square feet of garage.
Magnetic Imaging Systems, I, Ltd. built the garage in 1987. The total leasehold
improvements were approximately $285,289 at this location. Independent property
appraisals were performed and both valued the properties at a maximum of $22 a
square foot net of expenses. Magnetic Imaging Systems, I, Ltd. is currently
paying $23.66 a square foot net of expenses for the 4,656 square feet of office
space. This lease expires December 31, 2003. This lease was assigned to Dr.
Robert Kagan as part of the Global Settlement Agreement, whereby METCARE has
been released of any and all responsibility and obligations.

         The property located at 3079 East Commercial Boulevard, is owned by KFK
Enterprises, Inc., a Florida corporation and leased by Magnetic Imaging Systems,
I, Ltd. Dr. Kagan, a former director of the Company owns approximately 50% of
KFK Enterprises. The rental payment is $7,395 per month and the property is
5,740 square feet. The Company believes that this price is equal to current
market value. Magnetic Imaging Systems, I, Ltd. made leasehold improvements of
$139,289 at this location. This lease expires December 31, 2003. This lease has
been assigned to Dr. Robert Kagan as part of the Global Settlement Agreement,
whereby METCARE has been release of any and all responsibility and obligations.

         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 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

                                       21
<PAGE>   22
C O N T E N T S

<TABLE>
<CAPTION>

                                                                                 Page
                                                                                 ----

<S>                                                                             <C>
INDEPENDENT AUDITORS' REPORT                                                        1

CONSOLIDATED FINANCIAL STATEMENTS

         Balance Sheets                                                             2

         Statements of Operations                                                 3 - 4

         Statements of Changes in Stockholders' Equity (Deficiency In Assets)     5 - 6

         Statements of Cash Flows                                                 7 - 10

         Notes to Financial Statements                                           11 - 34

</TABLE>


<PAGE>   23



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 sheets of Metropolitan
Health Networks, Inc. and Subsidiaries as of December 31, 1999 and June 30,
1999, and the related consolidated statements of operations, changes in
stockholders' equity (deficiency in assets), and cash flows for the six month
period ended December 31, 1999 and each of the two years in the period 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, 1999 and June 30, 1999, and
the results of their operations and their cash flows for the six month period
ended December 31, 1999 and each of the two years in the period ended June 30,
1999, in conformity with accounting principles generally accepted in the United
States. We have not audited the consolidated statements of operations and cash
flows for the six months ended December 31, 1998. Accordingly, we do not express
an opinion or any other form of assurance on them.

The consolidated financial statements for the six month period ended December
31, 1999 have been restated as described in Note 2.

                                                     KAUFMAN, ROSSIN & CO., P.A.

Miami, Florida

June 16, 2000, except for the fourth paragraph under "The Practices" in Note 3,
which is August 2, 2000, and Note 2, which is September 14, 2001.


<PAGE>   24



METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND JUNE 30, 1999

<Table>
<Caption>
                                                                                  December 31, 1999         June 30, 1999
                                                                                  -----------------         -------------
<S>                                                                                 <C>                    <C>
ASSETS
CURRENT ASSETS
     Accounts receivable, net of allowances of $4,829,137 and $5,042,376,
         respectively                                                               $  3,001,661           $  3,459,245
     Other current assets (Note 6)                                                       257,699                 96,349
                                                                                    ------------           ------------
         Total current assets                                                          3,259,360              3,555,594

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $815,516 and
     $2,673,841, respectively (Note 4)                                                 1,228,416              4,316,128

GOODWILL, net of accumulated amortization of $249,555 and $958,722,
     respectively (Note 1)                                                             2,394,891              3,842,840

INTANGIBLE ASSETS, net of accumulated amortization of $91,145 and $36,458,
     respectively                                                                        127,605                182,292

OTHER ASSETS                                                                              23,308                 47,893
                                                                                    ------------           ------------
                                                                                    $  7,033,580           $ 11,944,747
                                                                                    ============           ============

LIABILITIES AND DEFICIENCY IN ASSETS
CURRENT LIABILITIES
     Accounts payable                                                               $  2,608,950           $  2,529,884
     Advances from HMO                                                                 1,596,000              1,089,000
     Due to related parties (Note 10)                                                     95,705                300,144
     Accrued expenses                                                                  3,013,466              1,665,399
     Medical costs payable                                                                98,907                357,940
     Line of credit (Note 8)                                                           1,520,668                132,231
     Unearned revenue                                                                    125,000                     --
     Current maturities of capital lease obligations (Note 7)                            378,094                848,120
     Current maturities of long-term debt (Note 9)                                     6,366,181              5,764,221
                                                                                    ------------           ------------
         Total current liabilities                                                    15,802,971             12,686,939

CAPITAL LEASE OBLIGATIONS (NOTE 7)                                                       449,515              2,280,705

LONG-TERM DEBT (NOTE 9)                                                                  293,700                477,902

COMMITMENTS AND CONTINGENCIES (NOTE 14)

DEFICIENCY IN ASSETS (NOTE 12)                                                        (9,512,606)            (3,500,799)
                                                                                    ------------           ------------
                                                                                    $  7,033,580           $ 11,944,747
                                                                                    ============           ============
</TABLE>


                             See accompanying notes.


                                       2
<PAGE>   25
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTH PERIODS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>

                                                                                      Unaudited
                                                                  1999                   1998
                                                              ------------           ------------
<S>                                                           <C>                    <C>
REVENUES                                                      $ 10,020,795           $  8,377,103
                                                              ------------           ------------
EXPENSES
     Direct medical costs                                        6,455,678              2,506,228
     Payroll, payroll taxes and benefits                         3,280,791              3,503,208
     Depreciation and amortization                                 918,145                911,934
     Bad debt expense                                               54,418                630,184
     Rent and leases                                             1,225,910                672,061
     Consulting expense                                            304,283                157,188
     Interest                                                      300,022                416,813
     General and administrative                                  1,510,497              2,211,194
                                                              ------------           ------------
         Total expenses                                         14,049,744             11,008,810
                                                              ------------           ------------


LOSS FROM OPERATIONS                                            (4,028,949)            (2,631,707)
                                                              ------------           ------------
OTHER INCOME (EXPENSE)
     Loss on disposal of assets (Note 3)                        (2,185,537)                (9,158)
     Other                                                              --                (79,647)
                                                              ------------           ------------
         Total other income (expense)                           (2,185,537)               (88,805)
                                                              ------------           ------------

NET LOSS                                                      $ (6,214,486)          $ (2,720,512)
                                                              ============           ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING            10,738,757              6,501,185
                                                              ============           ============
NET LOSS PER SHARE, basic and diluted                         $      (0.58)          $      (0.42)
                                                              ============           ============

</TABLE>



                            See accompanying notes.

