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

                                   FORM 10-KSB

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

                     For the fiscal year ended June 30, 1999

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

For the transition period from_________ to___________

                             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]


<PAGE>


         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 $20,840,990 (computed
using the closing price of $2.09 per share of Common Stock on June 30, 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 17,964,020 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 June 30, 2000.

         DOCUMENTS INCORPORATED BY REFERENCE

None.

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






<PAGE>

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") 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.

         As a result of poor performance recognized over the Company's history,
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, who was hired in
November 1999 and Debbie Finnel, the Company's COO, who was also 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 Company failed to file this Form 10-K and the subsequent Form
10-Q's for the quarters ended September 30, 1999, December 31, 1999 and March
31, 2000 on a timely basis. The delinquent quarterly reports are expected to be
filed shortly after this Form 10-K. This Form 10-K includes disclosure and
discussion of significant transactions and developments through the filing date.

         While the change in business strategy and related dispositions and
restructuring were substantially completed by the end of 1999, at June 30, 1999
the Company continued to own and operate certain Physician Practices and its
Ancillary Services and limited its MSO operations to Dade, Broward and Palm
Beach County. For the year ended June 30, 1999, 47.9% of revenue was from the
MSO business and the remainder from physician practices and ancillary services.

RECENT DEVELOPMENTS

         Subsequent to 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. 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 will 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 August 2000

         ON-LINE PHARMACY. The Company is currently reviewing several

                                       1
<PAGE>

opportunities with substantial pharmacy companies that will provide mail order
pharmacy and pharmacy management to its Network and patients. The Company
believes that it will finalize a relationship and begin implemtation before the
end of 2000.

         INTERNET PRACTICE MANAGEMENT, BILLING & COLLECTIONS. The Company is
currently negotiating with several Internet software billing & collection
companies to provide physicians with online solutions to manage their medical
practices efficiently in such areas as patient scheduling, claims processing,
provider directory management, ordering of diagnostic imaging and laboratory
tests, as well as for patient interaction in a secure Internet environment.

         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.

STRATEGY

          At June 30, 1999 the Company's strategy was to develop and expand its
MSO services, principally in the Dade, Broward and Palm Beach County areas, as
it transitioned from being a provider of Physician Practices and Ancillary
Services.

         Subsequent to June 30, 1999, the Company continues to focus on its
objectives to become an effective, growing and profitable MSO. The Company is
presently a health care provider that manages patients' lives in physicians'
offices. Metcare is incorporating new Internet-based technologies to its
operating model to improve its effectiveness and profitability, and that of its
Network. Metcare is expanding its markets with the increase and addition of full
risk contracts in Volusia and Flagler counties.

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, 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 percent 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 jumps 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 percent 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


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<PAGE>

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
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. MSOs, 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
Southern 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. 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 current
contract has 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.

         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


                                       3
<PAGE>

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 June 30, 1999, approximately 47.9% of the Company's revenues were
from managed care contracts with HMO's. At June 30, 2000, managed care contract
revenues accounted for approximately 80% of total revenues. All of the Company's
HMO contracts are with Humana. The Company has presently 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 before the end of year 2000.

         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 Physician 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 and
orthopedic surgery and occupational medicine, in addition to chiropractic
physicians, licensed massage therapists and additional ancillary services. GMA
uses both staff and subcontracting services to provide the 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 and clerical and billing support persons. 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.

         Advanced Health Care
         --------------------

         Advanced Health Care is comprised of 2 primary care centers, which
currently provide medical care on a fee-for-service basis to its 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 valued at $.50 per share as collateral for a
Promissory Note of $125,000. 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. As a result of this acquisition, $125,000 was
recorded as goodwill.

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         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.

         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, will be included in the Company's statement of operations. As a
result of this acquisition, approximately $700,000 was recorded as goodwill.

DISPOSITION OF PHYSICIAN PRACTICES AND ANCILLARY SERVICES

         The Company identified certain Physician Practices and Ancillary
Services which were not performing or which 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 certain
Physician Practices and its Ancillary Services as described below.

         Dr. Paul Wand, M.D. P.A.
         ------------------------

         The Company, on March 12, 1997 acquired the clinical practice of Dr.
Paul Wand, M.D., P.A. ("Wand Practice"). Dr. Wand is a neurologist who began his
practice in South Florida in 1982, and who, in addition to his practice,
conducts certain research in the field of head injuries.

         Effective July 1, 1998, the Company sold the practice back to Dr. Wand.
As consideration for the sale of all of the assets and liabilities associated
with the practice and the termination of his employment contract, the Company
received (i) a three (3) year $75,000.00 note payable by Dr. Wand bearing
interest at 7% per annum with payments beginning November 1, 1998, (ii) the
75,000 shares that were given to Dr. Wand when the Company originally purchased
the practice, (iii) an indemnification from certain obligations. In connection
with this sale, the Company recognized a loss of approximately $200,000, which
is included in the loss of disposals of assets in the accompanying statement of
operations for the year ended June 30, 1999.

         Dr. Glickman's Practice
         -----------------------

         As of January 31, 1999 the practice of Dr. Glickman 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 19,677 shares of the Company's 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 the Loss
on Disposal of Assets in the accompanying consolidated statement of operations.

         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. (See Legal Proceedings: MRI Scan Center, Inc. and Dr. Kagan).

                                       5
<PAGE>

         Sale of Datascan
         ----------------

         Effective December 31, 1999, Datascan was sold to its former owner. The
Agreement also called for the settlement of all outstanding litigation,
termination of any and all Executive Employment Agreements and any stock options
of the former owner. The Buyer also assumed certain third party obligations of
Metropolitan as well as any obligations under any lease agreements for Datascan.
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 $2,107,000.

AGREEMENTS

         Billing Agreement
         -----------------

         In November 1999 Metropolitan entered into an agreement to assign all
of its current billing contracts to a unaffiliated third party. Under the
agreement the third party paid the Company $250,000. 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") which provides for a fee of 10% of
gross revenues. In addition,, the Company or its designee 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 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 May 12, 2000 the Company has advanced $512,000 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, commonly known as the
"Y2K Risk", 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.