                                       3
<PAGE>   26
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1999 AND 1998

<TABLE>
<CAPTION>

                                                                                                1999                   1998
                                                                                            ------------           ------------
<S>                                                                                         <C>                    <C>
REVENUES                                                                                    $ 18,501,497           $ 14,025,264
                                                                                            ------------           ------------
EXPENSES
     Direct medical costs                                                                      7,346,978              1,294,347
     Payroll, payroll taxes and benefits                                                       7,046,342              7,114,017
     Depreciation and amortization                                                             1,870,774              1,415,515
     Bad debt expense                                                                          1,060,856              1,723,425
     Rent and leases                                                                           1,955,352              1,159,356
     Consulting expense                                                                        1,000,608                202,000
     Interest                                                                                    683,203                658,048
     General and administrative                                                                5,379,189              5,062,746
                                                                                            ------------           ------------
         Total expenses                                                                       26,343,302             18,629,454
                                                                                            ------------           ------------

LOSS FROM OPERATIONS                                                                          (7,841,805)            (4,604,190)
                                                                                            ------------           ------------

OTHER INCOME (EXPENSE)
     Loss on Primedica (Note 3)                                                               (2,206,448)                    --
     Loss on disposal of assets (Note 3)                                                        (362,003)              (330,000)
     Other                                                                                        90,440               (232,135)
                                                                                            ------------           ------------
         Total other income (expense)                                                         (2,478,011)              (562,135)
                                                                                            ------------           ------------

NET LOSS                                                                                    $(10,319,816)          $ (5,166,325)
                                                                                            ============           ============

WEIGHTED AVERAGE NUMBER OF COMMON
     SHARES OUTSTANDING                                                                        7,185,142              5,597,803
                                                                                            ============           ============

NET LOSS PER SHARE, basic and diluted                                                       $      (1.44)          $      (0.92)
                                                                                            ============           ============

</TABLE>


                             See accompanying notes.



                                       4
<PAGE>   27
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIENCY IN ASSETS)
SIX MONTH PERIOD ENDED DECEMBER 31, 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, 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 12)                     (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

Shares issued for
 interest expense
 and late fees                          --             --        130,000           130        46,090             --         46,220

Contingent shares
 issued in connection
 with acquisition                       --             --        156,923           157          (157)            --             --

Dividends on preferred
 stock (Note 12)                        --             --             --            --            --         (6,986)        (6,986)

Issuance of options
 in lieu of
 compensation
 (Note 13)                              --             --             --            --        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)
                                     =====   ============     ==========  ============  ============   ============   ============
</TABLE>






                             See accompanying notes.



                                       5
<PAGE>   28

METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIENCY IN ASSETS)
YEARS ENDED JUNE 30, 1999 AND 1998

<TABLE>
<CAPTION>

                                                                                                       Unrealized Gain
                                                      Common                  Additional                On Securities
                          Preferred  Preferred        Stock      Common        Paid-in                  Available For
                            Shares     Stock          Shares      Stock         Capital      Deficit        Sale          Total
                            -----  ------------     ---------  ------------  ------------  ------------ -------------  ----------
<S>                        <C>     <C>              <C>        <C>           <C>           <C>           <C>         <C>
BALANCES - JUNE 30, 1997       --  $         --     5,210,825  $      5,211  $  8,675,586  $ (1,747,993) $   40,916  $  6,973,720

Issuance of series A
 Preferred Stock
 (Note 12)                  5,000       500,000            --            --       (40,000)           --          --       460,000

Issuance of series B
 Preferred Stock
 (Note 12)                  1,200     1,200,000            --            --       (84,946)           --          --     1,115,054

Issuances of common
 stock                         --            --       625,142           625     1,768,853            --          --     1,769,478

Issuance of options
 in lieu of
 compensation                  --            --            --            --       127,000            --          --       127,000

Exercise of options
 (Note 13)                     --            --       470,602           471         3,959            --          --         4,430

Conversion of
 securities available
 for sale to the
 trading account               --            --            --            --            --            --     (40,916)      (40,916)

Dividends on
 preferred stock
 (Note 12)                     --            --            --            --            --       (10,000)         --       (10,000)

Net loss                       --            --            --            --            --    (5,166,325)         --    (5,166,325)

                            -----  ------------     ---------  ------------  ------------  ------------  ----------   -----------
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 12)            (700)     (700,000)    1,297,305         1,297       698,703            --          --            --

Returned or retired
 shares (Note 3)               --            --      (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

Contingent shares
 issued in connection
 with acquisition              --            --       225,000           225          (225)           --          --            --

Exercise of options
 (Note 13)                     --            --       252,318           252        89,748            --          --        90,000

Dividends on preferred
 stock (Note 12)               --            --            --            --            --       (47,503)         --       (47,503)

Options granted for
 services rendered
 (Note 13)                     --            --            --            --       576,310            --          --       576,310

Issuance of options
 in lieu of
 compensation (Note 13)        --            --            --            --       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)
                            =====  ============     =========  ============  ============  ============  ==========   ===========
</TABLE>



                             See accompanying notes.


                                       6
<PAGE>   29
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS PERIODS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>

                                                                                                          Unaudited
                                                                                       1999                  1998
                                                                                   -----------           -----------
<S>                                                                                <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                                      $(6,214,486)          $(2,720,512)
                                                                                   -----------           -----------
     Adjustments to reconcile net loss to net cash provided by (used in)
         operating activities:
         Depreciation and amortization                                                 918,145               911,934
         Loss on disposal of assets                                                  2,185,537                    --
         Provision for bad debts                                                        54,418               630,184
         Stock options granted in lieu of compensation                                  97,205                    --
         Stock issued for professional services and compensation                        31,240                    --
         Stock issued for loans, interest and late fees                                 46,220                    --
         Changes in operating assets and liabilities:
             Accounts receivable                                                       403,166             1,079,356
             Trading securities                                                             --                  (204)
             Other current assets                                                     (209,951)             (272,261)
             Other assets                                                               24,585               (72,092)
             Accounts payable and accrued expenses                                   1,350,062             1,331,322
             Unearned revenue                                                          125,000                    --
             Medical claims payable                                                         --                13,626
                                                                                   -----------           -----------
                  Total adjustments                                                  5,025,627             3,621,865
                                                                                   -----------           -----------
                      Net cash provided by (used in) operating activities           (1,188,859)              901,353
                                                                                   -----------           -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

     Cash consideration paid for companies acquired                                   (200,000)                   --
     Capital expenditures                                                             (109,181)             (360,542)
                                                                                   -----------           -----------
                      Net cash used in investing activities                           (309,181)             (360,542)
                                                                                   -----------           -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

     Net borrowings (repayments) under line of credit facilities                     1,388,437              (980,685)
     Repayments of notes payable                                                      (484,267)                   --
     Borrowings on note payable                                                        847,025                    --
     Net repayments of capital lease obligations                                      (360,155)             (285,855)
     Net proceeds from issuance of common stock                                             --              (158,719)
     Advances from HMO                                                                 107,000                    --
                                                                                   -----------           -----------
                      Net cash provided by (used in) financing activities            1,498,040            (1,425,259)
                                                                                   -----------           -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                                   --              (884,448)

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

CASH AND CASH EQUIVALENTS - ENDING                                                 $        --           $    32,016
                                                                                   ===========           ===========

</TABLE>




                            See accompanying notes.


                                       7
<PAGE>   30
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE SIX MONTHS PERIODS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>

                                                                                                             Unaudited
                                                                                            1999                1998
                                                                                         ----------          ----------
<S>                                                                                      <C>                 <C>
Supplemental Disclosures:

     Interest paid                                                                       $  221,000          $  384,000
                                                                                         ----------          ----------

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

Supplemental Disclosure of Non-cash Investing and Financing Activities (Note 3)

     Purchase price in excess of net assets acquired                                     $  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
                                                                                         ----------          ----------


</Table>


                             See accompanying notes.



                                       8
<PAGE>   31
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1999 AND 1998

<TABLE>
<CAPTION>

                                                                                     1999                 1998
                                                                                 ------------         ------------
<S>                                                                              <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                                    $(10,319,816)        $ (5,166,325)
                                                                                 ------------         ------------
     Adjustments to reconcile net loss to net cash provided by (used in)
         operating activities:
         Depreciation and amortization                                              1,702,034            1,415,515
         Loss on Primedica                                                          2,206,448                   --
         Realized loss on sales of securities                                         131,452               22,677
         Change in unrealized gain on trading securities                              (85,314)                  --
         Loss on sale of property and equipment                                        14,339                   --
         Loss on disposal of assets                                                   362,003                   --
         Provision for bad debts                                                    1,060,856            1,723,425
         Deferred costs charged to operations                                              --              260,364
         Amortization of discount on note payable                                     168,740               36,201
         Stock options granted in lieu of compensation                                153,292              127,000
         Stock options granted for professional services                              576,310                   --
         Stock issued in lieu of compensation                                         428,585                   --
         Stock issued for professional services                                       443,850              350,632
         Changes in operating assets and liabilities:
             Accounts receivable                                                    1,330,769           (1,577,900)
             Trading securities                                                            --              240,072
             Other current assets                                                     145,865              (92,296)
             Other assets                                                              85,436               20,461
             Accounts payable and accrued expenses                                  2,044,599            1,060,358
             Due to related parties                                                   300,144                   --
             Medical claims payable                                                  (487,597)             466,990
                                                                                 ------------         ------------
                  Total adjustments                                                10,581,811            4,053,499
                                                                                 ------------         ------------
                      Net cash provided by (used in) operating activities             261,995           (1,112,826)
                                                                                 ------------         ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Deferred acquisition costs                                                       171,890             (110,016)
     Repayment (issuance) of notes receivable                                         170,000             (170,000)
     Cash consideration paid for companies acquired                                        --             (346,500)
     Cash balances of companies acquired                                                   --               46,626
     Capital expenditures                                                            (908,712)            (371,815)
                                                                                 ------------         ------------
                      Net cash used in investing activities                          (566,822)            (951,705)
                                                                                 ------------         ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net borrowings (repayments) under line of credit facilities                   (1,543,694)           1,023,399
     Repayments of notes payable                                                      (82,044)            (717,547)
     Borrowings on note payable                                                       420,017              177,413
     Repayments of capital lease obligations                                         (584,916)            (704,641)
     Loan acquisition cost                                                                 --              (45,000)
     Proceeds from exercise of stock options                                           90,000                4,430
     Net proceeds from issuance of preferred stock                                         --            1,575,054
     Advances from HMO                                                              1,089,000                   --
                                                                                 ------------         ------------
                      Net cash provided by (used in) financing activities            (611,637)           1,313,108
                                                                                 ------------         ------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                            (916,464)            (751,423)

CASH AND CASH EQUIVALENTS - BEGINNING                                                 916,464            1,667,887
                                                                                 ------------         ------------
CASH AND CASH EQUIVALENTS - ENDING                                               $         --         $    916,464
                                                                                 ============         ============

</TABLE>



                             See accompanying notes.






                                       9
<PAGE>   32
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
YEARS ENDED JUNE 30, 1999 AND 1998


<TABLE>
<CAPTION>

                                                                                            1999                1998
                                                                                         ----------          ----------
<S>                                                                                      <C>                 <C>
Supplemental Disclosures:

     Interest paid                                                                       $  633,000          $  560,000
                                                                                         ----------          ----------

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

Supplemental Disclosure of Non-cash Investing and Financing Activities (Note 3)

     Common stock issued in connection with acquisitions                                 $       --          $1,291,846
                                                                                         ----------          ----------

     Issuance of notes payable in connection with acquisitions                           $   37,801          $2,856,123
                                                                                         ----------          ----------

     Fair value of assets received in connection with acquisitions                       $  581,810          $2,200,151
                                                                                         ----------          ----------

     Fair value of liabilities assumed in connection with acquisitions                   $  454,054          $1,060,270
                                                                                         ----------          ----------

     Capital lease obligations incurred on purchases of equipment                        $  502,808          $  221,673
                                                                                         ----------          ----------

     Dividends accrued but not paid                                                      $   47,503          $   10,000
                                                                                         ----------          ----------

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

</TABLE>



                                       10
<PAGE>   33
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 majority owned subsidiaries, the most significant
of which are Magnetic Imaging Systems I, Ltd. and Nuclear Magnetic Imaging, Inc.
(collectively MIS), Datascan of Florida, Inc. (Datascan), Advanced Healthcare
Consultants, Inc. (Advanced), Family Medical Plaza, Inc. and several physician
practices. 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 in South Florida, and during the periods ended
December 31, 1999 and June 1999 and 1998, owned and operated a radiology
practice, a magnetic resonance imaging (MRI) outpatient center, a diagnostic
testing company and various general medical practice offices. During the six
months ended December 31, 1999 the Company sold the radiology practice and
magnetic resonance imaging (MRI) outpatient center (see Note 3). The Company and
certain of the general medical practices operate under capitation agreements
with a national health maintenance organization (HMO). Commencing in 1999, the
Company entered into additional capitation agreements with the HMO in locations
where it did not have owned medical practices and in connection therewith, began
providing 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 related businesses, however, as
these services were not significant, the Company is deemed to be operating in
one segment.

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.



                                       11
<PAGE>   34
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

DEPRECIATION AND AMORTIZATION

Depreciation and amortization of property and equipment, including property
under capital leases, is computed using straight-line methods over the estimated
useful lives of the assets. The range of useful lives is as follows:

          Machinery and equipment                            5 - 7 years
          Computer and office equipment                      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 generally accepted
accounting principles 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.

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.

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,
     long-term debt and notes payable to redeemed partners are estimated using
     discounted cash flows analyses based on the Company's incremental borrowing
     rates for similar types of borrowing arrangements. At December 31, 1999 and
     June 30, 1999, the fair values approximate the carrying values.