GOVERNMENT REGULATION

         As a participant in the health care industry, the Company's operations
and relationships are subject to extensive and increasing regulation by a number
of governmental entities at the federal, State and local levels. The Company has
structured its operations to be in material compliance with applicable laws.
Nevertheless, because of the uniqueness of the structure of the relationship of
the Physician Practices and Ancillary Services owned or acquired by the Company,
many aspects of the Company's actual and proposed business operations have not
been

                                       6

<PAGE>

the subject of State or federal regulatory interpretation and there can be no
assurance that a review of the Company's or the affiliated physicians' business
by courts or regulatory authorities will not result in a determination that
could adversely affect the operations of the Company or the affiliated
physicians, or that the healthcare regulatory environment will not change so as
to restrict the Company's or the affiliated physicians' existing operations or
their expansion.

         As a result of the continued escalation of health care costs and the
inability of many individuals to obtain health insurance, numerous proposals
have been or may be introduced in the U.S. Congress and State legislatures
relating to health care reform. There can be no assurance as to the ultimate
content, timing or effect of any health care reform legislation, nor is it
possible at this time to estimate the impact of potential legislation, which may
be material on the Company.

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 healthcare companys' 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

         Metcare had 168 employees on June 30, 1999. As of June 30, 2000, the
Company had approximately 70 full-time employees. 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 June 30, 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 monthly rental of
approximately $16,595.38 pursuant to a sublease expiring December 31, 2002. The
Company relocated its corporate offices April 15, 2000.

         Magnetic Imaging Systems, I, Ltd. during fiscal year 1999 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. This lease expires December 31, 2003, and is leased from Dr.
Kagan, a former Director of the Company. Dr. Kagan is a former 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).

         GMA occupied approximately 1,800 square feet in North Miami, Florida at
a monthly rental of approximately $5,140. The term of this lease is 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 during fiscal year 1999 were located at 2301 West
Sample Road, Building 4, Suite 2A, Pompano Beach, Florida 33073 where it
occupies approximately 5,000 square at a monthly rental of approximately $2,900.
This lease expired on July 13, 1999. The lease was assigned to the former owner
as part of a settlement agreement dated December 31, 1999 (see LEGAL
PROCEEDINGS: Datascan).

         The Skylake Practice occupies approximately 4,800 square feet in North
Miami Beach, Florida at a monthly rental of $13,931. This lease expires on June
30, 2000. As of July 1, 2000 a new lease was signed for five years with an
annual base rent of $6,194.

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<PAGE>

         During fiscal year 1999 the Company leased approximately 5,740 square
feet for diagnostic facilities in Fort Lauderdale, Florida at a monthly rate of
approximately $7,395 which lease 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 31, 1999 (see
LEGAL PROCEEDINGS: MRI).

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

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, lease 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 $1,512,235 from $4,745,364. The settlement agreement provided for
payments of $25,000 per week. A change in anticipated payments under our 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 has
entered into a new agreement in which Primedica acknowledged the payments of
$700,000 and it continues the weekly payments of $25,000 for 32 weeks, with a
balloon payment of $500,000 equaling a total of $2,000,000 in March 2001. 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.

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 fiscal year ended June 30,
1999.

                                       8
<PAGE>

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:
<TABLE>
<CAPTION>

                                                      High                 Low
                                                      ($)                  ($)
<S>                                                   <C>                  <C>
     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                .065
     Quarter ended June 30, 1999                      1.938                .344

     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
</TABLE>

         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.

         In addition, the Company is not in compliance with Securities and
Exchange Commission and NASD reporting requirements with respect to annual,
quarterly and certain disclosure related filing requirements. In this regard,
should the Company remain deficient in its filing requirements, it may lose its
eligibility for quotation and be subject to removal from the OTCBB.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS

         The Company had operating revenues of $18,501,497 for fiscal 1999, as
compared to revenues of $14,025,264 for fiscal 1998, a $4,476,233 increase
(31.9%). The Company's Losses from Operations for fiscal 1999 and 1998 were
$7,841,805 and $4,604,190, respectively. In 1999, the Company generated its
medical revenues from Patients in the amount of $9,606,854, MSO revenues of
$8,862,826 and Billing Services revenue of $31,817. Fiscal 1999 MSO revenues
amounted to 47.9% of total revenues compared to 11.7% for the year earlier
period.

         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 in providing products and services including
mail order pharmacy, physician purchasing of supplies and equipment and
telemedicine.

         The Company had operating expenses of $26,343,302 for fiscal 1999, as
compared to expenses of $18,629,454 in 1998, a $7,713,848 increase. Direct
medical costs increased by $6,052,631 in 1999 from $1,294,347 in 1998. Direct
medical costs are associated with the MSO operations and include costs
representing direct medical payments to physician providers, hospitals and

                                       9
<PAGE>

ancillary services on a capitation and fee for service basis.

         Payroll related expenses totaling $7,046,342 for fiscal 1999 were 1%
lower than in the prior year and represented 26.7% of the total operating
expenses. For fiscal 1998, payroll related expenses accounted for $7,114,017 or
38.2% of the total operating expenses. The reduction was a result of the
Company's assessment of the various job functions and efforts to streamline
operations.

         Rent expense amounted to $1,955,352 or 7.4% of the total operating
expenses for fiscal 1999 and $1,159,356 or 6.2% for 1998. This increase of
$795,996 is due to a full year's rent expense for the acquisition of the Skylake
and other new practices, and the addition of new locations. The rent expense for
the corporate offices was approximately $120,000 for the year ended June 30,
1999. As of April 15, 2000, the Company vacated the corporate offices and moved
to its new location in West Palm Beach. There is sufficient capacity at these
locations for future growth.

         Bad debt expense totaled $1,060,856 or 4% of the total operating
expenses for fiscal 1999 as compared to $1,723,425 or 9.3% for 1998. The
decrease in Bad Debt Expense for 1999 of $662,569 was primarily due to a
decrease in the MRI and Datascan business and improved collection procedures.