                                       12
<PAGE>   35
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NET LOSS PER SHARE

Net loss per share is computed in accordance with Statement of Financial
Accounting Standards (SFAS) No. 128, based on the weighted average number of
common shares outstanding. Outstanding stock options (see Note 13) were not
considered in the calculation of weighted average number of common shares
outstanding, as their effect would have been antidilutive.

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 Management Service Organization
(MSO) 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 MSO 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 six month period ended December 31, 1999 and years ended June
30, were as follows:


<TABLE>
<CAPTION>

                                                                  Years Ended June 30
                                    Six Months Ended        --------------------------------
                                    December 31, 1999          1999                 1998
                                    -----------------       -----------          -----------
<S>                                    <C>                  <C>                  <C>
Patient revenues, net                  $ 3,170,405          $ 9,606,854          $12,116,028
MSO revenues, net                        6,838,390            8,862,826            1,643,462
Billing service revenues, net               12,000               31,817              265,774
                                       -----------          -----------          -----------
                                       $10,020,795          $18,501,497          $14,025,264
                                       ===========          ===========          ===========

</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.



                                       13
<PAGE>   36
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

GOODWILL

In connection with its acquisitions of physician and ancillary practices, the
Company has recorded goodwill of $2,644,446 and $4,801,562 as of December 31 and
June 30, 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, 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.

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.

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.

RECLASSIFICATION

Certain amounts in the unaudited financial statements for the six month period
ended December 31, 1998 have been reclassified to conform with the December 31,
1999 financial statement presentation.



                                       14
<PAGE>   37
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS

During 1998, the Company adopted Financial Accounting Standards Board ("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.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. Among other
provisions, SFAS No. 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities. It also requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. Management believes the adoption of SFAS No. 133 will not
have a material effect on the Company's consolidated financial statements.

NOTE 2. 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 six month
period ended December 31, 1999, is as follows:

<TABLE>
<CAPTION>

                                            As Previously
                                           Reported as of               As Restated as of
                                          December 31, 1999             December 31, 1999
                                          -----------------             -----------------
<S>                                          <C>                            <C>
Accrued expenses                             $ 2,793,466                    $ 3,013,466
Total current liabilities                     15,582,971                     15,802,971
Accumulated deficit                           23,293,109                     23,513,109
Deficiency in assets                           9,292,606                      9,512,606

</TABLE>




                                       15
<PAGE>   38
NOTE 2. RESTATEMENT (CONTINUED)


<TABLE>
<CAPTION>

                                                         As Previously
                                                        Reported for the            As Restated for the
                                                        Six Months Ended             Six Months Ended
                                                       December 31, 1999             December 31, 1999
                                                       -----------------            -------------------
<S>                                                      <C>                            <C>
General and administrative expenses                      $ 1,290,497                    $ 1,510,497
Total expenses                                            13,829,744                     14,049,744
Loss from operations                                       3,808,949                      4,028,949
Net loss                                                   5,994,486                      6,214,486
Net loss per share, basic and diluted                           0.55                           0.58

</TABLE>

NOTE 3. ACQUISITIONS AND DISPOSALS

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.



                                       16
<PAGE>   39
NOTE 3. ACQUISITIONS AND DISPOSALS (CONTINUED)

DATASCAN

Effective September 30, 1996, the Company acquired 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.

WAND

Effective March 12, 1997, the Company acquired a medical practice (Wand) for
$363,015. The purchase price consisted of a cash payment of $120,000, 75,000
shares of the Company's common stock (valued at $3 per share) and related
acquisition costs of $18,015. 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,
$10,525 was allocated to goodwill. Effective July 1, 1998, Wand was sold to its
former owner in exchange for the return of the initial 75,000 shares of the
Company's common stock. Additionally, the buyer assumed certain liabilities of
Wand. In connection with this sale, the Company recognized a loss of
approximately $200,000, which is included in loss on disposals of assets in the
accompanying statement of operations for the year ended June 30, 1999.

CERTAIN ASSETS OF IFHC

Effective October 15, 1996, the Company acquired certain assets of IFHC. The
purchase price consisted of 50,000 shares of the Company's common stock (valued
at $3 per share) and the issuance of a 8% note payable in the amount of
$150,000. During 1998 the Company discontinued the operations of IFHC. In
connection therewith, certain assets of IFHC were sold in exchange for a $35,000
note receivable. Total amounts charged to operations in connection with closing
these facilities totalled approximately $330,000 for the year ended June 30,
1998.

GMA

Effective July 1, 1997, the Company purchased all of the outstanding common
stock of GMA for $1,720,306. In exchange for the stock of GMA, the Company paid
$300,000 cash, 216,154 shares of the Company's common stock (valued at $4.37),
entered into a note payable of $400,000 with the former shareholder of GMA, and
incurred related acquisition costs of $75,713. 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. The results of
operations beginning July 1, 1997 are included in the Company's statement of
operations. As a result of this acquisition, $98,475 was allocated to goodwill.



                                       17
<PAGE>   40
NOTE 3. ACQUISITIONS AND DISPOSALS (CONTINUED)

In addition to the purchase consideration, the acquisition agreement provides
for two types of contingent consideration: 1) If the EBITDA of GMA for the years
ended June 30, 1998 and 1999 equals or exceeds 80% of GMA's EBITDA for the
twelve months ended June 30, 1997 (the "Targeted Amount"), there shall be
released from escrow 104,615 and 52,308 additional shares, respectively, of the
common stock of the Company. In the event, however, that the EBITDA is less than
the Targeted Amount, the seller of GMA is entitled to receive additional shares
of the Company, as determined based upon a sliding scale down to 60%. The
Company was not liable for contingent consideration under this provision at June
30, 1998 or 1999; 2) If the gross proceeds from the sale of up to 200,000 shares
of the Company's common stock issued to the former owner of GMA (the Seller)
amounted to less then $6.50 per share, the Company must make up the deficiency
in cash. In June 1999, the Company issued 225,000 shares of its common stock
(valued at $1.65 per share) to the Seller in full satisfaction of this
contingent consideration provision. The Seller was entitled to sell 25,000 share
blocks monthly, during the period July 1, 1999 through February 12, 2000.

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 is
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%) (see Note
9). 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 April 1, 1998 are
included in the Company's statement of operations. As a result of this
acquisition, $1,588,349 was allocated to goodwill.

In connection with this acquisition, a Repurchase Election Agreement was signed,
whereby Primedica may be required to repurchase the Practices at the end of five
years in exchange for extinguishing the Company's further obligations under the
note payable, provided certain conditions are met, among the most significant of
which is the requirement that the Company be in compliance with the terms of the
Promissory Note. Additionally, Primedica may elect not to be liable to
repurchase the Practices if the net revenue derived from the purchased assets
exceeds $6,000,000.

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 result of
operations for the year ended June 30, 1999.