         Consulting expense increased $798,608 to $1,000,608 or 3.8% of the
total operating expenses for the fiscal year 1999 as compared to $202,000 or
1.1% for 1998. In fiscal year 1999, 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 increased by $316,443 to $5,379,189
(5.9%) and were 20.4% of the total operating expenses as compared to $5,062,746
or 27.2% for 1998. The increase in expense was primarily due to increases in
legal and professional fees due to the litigation in 1999. The Company
effectively settled all its material and significant litigation as of December
31, 1999.

         Depreciation and amortization totaled approximately $1,870,774 or 7.1%
of the total operating expenses for fiscal 1999 and $1,415,515 or 7.6% for 1998.
This increase of $455,229 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 $683,203 in fiscal year 1999 compared to $658,048
in fiscal 1998. This increase is due to additional interest costs on financing
debt and increases in rates on various loans in fiscal 1999.

         The loss relating to the Primedica transaction of approximately
$2,206,000 reflects the difference between the amount that was originally booked
at the time of the acquisition and the subsequent additional obligation
resulting from the payment schedule defaults

LIQUIDITY AND CAPITAL RESOURCES

         As a result of the Company's net loss of $10,319,816 for fiscal year
1999, which included the costs associated with restructuring, closing of
operations, cost of severance and separation agreements, the Company has
experienced liquidity and cash flow problems. 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 exceeded $10,000,000 in fiscal 1999,
approximately $5,439,843 was attributable to non-cash items, including stock and
stock options issued for services and compensation, loss on Primedica, 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 $1,000,000 and
certain private borrowings totaling approximately $300,000. Subsequent to June
30 1999, the Company raised additional equity of $1,420,000 in connection with
the issuance of convertible debt and common stock.

         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


                                       10
<PAGE>

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 $1,039,149 at
June 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.

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, the availability of appropriate acquisition candidates, the
Company's ability to close once a letter of intent or contract has been
executed, the Company's ability to raise capital to close on such acquisitions,
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, including but not limited to the
Company's SB-2, S-3, S-8 and 8-K fillings. 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.

                                       11
<PAGE>


PART III

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

         As of June 30, 1999, the directors, control persons and executive
officers of the Company were as follows:
<TABLE>
<CAPTION>

         NAME                               AGE               TITLE
<S>                                         <C>               <C>
         Noel J. Guillama                   39                Chairman, President, Chief Executive Officer and
                                                                  Director
         Debra A. Finnel                    37                Chief Operating Officer-MSO Division
         Daniel L. Beckett                  40                Chief Accounting Officer
         Walter A. Fox, D.O.                71                Director
         Mark K. Gerstenfeld                56                Director
         Paul Preste                        47                Director
         Karl Sachs                         63                Director
</TABLE>
--------------

As of June 30, 2000, the directors, control persons and executive officers of
the Company are as follows:

<TABLE>
<CAPTION>
         NAME                               AGE               TITLE
<S>                                         <C>               <C>
         Fred Sternberg                     60                Chairman, President, Chief Executive Officer and
                                                                  Director
         Debra A. Finnel                    38                Vice-President and Chief Operating Officer
         David S. Gartner, CPA              42                Chief Financial Officer and Secretary
         Michael Cahr                       60                Director
         Marvin Heiman                      54                Director
         Mark K. Gerstenfeld                56                Director
         Paul Preste                        47                Director
         Karl Sachs                         63                Director
         Michael Earley                     45                Director

</TABLE>
         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.

                                       12
<PAGE>


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

         DAVID S. GARTNER, CPA., joined the Company in November 1999 as its
Chief Financial Officer. He has 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' 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, and 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


                                       13
<PAGE>

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.

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 (1) director. Currently, there are seven (7)
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. Other
than as indicated above, 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 (3) committees, an Audit and Compensation
Committee, Executive Committee and Regulatory Compliance Committee. As of March
27, 2000, 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, 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.

         As of June 30, 1999, the Executive Committee was established and shall
have 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. As of March 27, 2000, 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.

         As of March 27, 2000, 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 (1) of the seven (7)
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 is anticipated to be adopted for the Company's outside
Directors in the near future. 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.

         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


                                       14
<PAGE>

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 year ended June 30, 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 June 30, 1999 ("fiscal 1999"). The notes to
these tables provide more specific information regarding compensation.

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        83,300                    11,592
President,
Chief Executive Officer      1999        41,666                   197,989

Robert L. Kagan, MD
Vice President and           1998       558,100       77,500        7,700
Medical Director  MRI
Scan Center

Michael P. Goldstein
Director, Acting Chief       1998       148,400                     8,400
Operating Officer and
President Metcare
Diagnostic Services

Roman G. Fisher              1997       125,000       15,166
Executive Vice President,    1998       120,000                     5,000
Acting Chief Operating
Officer - MRI Scan Center
</TABLE>

                                       15


<PAGE>
Options Granted in the Year Ended June 30, 1999 to Executives
<TABLE>
<CAPTION>

                             Number of             % of Total
                             Securities            Options/
                             Underlying            SARs
                             Options/              Granted to           Exercise or
                             SARs                  Employees in         Base Price             Expiration
                             Granted               Fiscal Year          ($/Share)              Date
                             -------               -----------          ---------              ----
<S>                          <C>                    <C>                  <C>                   <C>
Name
NONE


</TABLE>

         Total number of options granted to non-executives during the year ended
June 30, 1999 was 1,331,975.

Aggregated Fiscal Year-End Option Value Table

         The following table sets forth certain information concerning
unexercised stock options as of June 30, 1999. No stock appreciation rights were
granted or are outstanding.
<TABLE>
<CAPTION>


                                                                                 Value of Unexercised
                            Number of Unexercised Options                            In-the-Money
                                Held at June 30, 1999                        Options at June 30, 1999 1
                                ---------------------                        --------------------------
Name                      Exercisable        Unexercisable                Exercisable         Unexercisable
----                      -----------        -------------                -----------         -------------
                          (#)                (#)                          ($)                 ($)
                          ---                ---                          ---                 ---
<S>                         <C>              <C>
Robert Kagan                80,000           20,000
Donald B. Cohen            306,000
</TABLE>

1 The closing sale price of the Common Stock on June 30, 1999 as reported by
NASDAQ was $0.50 per share. Value is calculated by multiplying (a) the
difference between $0.50 and the option exercisable price by (b) the number of
shares of Common Stock underlying.

         Compensation of Directors. For the fiscal period ending June 30, 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 cashless 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 employment with the Company, each of 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.

                                       16
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table sets forth certain information regarding the
Company's Common Stock beneficially owned at June 30, 2000 (i) by each person
who is known by the Company to own beneficially 5% or more of the Company's
common stock; (ii) by each of the Company's directors; and (ii) by all executive
officers and directors as a group.

<TABLE>
<CAPTION>
                                                                                  Percentage of
Name/Address of                                 Beneficial Ownership          Beneficial Ownership
Beneficial Owner                                    Common Stock                  Common Stock
----------------                                    ------------                  ------------
<S>                                                  <C>                                <C>
Noel J. Guillama (1)                                 1,490,666                          8.29%
Martin Harrison, M.D. (2)                            5,291,372                         29.46%
Fred Sternberg (3)                                     923,850                          5.14%
Paul Preste, M.D. (4)                                   57,500                          0.32%
Karl Sachs (5)                                         240,000                          1.34%
Mark Gerstenfeld (6)                                   400,666                          2.23%
Michael Cahr (7)                                       278,924                          1.55%
Marvin Heiman (8)                                      149,276                          0.83%
Michael Earley (9)                                      20,000                          0.11%
David Gartner (10)                                      50,000                         0.003%
Debbie Finnel(11)                                      200,000                          1.11%
Directors and Executive
Officers as a group
(9 persons)                                          2,320,216                         12.92%
</TABLE>

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

(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 options
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 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.

                                       17
<PAGE>

(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) 230,666 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) 204,924 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) 129,276 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 11,
2000 to November 11, 2001 or 50,000 options issuable upon the exercise of
options at a price of $0.30 per share from November 11, 2001 to November 11,
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 provides for commissions on any acquisition for which
Sternco is or was the introducing party or materially contributed to such
acquisition. Prior to becoming an officer and director of the Company's
obligations were satisfied with the payment of $24,000 cash and 160,000 shares
of commons 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


                                       18
<PAGE>

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 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.

         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. Thus, Magnetic Imaging Systems, I, Ltd. is paying $15.46 per
square foot net of expenses. 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

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)

                                       19
<PAGE>

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)

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)

                                       20
<PAGE>

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)

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. (7)

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)

23.1              Consent of Kaufman, Rossin and Company. (7)


                                       21
<PAGE>

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


                                       22


<PAGE>


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                  August 10, 2000
------------------         Officer and Chairman of the Board
Fred Sternberg

/s/ David S. Gartner       Chief Financial Officer                     August 10, 2000
--------------------       and Secretary
David S. Gartner

_________________          Director                                    August 10, 2000
Karl Sachs

_________________          Director                                    August 10, 2000
Michael Cahr

_________________          Director                                    August 10, 2000
Marvin Heiman

_________________          Director                                    August 10, 2000
Mark Gerstenfeld

_________________          Director                                    August 10, 2000
Michael Earley

__________________         Director                                    August 10, 2000
Paul Preste
</TABLE>

                                       23

<PAGE>

                               METROPOLITAN HEALTH
                         NETWORKS, INC. AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999





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


<PAGE>


C O N T E N T S
<TABLE>
<CAPTION>

                                                                                                              Page
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                                            <C>
INDEPENDENT AUDITORS' REPORT                                                                                   F-1

CONSOLIDATED FINANCIAL STATEMENTS

         Balance Sheet                                                                                         F-2

         Statements of Operations                                                                              F-3

         Statements of Changes in Stockholders' Equity (Deficiency In Assets)                                  F-4

         Statements of Cash Flows                                                                              F-5-6

         Notes to Financial Statements                                                                         F-7-26
</TABLE>



<PAGE>



INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------


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


We have audited the accompanying consolidated balance sheet of Metropolitan
Health Networks, Inc. and Subsidiaries as of June 30, 1999, and the related
consolidated statements of operations, changes in stockholders' equity
(deficiency in assets), and cash flows for 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free 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 June 30, 1999, and the results of their
operations and their cash flows for each of the two years in the period then
ended, in conformity with generally accepted accounting principles.




                                                  KAUFMAN, ROSSIN & CO., P.A.


June 16, 2000
Miami, Florida

                                      F-1

<PAGE>


METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------

ASSETS
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                           <C>
CURRENT ASSETS
     Accounts receivable, net of allowances of $5,042,376                                                    $       3,459,245
     Other current assets                                                                                               96,349
-----------------------------------------------------------------------------------------------------------------------------------
         Total current assets                                                                                        3,555,594

PROPERTY AND EQUIPMENT, net of accumulated depreciation of                                                           4,316,128
   $2,673,841 (Not 4)

GOODWILL, net of accumulated amortization of $958,722 (Note 1)                                                       3,842,840

INTANGIBLE ASSETS, net of accumulated amortization of $36,458                                                          182,292

OTHER ASSETS                                                                                                            47,893
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                                             $      11,944,747
-----------------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND DEFICIENCY IN ASSETS
-----------------------------------------------------------------------------------------------------------------------------------

CURRENT LIABILITIES
     Accounts payable                                                                                        $       2,529,884
     Advances from HMO                                                                                               1,089,000
     Due to related parties (Note 9)                                                                                   300,144
     Accrued expenses                                                                                                1,665,399
     Medical costs payable                                                                                             357,940
     Line of credit (Note 7)                                                                                           132,231
     Current maturities of capital lease obligations (Note 6)                                                          848,120
     Current maturities of long-term debt (Note 8)                                                                   5,764,221
-----------------------------------------------------------------------------------------------------------------------------------
         Total current liabilities                                                                                  12,686,939

CAPITAL LEASE OBLIGATIONS (NOTE 6)                                                                                   2,280,705

LONG-TERM DEBT (NOTE 8)                                                                                                477,902

COMMITMENTS AND CONTINGENCIES (NOTE 13)

DEFICIENCY IN ASSETS (NOTE 11)                                                                                      (3,500,799)
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                                             $      11,944,747
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                             See accompanying notes.
                                      F-2

<PAGE>





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)
===================================================================================================================================



                             See accompanying notes.