                                       18
<PAGE>   41
NOTE 3. ACQUISITIONS AND DISPOSALS (CONTINUED)

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. Effective August
2, 2000 the parties entered into a second stipulation for forbearance providing
for a discount on amounts owed of $2,000,000 to $2,500,000 contingent upon
timely weekly payments of $25,000 to Primedica. In the event of a default by the
Company in connection with the timely required payments, the Company shall be
obligated to pay the full amount of the $4,745,364. At December 31, 1999 the
Company owed Primedica $4,524,462, which is included in current maturities of
long-term debt.

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. 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.



                                       19
<PAGE>   42
NOTE 3. ACQUISITIONS AND DISPOSALS (CONTINUED)

PRO FORMA - UNAUDITED

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 and June 30, 1998, after giving effect to certain
adjustments such as the elimination of intercompany transactions resulting from
the acquisitions were as follows:

                                   (Unaudited)                      (Unaudited)
                                  June 30, 1999                    June 30, 1998
                                  -------------                    -------------

Revenues                          $ 19,749,497                     $ 14,025,264
Net loss                          $(10,947,319)                    $ (4,950,325)
Loss per share                    $      (1.52)                    $      (0.88)

The pro forma summary does not necessarily reflect the results of operations as
they would have been if the companies had constituted a single entity during
such periods.

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 will be 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.



                                       20
<PAGE>   43
NOTE 3. ACQUISITIONS AND DISPOSALS (CONTINUED)

PRO FORMA - UNAUDITED

Unaudited pro forma results of operations, assuming the acquisition of the
Sreekumar and Federgreen practices occurred as of the beginning of the six
months periods ended December 31, 1999 and 1998, after giving effect to certain
adjustments such as the elimination of intercompany transactions resulting from
the acquisitions were as follows:

                              (Unaudited)                (Unaudited)
                           December 31, 1999           December 31, 1998
                           -----------------           -----------------

Revenues                     $ 10,560,795                $  8,917,103
Net loss                     $  6,094,486)               $ (2,600,512)
Loss per share               $      (0.56)               $      (0.40)

The pro forma summary does not necessarily reflect the results of operations as
they would have been if the companies had constituted a single entity during
such periods.

NOTE 4. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

<TABLE>
<CAPTION>

                                           December 31, 1999            June 30, 1999
                                           -----------------            -------------
<S>                                           <C>                        <C>
Machinery and medical equipment               $   222,805                $ 1,694,841
Furniture and fixtures                            531,721                    254,154
Leasehold improvements                            365,931                    813,941
Computer and office equipment                     425,259                    492,589
Automobile equipment                               61,380                    160,086
                                              -----------                -----------
                                                1,607,096                  3,415,611
Less accumulated depreciation                    (569,835)                (1,346,948)
                                              -----------                -----------
                                              $ 1,037,261                $ 2,068,663
                                              ===========                ===========


</TABLE>



                                       21
<PAGE>   44
NOTE 4. PROPERTY AND EQUIPMENT (CONTINUED)

Property and equipment under capital leases consisted of the following:

                                      December 31, 1999         June 30, 1999
                                      -----------------         -------------
Machinery and equipment                 $        --              $ 3,137,399
Computer and office equipment                436,836                 436,959
                                         -----------             -----------
                                             436,836              3,574,358

Less accumulated amortization               (245,681)             (1,326,893)
                                         -----------             -----------
                                             191,155              2,247,465
                                         -----------             -----------
                                         $ 1,228,416             $ 4,316,128
                                         ===========             ===========

NOTE 5. 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 years ended June 30, 1999 and 1998 was $85,314 and ($131,817),
respectively, and these changes are included in other income (expense) in the
consolidated statements of operations.

Net realized losses on sales of trading securities for the periods ended June
30, 1999 and 1998 were $131,452 and $22,677, respectively, and are included in
other income (expense) in the consolidated statements of operations.

NOTE 6. OTHER CURRENT ASSETS

ALPHA CLINICAL LABORATORY AGREEMENT

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. The designated purchase price shall be three times the pre-tax
profit for the twelve-month period preceding the measurement date, and shall be
payable with the Company's common stock. 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 which is included in other
current assets in the accompanying balance sheet. On May 12, 2000 these
advances, plus additional advances in 2000 were converted into a promissory note
in the amount of $512,000. The promissory note is payable upon demand, bears
interest at 18% per annum, and is collateralized by substantially all of the
assets of Alpha.



                                       22
<PAGE>   45
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:

        2000                                           $       466,539
        2001                                                   226,768
        2002                                                   141,394
        2003                                                   109,041
        2004                                                    75,461
                                                       ---------------
                                                             1,019,203
        Less amount representing interest                      191,594
                                                       ---------------
                                                               827,609
        Less current maturities                                378,094
                                                       ---------------
                                                       $       449,515
                                                       ===============

NOTE 8. LINE OF CREDIT FACILITIES

In September 1997, the Company entered into an accounts receivable funding
program (the Program) with a financing company. The Program allowed for advances
to the Company of up to 85% of the expected collections from third party payers
on eligible accounts receivable of GMA, as defined. Outstanding amounts under
this credit facility are collateralized by the eligible accounts receivable. The
Program bears interest at 12% and repayments are made directly through a lock
box arrangement. At June 30, 1999, $132,231 was outstanding under this Program,
which was repaid in July 1999 and the Program was canceled.

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% (12.50%
and 11.75% at December 31 and June 30, 1999, respectively) and repayments are
made directly through a lock box arrangement. At December 31, 1999 $1,520,668
was outstanding on this credit facility. At June 30, 1999 no amounts were
outstanding on this credit facility.




                                       23
<PAGE>   46
NOTE 9. LONG-TERM DEBT

Long-term debt consisted of the following:

<TABLE>
<CAPTION>

                                                                December 31, 1999      June 30, 1999
                                                                -----------------      -------------
<S>                                                                <C>                   <C>
Promissory note to Primedica in connection with the
  acquisition of assets on April, 1998; stated interest at
  7.5%; original note balance of $3,500,000; note is in
  default and carried at the default amount (See Note
  3); due on demand.                                               $4,524,462            $4,745,370

Note payable to former owner of MIS; interest at 6.5%;
  principal and interest payment of $213,000 was due April 1,
  1998; unsecured; during 1998 and 1999 the note was in
  default; interest was increased to 18%. Effective December
  18, 1999, the note was discharged
  as part of the sale of MIS.  (see Note 3).                               --               185,000

Note payable to former owner of GMA and shareholder of the
  Company; interest at 8%; payable in monthly installments of
  $37,834 commencing in August, 1998; collateralized by
  substantially all assets of GMA; prior to August 1998 the
  note required only monthly interest payments; at December
  31, 1999 and June 30,
  1999 in default and; due on demand.  (Notes 10 and 16)              712,615               329,194