                                      F-3

<PAGE>

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


                                                                                           Common
                                                          Preferred       Preferred         Stock          Common
                                                            Shares          Stock          Shares           Stock
---------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>       <C>               <C>         <C>
BALANCES - JUNE 30, 1997                                           -   $           -      5,210,825   $       5,211

Issuance of series A Preferred Stock (Note 11)                 5,000         500,000              -               -

Issuance of series B Preferred Stock (Note 11)                 1,200       1,200,000              -               -

Issuances of common stock                                          -               -        625,142             625

Issuance of options in lieu of compensation                        -               -              -               -

Exercise of options (Note 12)                                      -               -        470,602             471

Conversion of securities available for sale to the
     trading account                                               -               -              -               -


Dividends on preferred stock (Note 11)                             -               -              -               -

Net loss                                                           -               -              -               -
---------------------------------------------------------------------------------------------------------------------

BALANCES - JUNE 30, 1998                                       6,200       1,700,000      6,306,569           6,307

Conversion of preferred shares into common shares      (         700)  (     700,000)     1,297,305           1,297

Returned or retired shares (Note 3)                                -               -   (    114,354)  (         114)

Shares issued in lieu of compensation                              -               -        426,427             426

Shares issued for consulting services                              -               -        540,500             541

Shares issued for marketing services                               -               -        250,000             250

Shares issued for legal services                                   -               -         25,000              25

Shares issued for director's fees                                  -               -         18,000              18

Shares issued for non-compete agreement                            -               -        125,000             125

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

Exercise of options (Note 12)                                      -               -        252,318             252

Dividends on preferred stock (Note 11)                             -               -              -               -

Options granted for services rendered (Note 12)                    -               -              -               -

Issuance of options in lieu of compensation (Note 12)              -               -              -               -

Net loss                                                           -               -              -               -
---------------------------------------------------------------------------------------------------------------------

                                                               5,500   $   1,000,000      9,351,765   $       9,352
---------------------------------------------------------------------------------------------------------------------
</TABLE>

[RESTUBBED]


<TABLE>
<CAPTION>

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

Issuance of series A Preferred Stock (Note 11)                   (      40,000)              -               -        460,000

Issuance of series B Preferred Stock (Note 11)                   (      84,946)              -               -      1,115,054

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

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

Exercise of options (Note 12)                                            3,959               -               -          4,430

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


Dividends on preferred stock (Note 11)                                       -   (      10,000)              -   (     10,000)

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

BALANCES - JUNE 30, 1998                                            10,450,452   (   6,924,318)              -      5,232,441

Conversion of preferred shares into common shares                      698,703               -               -              -

Returned or retired shares (Note 3)                              (     276,594)              -               -   (    276,708)

Shares issued in lieu of compensation                                  428,159               -               -        428,585

Shares issued for consulting services                                  228,509               -               -        229,050

Shares issued for marketing services                                   127,000               -               -        127,250

Shares issued for legal services                                        81,225               -               -         81,250

Shares issued for director's fees                                        6,282               -               -          6,300

Shares issued for non-compete agreement                                218,625               -               -        218,750

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

Exercise of options (Note 12)                                           89,748               -               -         90,000

Dividends on preferred stock (Note 11)                                       -   (      47,503)              -   (     47,503)

Options granted for services rendered (Note 12)                        576,310               -               -        576,310

Issuance of options in lieu of compensation (Note 12)                  153,292               -               -        153,292

Net loss                                                                     -   (  10,319,816)              -   ( 10,319,816)
---------------------------------------------------------------------------------------------------------------------------------

                                                                 $  12,781,486   ($ 17,291,637)  $           -   ($ 3,500,799)
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                             See accompanying notes.


                                      F-4
<PAGE>


<TABLE>
<CAPTION>
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1999 AND 1998
------------------------------------------------------------------------------------------------------------------------------------
                                                                                            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.


                                      F-5
<PAGE>
<TABLE>
<CAPTION>
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
YEARS ENDED JUNE 30, 1999 AND 1998
------------------------------------------------------------------------------------------------------------------------------------
                                                                                            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>
                            See accompanying notes.


                                      F-6
<PAGE>

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),
                  Metbilling Group, Inc. (Metbilling), General Medical
                  Associates, Inc. (GMA), Paul Wand, M.D., P.A. (Wand), 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 year ended June 30, 1999,
                  owned and operated a radiology practice, a magnetic resonance
                  imaging (MRI) outpatient center, a diagnostic testing company
                  and various general medical practice offices. The Company and
                  certain of these practices operate under capitation agreements
                  with a national health maintenance organization (HMO).
                  Commencing in 1999, the Company entered into additional
                  capitation agreements with this 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.

                                      F-7
<PAGE>


--------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
<S>                                                                                                       <C> <C>
                         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
</TABLE>

                  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 June 30, 1999, the fair values
                      approximate the carrying values.

                                      F-8
<PAGE>

--------------------------------------------------------------------------------
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 12) 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 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 is not included as a deduction to net revenues of
                  the Company but is 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.

                  Results for the year ended June 30, were as follows:
<TABLE>
<CAPTION>

                                                                                     1999                  1998
                  ---------------------------------------------------------- --------------------- ---------------------
<S>                                                                           <C>                   <C>
                  Patient revenues, net                                       $       9,606,854     $      12,116,028
                  MSO revenues, net                                                   8,862,826             1,643,462
                  Billing service revenues, net                                          31,817               265,774
                  ---------------------------------------------------------- --------------------- ---------------------

                                                                              $      18,501,497     $      14,025,264
                  ========================================================== ===================== =====================
</TABLE>
                  Advances from HMO

                  Advances represent amounts advanced from a Health Maintenance
                  Organization (HMO) to the Company. These advances are due on
                  demand and are being repaid via offsets to future revenues
                  earned from this HMO.

                                      F-9
<PAGE>


--------------------------------------------------------------------------------
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 $4,801,562,
                  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 1998 financial statements have been
                  reclassified to conform with 1999 presentation.

                  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.

                                      F-10
<PAGE>


--------------------------------------------------------------------------------
NOTE 1.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
--------------------------------------------------------------------------------

                  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.           LIQUIDITY
--------------------------------------------------------------------------------

                  The Company has sustained substantial operating losses and
                  negative cash flows from operations since inception. In
                  addition, the Company has had difficulty in meeting its
                  current and long-term obligations (See Notes 8 and 13). In the
                  absence of achieving profitable operations and positive cash
                  flows from operations or obtaining additional debt or equity
                  financing, the Company may have increased difficulty meeting
                  current and long term obligations.

                  In addition, as of October 15, 1999 the Company is not in
                  compliance with Securities and Exchange Commission and NASD
                  reporting requirements with respect to annual, quarterly and
                  certain disclosure related filing requirements. In this
                  regard, should the Company remain deficient in its filing
                  requirements, it may lose its eligibility for quotation and be
                  subject to removal from the OTCBB.

--------------------------------------------------------------------------------
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. Subsequent to June 30, 1999, the Company sold MIS back
                  to its original owner (See Note 14).

                                      F-11
<PAGE>


--------------------------------------------------------------------------------
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. Subsequent to June 30,
                  1999, the Company sold Datascan back to its original owner
                  (see Note 14).

                  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.

                                      F-12
<PAGE>


--------------------------------------------------------------------------------
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 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 8). 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 $4,745,364.
                  Accordingly, the Promissory Note has been increased to
                  $4,745,364, and a loss of $2,206,448 has been recorded.

                  Subsequent to year end, 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. The Company and Primedica are currently
                  under negotiations to reach a new settlement agreement.

                                      F-13

<PAGE>


--------------------------------------------------------------------------------
NOTE 3.           ACQUISITIONS AND DISPOSALS (Continued)
--------------------------------------------------------------------------------

                  Disposal of Dr. Glickman's Practice

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

                  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

                  Pursuant to an asset purchase agreement effective March 17,
                  1999, the Company acquired all operating assets and certain
                  liabilities of Advanced for $512,000. The purchase price
                  consisted of assumed liabilities of approximately $387,000 and
                  payments of approximately $90,000 in cash and 70,000 shares of
                  the Company's common stock (valued at $0.50 per share). At
                  June 30, 1999, the shares were held in escrow and subsequent
                  to year end 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.

                  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:
<TABLE>
<CAPTION>

                                                                                 (Unaudited)           (Unaudited)
                                                                                June 30, 1999         June 30, 1998
                  ---------------------------------------------------------- --------------------- ---------------------
<S>                                                                           <C>                   <C>
                  Revenues                                                    $      19,749,497     $        14,025,264
                  Net loss                                                   ($      10,947,319)   ($         4,950,325)
                  Loss per share                                             ($            1.52)   ($              0.88)

</TABLE>
                  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.

                                      F-14
<PAGE>
--------------------------------------------------------------------------------
NOTE 4.           PROPERTY AND EQUIPMENT
--------------------------------------------------------------------------------

                  At June 30, 1999, property and equipment consisted of the
                  following:

<TABLE>
<CAPTION>
<S>                                                                                                 <C>
                  Machinery and medical equipment                                                   $     1,694,841
                  Furniture and fixtures                                                                    254,154
                  Leasehold improvements                                                                    813,941
                  Computer and office equipment                                                             492,589
                  Automobile equipment                                                                      160,086
                  -------------------------------------------------------------------------------- ---------------------
                                                                                                          3,415,611
                  Less accumulated depreciation                                                    (      1,346,948)
                  -------------------------------------------------------------------------------- ---------------------

                                                                                                    $     2,068,663
                  -------------------------------------------------------------------------------- ---------------------

                  At June 30, 1999, property and equipment under capital leases
                  consisted of the following:

                  Machinery and equipment                                                           $     3,137,399
                  Computer and office equipment                                                             436,959
                  -------------------------------------------------------------------------------- ---------------------
                                                                                                          3,574,358
                  Less accumulated amortization                                                    (      1,326,893)
                  -------------------------------------------------------------------------------- ---------------------

                                                                                                          2,247,465
                  -------------------------------------------------------------------------------- ---------------------

                                                                                                    $     4,316,128
                  ================================================================================ =====================
</TABLE>

--------------------------------------------------------------------------------
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.

                                      F-15
<PAGE>


--------------------------------------------------------------------------------
NOTE 6.           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 June 30 were as
                  follows:
<TABLE>
<CAPTION>
<S>               <C>                                                                                  <C>
                  2000                                                                                 $      1,199,875
                  2001                                                                                          904,603
                  2002                                                                                          830,093
                  2003                                                                                          757,383
                  2004                                                                                          190,585
                  Thereafter                                                                                     28,011
                  -------------------------------------------------------------------------------- -------------------------
                                                                                                              3,910,550
                  Less amount representing interest                                                             781,725
                  -------------------------------------------------------------------------------- -------------------------
                                                                                                              3,128,825
                  Less current maturities                                                                       848,120
                  -------------------------------------------------------------------------------- -------------------------

                                                                                                       $      2,280,705
                  ================================================================================ =========================
</TABLE>
--------------------------------------------------------------------------------
NOTE 7.           LINE OF CREDIT FACILITIES
--------------------------------------------------------------------------------

                  In September 1997, the Company entered into an accounts
                  receivable funding program (the Program) with a financing
                  company. The Program allows 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 is 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% (11.75% at June 30, 1999) and repayments are
                  made directly through a lock box arrangement. At June 30, 1999
                  no amounts were outstanding on this credit facility.