Note payable to former owner of Advanced; non-interest
  bearing; due and payable on April 30, 1999; at June 30, 1999
  in default and; due on demand. Repaid during the six months
  ended December 31, 1999 for $40,000 and
  the release of 70,000 shares held in escrow.                             --                75,000

Note payable to HMO in connection with the Advanced
  acquisition (see Note 3); interest at 6%, 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.                             371,620               377,223

Promissory note to former owner of Family Medical Plaza;
  interest at 8%, due and payable on March 14, 1999; at June
  30, 1999 in default and due on demand. Subsequently, a
  settlement was reached, revised terms reduce installments of
  $2,500 commencing on August 15, 2000.                                45,000                37,756

</TABLE>



                                       24
<PAGE>   47



NOTE 9. LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>

                                                                December 31, 1999      June 30, 1999
                                                                -----------------      -------------
<S>                                                                <C>                   <C>
Note payable to an individual; unsecured; stock-based interest
  of 23%; due on demand. Repaid on July 1, 1999 in full with
  45,500 shares of the Company's
  common stock issued in lieu of interest.                                 --               200,000

Note payable to former officer of MIS in connection with
  severance agreement; due on March 1, 1999; non-interest
  bearing unless defaults occurs, then interest shall be 5%
  above the prime rate; at December 31, 1999 and June 30, 1999
  in default and; due on demand.                                      170,000               195,000

Note payable to former owner of Federgreen practice;
  non-interest bearing; payable in installments of
  $10,000 commencing January 2000.                                    120,000                    --

Note payable to former owner of Sreekumar practice;
  non-interest bearing; collateralized by the assets of the
  practice; due and payable on August 12, 2000 in
  cash or common stock.                                               300,000                    --

Various installment notes payable; interest ranging from 9.7%
  to 10.13%; collateralized by various automobiles;
  due September 2001 through August 2002.                              44,545                44,545

Equipment notes payable to bank; interest ranging from 9.5% to
  10.48%; collateralized by medical testing
  equipment; due August, 2000 through November, 2000.                  53,035                53,035

Notes payable with interest at 17.5%, due in six monthly
  installments beginning July 2000. The holders of these notes
  have the right to convert the outstanding obligations to
  common stock at $0.50 per share at any time.                        125,000                    --

Notes payable with interest at 11.5% payable in three monthly
  installments of $10,000 beginning January 2000 and
  thereafter nine monthly installments of $19,688 and
  collateralized by substantially all assets of the
  Company.                                                            193,604                    --
                                                                   ----------            ----------
                                                                    6,659,881             6,242,123
Less current maturities                                             6,366,181             5,764,221
                                                                   ----------            ----------
Long-term debt                                                     $  293,700            $  477,902
                                                                   ==========            ==========

</TABLE>



                                       25
<PAGE>   48
NOTE 9. LONG-TERM DEBT (CONTINUED)

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

        2000                                             $ 6,366,181
        2001                                                  90,615
        2002                                                  87,815
        2003                                                  85,344
        2004                                                  29,926
                                                         -----------
                                                         $ 6,659,881
                                                         ===========

NOTE 10. 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 and $235,000 for the years ended June 30,
1999 and 1998. These leases were canceled in December 1999 (See Note 3).

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
$60,000 for the six month period ended December 31, 1999 and $142,000 for the
year ended June 30, 1999. As of December 31, 1999, approximately $85,000 was
owed to the Related Consultant.

For the six month period ended December 31, 1999 and the year ended June 30,
1999, approximately $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, 1999, $220,000 of these amounts were included in long-term debt
in the accompanying balance sheet. At December 31, 1999 and June 30, 1999,
approximately $26,000 and $220,000 of these amounts were included in due to
related parties in the accompanying balance sheet.




                                       26
<PAGE>   49
NOTE 11. INCOME TAXES

The components of income taxes were as follows:

<TABLE>
<CAPTION>

                                      Six months ended         Year Ended            Year Ended
                                      December 31, 1999       June 30, 1999         June 30, 1998
                                      -----------------       -------------         -------------
<S>                                      <C>                   <C>                   <C>
Current Benefit
     Federal                             $        --           $        --           $        --
     State                                        --                    --                    --

Deferred Benefit
     Federal                               1,669,000             3,353,000             1,787,000
     State                                   288,000               381,000               183,000

Increase in Valuation Allowance           (1,957,000)           (3,734,000)           (1,970,000)
                                         -----------           -----------           -----------
Income Tax Benefit                       $        --           $        --           $        --
                                         ===========           ===========           ===========

</TABLE>

The effective tax rate for 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 effective tax rate for 1998 differed from the federal statutory rate due to
state income tax benefits of approximately $183,000, a net increase in the
valuation allowance of approximately $1,970,000, and permanent and other
differences of approximately $49,000.

The Company has net operating loss carryforwards totalling approximately
$23,200,000, expiring in various years through 2019.



                                       27
<PAGE>   50
NOTE 11. INCOME TAXES (CONTINUED)

At December 31, and June 30, 1999, approximate deferred tax assets and
liabilities were as follows:

<TABLE>
<CAPTION>

                                               December 31, 1999            June 30, 1999
                                               -----------------            -------------
<S>                                               <C>                        <C>
DEFERRED TAX ASSETS:
  Allowances for doubtful accounts                $   868,000                $ 1,560,000
  Amortization                                             --                    101,000
  Net operating loss carryforward                   8,707,000                  6,619,000
                                                  -----------                -----------
     Total deferred tax assets                      9,575,000                  8,280,000
                                                  -----------                -----------
DEFERRED TAX LIABILITIES:
  Cash basis subsidiaries                             674,000                    914,000
  Depreciation                                         14,000                    436,000
                                                  -----------                -----------
     Total deferred tax liabilities                   688,000                  1,350,000
                                                  -----------                -----------
Net deferred tax asset                              8,887,000                  6,930,000
Less valuation allowance                           (8,887,000)                (6,930,000)
                                                  -----------                -----------
                                                  $        --                $        --
                                                  ===========                ===========
</TABLE>


NOTE 12. DEFICIENCY IN ASSETS

At December 31, 1999 and June 30, 1999, the Company has authorized 40,000,000
shares of par value $.001 common stock, with 12,111,888 and 9,351,765 shares
issued and outstanding, respectively. Additionally, the Company has authorized
10,000,000 shares of preferred stock.

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, 1999 and June 30, 1999, the Company has 3,517,625 warrants
outstanding.



                                       28
<PAGE>   51
NOTE 12. DEFICIENCY IN ASSETS (CONTINUED)

During 1998, the Company completed two separate placements of non-voting
preferred stock. The Company has 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, 1999
and June 30, 1999, the aggregate and per share amounts of cumulative dividend
arrearages were approximately $150,000 and $30 and $92,000 and $18.40,
respectively. 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. For the
year ended June 30, 1998, gross proceeds from this issuance amounted to
$500,000, less commissions and costs of $40,000. At December 31, 1999 and June
30, 1999 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 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. At December 31, 1999, the aggregate and per
share amounts of cumulative dividend arrearages was $57,503 and $114.81,
respectively. 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. For the year ended June
30, 1998, gross proceeds from the issuance of series B preferred stock amounted
to $1,200,000, less commissions and costs of $84,946. From September 1998 to May
1999, 700 shares of series B preferred stock were converted into 1,297,305
shares of the Company's common stock at various prices. At June 30, 1999, there
were 500 shares of series B preferred stock issued and outstanding. During
October 1999, the remaining 500 shares of series B preferred stock were
converted into 2,300,000 shares of the Company's common stock. There were no
series B preferred shares outstanding at December 31, 1999.




                                       29
<PAGE>   52
NOTE 13. 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 six month period ended December 31,
1999 compensation costs related to stock options amounted to approximately
$97,200. For the years ended June 30, 1999 and 1998, compensation costs related
to stock options amounted to approximately $729,600 and $127,000, respectively.

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 period                                 507,000                $   0.37
Exercised and returned during period                       --                $     --
Forfeited during period                              (247,150)               $   4.29
                                                    ---------
Balance, end of period                              2,643,692                $   3.70
                                                    =========
Exercisable at end of 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                                Weighted
                                                  Average                                 Average
                                                 Remaining                               Remaining
                                Number of       Contractual             Number of       Contractual
Exercise Price                   Options           Life                  Options            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>




                                       30
<PAGE>   53
NOTE 13. STOCK OPTIONS (CONTINUED)

The weighted average fair value per option as of grant date was $0.12 for stock
options granted during the six months 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.

                                                 Period ended
                                               December 31, 1999
                                               -----------------

Net loss                                         $(6,272,057)

Net loss per share                               $     (0.58)

Stock option activity for the year ended June 30, 1999 was as follows:

<TABLE>
<CAPTION>

                                                               Number of         Weighted Average
                                                                Options           Exercise Price
                                                               ---------         -----------------
<S>                                                            <C>                  <C>
Balance, June 30, 1998                                         1,458,250            $      5.02
Granted during year                                            1,331,975            $      1.20
Exercised and returned during year                              (260,500)           $      0.44
Forfeited during year                                           (145,883)           $      8.62
                                                               ---------
Balance, end of year                                           2,383,842            $      4.27
                                                               =========
Exercisable at end of year                                     1,928,792            $      4.00
                                                               =========

</TABLE>

The following table summarizes information about stock options outstanding at
June 30, 1999:

<TABLE>
<CAPTION>

                                    Options Outstanding                      Options Exercisable
                                 --------------------------             ----------------------------
                                                 Weighted                                  Weighted
                                                  Average                                   Average
                                                 Remaining                                 Remaining
                                 Number of      Contractual             Number of         Contractual
Exercise Price                    Options          Life                  Options              Life
----------------                 ---------      -----------             ---------         -----------
<S>                               <C>              <C>                    <C>                 <C>
$0.100 - $1.000                   814,925          5.0                    537,542             4.8
$1.250 - $2.000                   237,250          4.7                    214,083             4.6
$2.500 - $3.000                   629,117          3.7                    582,517             3.5
$3.125 - $5.000                   147,050          3.8                    135,400             3.6
$5.250 - $8.000                   380,000          3.7                    299,250             3.3
$9.000 - $18.000                  175,500          3.7                    160,000             3.6
                                ---------                               ---------
                                2,383,842                               1,928,792
                                =========                               =========

</TABLE>



                                       31
<PAGE>   54
NOTE 13. STOCK OPTIONS (CONTINUED)

The weighted average fair value per option as of grant date was $0.80 for stock
options granted during the fiscal year ended June 30, 1999. The determination of
the fair value of all stock options granted during the fiscal year ended June
30, 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.

                                   Year ended                  Year ended
                                    June 30,                    June 30,
                                      1999                        1998
                               -------------------         -------------------
Net loss                       $    (10,588,216)            $     (5,415,226)

Net loss per share             $          (1.47)            $          (0.97)

During the year ended June 30, 1999, 252,318 options were exercised, with net
proceeds to the Company of $90,000, plus the return of 8,182 options. During the
year ended June 30, 1998, 470,602 options were exercised with net proceeds of
$4,430 to the Company, plus the return of 14,398 options.

NOTE 14. 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:

      2000                                            $  400,000
      2001                                               248,000
      2002                                               244,000
      2003                                               173,000
      2004                                               139,000
      Thereafter                                         245,000
                                                      ----------
      Total                                           $1,449,000
                                                      ==========




                                       32
<PAGE>   55
NOTE 14. 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:

        2000                                            $471,000
        2001                                             154,000
        2002                                             121,000
        2003                                              96,000
        2004                                               4,000
                                                        --------
                                                        $846,000
                                                        ========

OTHER LITIGATION

During 1998 a marketing company (the Marketer) filed a complaint against the
Company seeking to enforce a written letter agreement regarding marketing and
other services. The complaint seeks damages of approximately $125,000 plus
interest, costs and attorneys fees. The Company has filed defenses and a
counterclaim alleging that the Marketer did not perform as required under the
agreement, and is not entitled to the amount claimed. Although the Company
believes it has meritorious defenses against this complaint, management is
unable to determine the likelihood of an unfavorable outcome and an estimate of
the amount of any potential loss, if any.

OTHER CONTINGENCIES

At December 31, 1999 and June 30, 1999, the Company had recorded accrued payroll
taxes and interest and penalties of approximately $1,510,000 and $598,000,
respectively, which are included in accrued expenses in the accompanying balance
sheet. The Company has requested an IRS agent be assigned to this matter and
intends to negotiate a payment plan to repay this amount.

NOTE 15. CONCENTRATIONS

REVENUE CONCENTRATION

During the year ended June 30, 1999 and 1998 one HMO accounted for approximately
48% and 12% of revenue, respectively. Revenue from this HMO, for the six months
ended December 31, 1999 were approximately 68% of total sales. The loss of this
HMO could affect the operating results of the Company.



                                       33
<PAGE>   56
NOTE 16. SUBSEQUENT EVENTS

Effective January 1, 2000, the Company issued 3,500,000 shares of common stock
to the former owner of GMA, who is a shareholder of the Company in satisfaction
of all outstanding obligations to this individual, approximating $713,000.

Subsequent to December 31, 1999, the Company granted 2,765,000 options under
consulting, employee compensation agreements and settlements with exercise
prices from $0.30 to $4.50 which expire from August 2000 through January 2007.