                                      F-16
<PAGE>


--------------------------------------------------------------------------------
NOTE 8.           LONG-TERM DEBT
--------------------------------------------------------------------------------

                  Long-term debt consisted of the following:

<TABLE>
<CAPTION>
<S>                                                                                                 <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.                                                                         $       4,745,370

                  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% (see Note 14).                     185,000

                  Note  payable  to former  owner of GMA;  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 June 30, 1999 in default and; due on demand.                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.                 75,000

                  Note  payable  to a Health  Maintenance  Organization  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.                   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 (see Note 3).                                                                       37,756

                  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 June 30, 1999 in default and;
                    due on demand.                                                                            195,000

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

                  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
                  -------------------------------------------------------------------------------- ---------------------
                                                                                                            6,242,123
                  Less current maturities                                                                   5,764,221
                  -------------------------------------------------------------------------------- ---------------------

                  Long-term debt                                                                    $         477,902
                  ================================================================================ =====================
</TABLE>

                                      F-17
<PAGE>


--------------------------------------------------------------------------------
NOTE 8.           LONG-TERM DEBT (Continued)
--------------------------------------------------------------------------------

                  Aggregate maturities of long-term debt for the years
                  subsequent to June 30, 1999 are as follows:
<TABLE>
<CAPTION>
<S>                    <C> <C>                                                                     <C>
                  June 30, 2000                                                                    $        5,764,221
                  June 30, 2001                                                                               160,913
                  June 30, 2002                                                                               150,758
                  June 30, 2003                                                                               100,158
                  June 30, 2004                                                                                66,073
                  ------------------------------------------------------------------------------ -----------------------

                                                                                                   $        6,242,123
                  ============================================================================== =======================
</TABLE>

--------------------------------------------------------------------------------
NOTE 9.           RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------

                  Office Rent

                  The Company rents 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 $269,000 and
                  $235,000 for the years ended June 30, 1999 and 1998. These
                  leases were canceled in December 1999 (See Note 13).

                  Due to related parties

                  During 1998, the Company entered an agreement with an entity
                  controlled by the current President of the Company (Related
                  Consultant). Under the agreement, the Related Consultant
                  provided consulting services to the Company. Fees and expenses
                  paid to the Related Consultant for services amounted to
                  approximately $142,000 for the year ended June 30, 1999. As of
                  June 30, 1999, approximately $77,000 was owed to the Related
                  Consultant.

                  As of June 30, 1999, approximately $220,000 of Company
                  expenses were paid by the former owner of GMA, who is
                  presently a shareholder of the Company. At June 30, 1999, this
                  amount is owed to this individual.

                                      F-18
<PAGE>

--------------------------------------------------------------------------------
NOTE 10.          INCOME TAXES
--------------------------------------------------------------------------------

                  The components of income taxes were as follows:
<TABLE>
<CAPTION>
                                                                                  Year Ended            Year Ended
                                                                                June 30, 1999         June 30, 1998
                  ---------------------------------------------------------- --------------------- ---------------------
<S>                                                                            <C>                   <C>
                  Current Benefit
                       Federal                                                 $              -      $              -
                       State                                                                  -                     -

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

                  Increase in Valuation Allowance                            (        3,734,000)   (        1,970,000)
                  ---------------------------------------------------------- --------------------- ---------------------

                  Income Tax Benefit                                           $              -      $              -
                  ========================================================== ===================== =====================
</TABLE>
                  The effective tax rate for 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 $17,300,000, expiring in various years through
                  2018.

                  At June 30, 1999, approximate deferred tax assets and
                  liabilities were as follows:
<TABLE>
<CAPTION>
                  Deferred tax assets:
                  --------------------
<S>                                                                                                  <C>
                  Allowances for doubtful accounts                                                   $      1,560,000
                  Amortization                                                                                101,000
                  Net operating loss carryforward                                                           6,619,000
                  -------------------------------------------------------------------------------- ---------------------
                  Total deferred tax assets                                                                 8,280,000
                  -------------------------------------------------------------------------------- ---------------------

                  Deferred tax liabilities:
                  -------------------------
                  Accounts receivable of cash basis subsidiaries                                              914,000
                  Excess tax over book deprecation                                                            436,000
                  -------------------------------------------------------------------------------- ---------------------
                  Total deferred tax liabilities                                                            1,350,000
                  -------------------------------------------------------------------------------- ---------------------

                  Net deferred tax asset                                                                    6,930,000
                  Less valuation allowance                                                         (        6,930,000)
                  -------------------------------------------------------------------------------- ---------------------

                                                                                                     $              -
                  ================================================================================ =====================
</TABLE>

                                      F-19

<PAGE>


--------------------------------------------------------------------------------
NOTE 11.          DEFICIENCY IN ASSETS
--------------------------------------------------------------------------------

                  At June 30, 1999, the Company has authorized 40,000,000 shares
                  of par value $.001 common stock, with 9,351,765 shares issued
                  and outstanding. 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 June 30, 1999, the Company has 3,517,625 warrants
                  outstanding.

                  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 in 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 June 30, 1999, the
                  aggregate and per share amounts of cumulative dividend
                  arrearages was approximately $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 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.


                                      F-20
<PAGE>


--------------------------------------------------------------------------------
NOTE 11.          DEFICIENCY IN ASSETS (Continued)
--------------------------------------------------------------------------------

                  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 June 30, 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. In the event of liquidation, as defined, holders
                  of the Series B preferred stock shall be entitled to receive a
                  liquidating distribution, before any distribution may be made
                  to holders of any other class of capital stock.

--------------------------------------------------------------------------------
NOTE 12.          STOCK OPTIONS
--------------------------------------------------------------------------------

                  The Company adopted the disclosure-only provisions of
                  Statement of Financial Accounting Standards No. 123,
                  "Accounting for Stock-Based Compensation," ("SFAS 123") in
                  1997. The Company has elected to continue using Accounting
                  Principles Board Opinion No. 25, "Accounting for Stock Issued
                  to Employees" in accounting for employee stock options.
                  Accordingly, compensation expense has been recorded to the
                  extent that the market value of the underlying stock exceeded
                  the exercise price at the date of grant. For the years ended
                  June 30, 1999 and 1998, compensation costs related to stock
                  options amounted to approximately $729,602 and $127,000,
                  respectively.

                  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>                  <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>

                                      F-21

<PAGE>


--------------------------------------------------------------------------------
NOTE 12.          STOCK OPTIONS (Continued)
--------------------------------------------------------------------------------

                  The following table summarizes information about stock options
                  outstanding at June 30, 1999:
<TABLE>
<CAPTION>

                                                    Options Outstanding                     Options Exercisable
                                            ------------------------------------    -------------------------------------
                                                                   Weighted
                                                                    Average                                 Weighted
                                                                   Remaining                                Average
                                                Number of         Contractual                              Remaining
                       Exercise Price            Options             Life           Number of Options   Contractual Life
                  ------------------------- ------------------- ----------------    ------------------- -----------------
<S>               <C>      <C>                      <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>
                  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.
<TABLE>
<CAPTION>
                                                                             Year ended June 30,   Year ended June 30,
                                                                                     1999                  1998
                  ---------------------------------------------------------- --------------------- ---------------------
<S>                                                                          <C>                   <C>
                  Net loss                                                   ( $     10,588,216)   ( $      5,415,226)

                  Net loss per share                                         ( $           1.47)   ( $           0.97)
</TABLE>

                  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.