                                       34
<PAGE>   57


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)

3.5               Article of Amendment to the Articles of Incorporation
                  designating the Series B Preferred Stock.(8)

3.6               Articles of Amendment to the Articles of Incorporation
                  amending the designation of the Series B Preferred Stock.(8)

4.1               Specimen Common Stock Certificate.(1)

4.2               Specimen Common Stock Purchase Warrant (issued pursuant to the
                  Company's initial public offering on February 13, 1997)(1)

4.3               Underwriter's Warrant.(1)

4.4               Warrant Agreement.(1)

4.5               Specimen of Class A Warrant (issued pursuant to the Company's
                  Private Placement in February 1996).(1)

4.6               Stock Purchase Warrant (issued pursuant to the Securities
                  Purchase Agreement dated April 27, 1998).(8)

5.1               Opinion of Atlas, Pearlman, Trop & Borkson, P.A. concerning
                  legality of shares being registered pursuant to this
                  Registration Statement.(8)

10.1              Stock Option Plan.(1)

10.2              Executive Employment Agreement between the Company and Noel J.
                  Guillama.(1)

10.3              Executive Employment Agreement between the Company and Robert
                  L. Kagan, M.D.(1)

10.4              Sub-Lease Agreement with the Company and Safeskin dated August
                  1, 1996.(1)

10.5              Purchase and Sales Agreement between the Company, Roman Fisher
                  and Ofra Fisher dated August 13, 1996.(1)

                                       22
<PAGE>   58

10.6              Purchase and Sales Agreement between the Company and Edwin
                  Kagan dated August 13, 1996.(1)

10.7              Agreement between the Company and Dr. Robert Kagan dated
                  September 1, 1996.(1)

10.8              Merger Agreement between the Company, Florida Rehabilitation
                  Services, Inc., Southeast Medical Staffing, Inc. and Dr.
                  Frederick J. Kunen dated September 25, 1996.(1)

10.9              Stock Purchase Agreement between the Company, Kenneth J. Hall,
                  Ira P. Hall, Lee M. Hall and Michael Goldstein dated September
                  26, 1996.(1)

10.10             Assets Purchase Agreement between the Company, International
                  Family Healthcare Centers, Inc. and Emergency Care Services,
                  Inc. dated October 15, 1996.(1)

10.11             Merger Agreement between the Company, Metcare II, Inc., Paul
                  Wand, M.D., P.A., and Paul Wand dated October 24, 1996.(1)

10.12             Promissory Note dated December 23, 1993 by Datascan of
                  Florida, Inc. to First Union National Bank.(1)

10.13             Promissory Note dated September 1, 1996 by the Company to
                  Robert L. Kagan.(1)

10.14             Promissory Note dated September 1, 1996 by the Company to
                  Robert L. Kagan.(1)

10.15             Promissory Note dated September 1, 1996 by the Company to
                  Robert L. Kagan.(1)

10.16             Promissory Note dated September 25, 1996 by the Company to
                  Frederick J. Kunen.(1)

10.17             Promissory Note dated October 15, 1996 by the Company to
                  International Family Healthcare Center, Inc.(1)

10.18             Executive Employment Agreement between the Company and Kenneth
                  Hall.(1)

10.19             Executive Employment Agreement between the Company and Roman
                  Fisher.(1)

10.20             Agreement between Mr. Guillama, Mr. Kagan and Ms. Hilderbrand.
                  (1)

10.21             Consulting Agreement between the Company and Euro-Atlantic
                  Securities, Inc.(1)

10.22             Consulting Agreement between the Company and Sternco, Inc.(1)

10.23             Letter of Intent between the Company and General Medical
                  Associates, Inc.(1)

10.24             Lease Agreement between the Company and Champion Technologies
                  of Florida, Inc.(1)

10.25             Letter of Intent between Martin Harrison, M.D. and
                  Metropolitan Health Networks, Inc.(1)

10.26             Option Agreement between Noel J. Guillama, Bonnie Hilderbrand
                  and Dr. Martin Harrison.(1)

10.27             Option Agreement between Noel J. Guillama, Bonnie Hilderbrand
                  and Dr. Robert L. Kagan.(1)

10.28             Option Agreement between Noel J. Guillama, Bonnie Hilderbrand
                  and Kenneth J. Hall.(1)

10.29             Merger Agreement dated August 6, 1997 by and among the
                  Company, Metcare, GMA and Martin Harrison, M.D.(2)

                                       23
<PAGE>   59

10.30             Promissory Note dated August 6, 1997.(2)

10.31             Consulting Agreement dated July 28, 1997, between the Company
                  and Lion Capital.(3)

10.32             Promissory Note dated August 6, 1997, by the Company to Dr.
                  Harrison, M.D.(3)

10.33             Post-Effective Amendment No. 1 to Merger Agreement dated
                  October 1997, by and among Metropolitan Health Networks, Inc.
                  ("Metropolitan"), Metcare III, Inc., General Medical
                  Associates, Inc. and Martin Harrison.(4)

10.34             Agreement and Plan of Merger dated November 30, 1997 by and
                  among the Company, Metcare VI, Inc. and Trident Medical
                  Concepts, Inc.(5)

10.35             First Amendment to Merger Agreement dated January 13, 1998 by
                  and among the Company, Metcare VI, Inc. and Trident Medical
                  Concepts, Inc.(5)

10.36             Second Amendment to Merger Agreement dated February 22, 1998
                  by and among Trident Medical Concepts, Inc.(5)

10.37             Asset Purchase Agreement dated April 2, 1997 by and among the
                  Company, Metcare VII, Inc. and Primedica Healthcare, Inc.(6)

10.38             Repurchase Election Agreement dated April 2, 1998 by and among
                  the Company, Metcare VII and Primedica Healthcare, Inc.(6)

10.39             Promissory Note dated April 2, 1998.(6)

10.40             Stock Purchase Agreement dated July 1997 between Neal Jay
                  Tolar and the Company.(8)

10.41             Securities Purchase Agreement dated April 27, 1998 between
                  Pangea Fund Ltd. and the Company.(8)

10.42             Registration Rights Agreement dated April 27, 1998 between
                  Pangea Fund Ltd. and the Company.(8)

21                Subsidiaries of the Company.(8)

23.2              Consent of Atlas, Pearlman, Trop & Borkson, counsel for the
                  Company (included in opinion filed in Exhibit 5.1).(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
(8)      Previously filed

                                       24
<PAGE>   60

SIGNATURES

Pursuant to the requirements of the Securities Act, as amended, the
registrant has duly caused this Form 10-KSB to be signed on its behalf by the
undersigned, thereunto duly authorized in the Boca Raton, State of Florida on
the 10th of August 2000.

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 14, 2001
------------------                  Officer and Chairman of the Board
Fred Sternberg

/s/ David S. Gartner                Chief Financial Officer                          September 14, 2001
--------------------                and Secretary
David S. Gartner


_________________                   Director                                         September 14, 2001
Karl Sachs


_________________                   Director                                         September 14, 2001
Michael Cahr


_________________                   Director                                         September 14, 2001
Marvin Heiman


_________________                   Director                                         September 14, 2001
Mark Gerstenfeld


_________________                   Director                                         September 14, 2001
Michael Earley


_________________                   Director                                         September 14, 2001
Martin Harrison

</TABLE>

                                       25