                                      F-22
<PAGE>


--------------------------------------------------------------------------------
NOTE 13.          COMMITMENTS AND CONTINGENCIES
--------------------------------------------------------------------------------

                  Leases

                  The Company leases office and medical facilities under various
                  non-cancelable operating leases. Approximate future minimum
                  payments under these leases are as follows:
<TABLE>
<CAPTION>
<S>               <C>                                                                               <C>
                  2000                                                                              $         787,000
                  2001                                                                                        702,000
                  2002                                                                                        716,000
                  2003                                                                                        404,000
                  2004                                                                                        406,000
                  -------------------------------------------------------------------------------- ---------------------

                  Total                                                                             $       3,015,000
                  ================================================================================ =====================
</TABLE>
                  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 are as follows:
<TABLE>
<CAPTION>
<S>               <C>                                                                               <C>
                  2000                                                                              $       1,803,354
                  2001                                                                                      1,421,000
                  2002                                                                                        708,500
                  2003                                                                                        132,458
                  2004                                                                                         48,000
                  -------------------------------------------------------------------------------- ---------------------

                                                                                                    $       4,113,312
                  ================================================================================ =====================
</TABLE>
                  MIS

                  In October 1998, a lawsuit was initiated against the Company
                  by an individual who is the medical director and former owner
                  of MIS, and an officer and director of the Company (the
                  Plaintiff). The lawsuit centers on a $185,000 note payable to
                  the Plaintiff which was due April 1, 1998, but was not repaid
                  by the Company. Subsequently, several new claims and
                  counterclaims were filed by the Plaintiff and the Company,
                  respectively. Effective December 15, 1999, the Plaintiff and
                  the Company reached a settlement whereby all pending
                  litigation was dismissed. Under the settlement agreement, the
                  Plaintiff agreed to forgive the remaining $185,000 on the
                  promissory note in exchange for the operations and specified
                  assets and liabilities of MIS. Further, the Company and the
                  Plaintiff entered into a consulting agreement whereby the
                  Plaintiff would provide consulting services, as needed, in
                  exchange for a fee of $5,000 per month, for 48 months. In
                  addition, the Company was granted an option to repurchase up
                  to 340,000 shares of its common stock from the Plaintiff at
                  $0.10 per share. In connection with the settlement, the
                  Company and the Plaintiff agreed to cancel two lease
                  agreements between the parties (See Note 9). As a result, the
                  Company has disposed of MIS, all of its operations, and
                  vacated those premises. (See Note 14)

                                      F-23

<PAGE>

--------------------------------------------------------------------------------
NOTE 13.          COMMITMENTS AND CONTINGENCIES (Continued)
--------------------------------------------------------------------------------

                  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 June 30 1999, the Company had recorded accrued payroll
                  taxes of approximately $598,000, which is included in accrued
                  expenses in the accompanying balance sheet. The Company is
                  currently negotiating a payment plan to repay this amount.

--------------------------------------------------------------------------------
NOTE 14.          SUBSEQUENT EVENTS
--------------------------------------------------------------------------------

                  Acquisitions

                  Purchase of 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 will be
                  included in the Company's statement of operations. As a result
                  of this acquisition approximately $700,000 was recorded as
                  goodwill.

                  Purchase of 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 December 31, 1999
                  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.

                                      F-24

<PAGE>

--------------------------------------------------------------------------------
NOTE 14.          SUBSEQUENT EVENTS (Continued)
--------------------------------------------------------------------------------

                  Disposals

                  Sale of MIS
                  -----------

                  Effective December 18, 1999, MIS was sold to its former owner
                  in exchange for the settlement of all outstanding litigation,
                  the discharge of a note payable of approximately $185,000 and
                  other amounts due to 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.

                  Sale of Datascan
                  ----------------

                  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 $2,107,000.

                  Deficiency in Assets

                  Subsequent to June 30, 1999, the Company granted 3,172,000
                  options under consulting and employee compensation agreements
                  with exercise prices from $0.30 to $4.5 which expire from
                  February 2003 through October 2007.

                  On January 7, 2000, the Company reduced the exercise price on
                  240,000 warrants, issued in connection with the issuance of
                  series B preferred stock, from $7.00 to $0.70 in exchange for
                  the elimination of a cashless exercise provision.

                  On March 31, 2000, the Company extended the expiration of
                  867,000 warrants from February 28, 2000 to September 30, 2000.

                  Alpha Clinic 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. On May 12, 2000 these
                  advances 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.

                                      F-25
<PAGE>


--------------------------------------------------------------------------------
NOTE 15.          CONCENTRATIONS
--------------------------------------------------------------------------------

                  Customer Concentration

                  During 1999 and 1998 one customer accounted for approximately
                  48% and 12% of total sales, respectively. The loss of this
                  customer could affect the operating results of the Company.

--------------------------------------------------------------------------------
NOTE 16.          SIGNIFICANT FOURTH QUARTER ADJUSTMENTS
--------------------------------------------------------------------------------

                  During the fourth quarter the Company made certain adjustments
                  deemed to be material to the results of the quarter, including
                  the following:

                  o   The Company charged approximately $700,000 to operations
                      relating to the granting of stock options.

                  o   The Company made provisions to bad debt expense of
                      approximately $1,000,000 relating to certain customer
                      accounts estimated to be uncollectible.

                  o   The Company recorded a loss on the settlement with
                      Primedica of approximately $2,200,000.

                  o   The Company recorded approximately $342,000 of losses
                      associated with the disposal of two of its subsidiaries.

                  The effect of the above adjustments increased the net loss
                  by $4,242,000 in the fourth quarter.



                                      F-26